Marketing for Hospitality and Tourism

1. Introduction: Marketing for Hospitality and Tourism

 

     What is hospitality and tourism marketing? In the hotel industry, marketing and sales are often thought to be the same and no wonder: the sales department is one of the most visible in the hotel. Sales managers provide clients with tours and entertain them in the hotel’s food and beverage outlets. Thus the sales function is highly visible.

     In the restaurant industry, many people confuse marketing with advertising and sales promotion. In reality, selling and advertising are only two marketing functions and often not the most important. Advertising and sales are components of the promotional element of the marketing mix. Other marketing mix elements include product, price and distribution. Marketing also includes research, information system and planning.

Understanding the marketplace and customer needs:

     Customer needs, wants and demands: The most basic concept underlying marketing is that of human needs. A human need is a state of felt deprivation. Included are the basic physical needs for food, clothing, warmth and safety, as well as social needs for belonging, affection, fun, and relaxation. There are esteem needs for prestige, recognition and fame, and individual needs for knowledge and self-expression. These needs were not invented by marketers, but they are part of the human makeup.

     Wants: The second basic concept to marketing is that of human wants, the form human needs take as they are shaped by culture and individual personality. Wants are how people communicate their needs. A hungry person in Papua New Guinea needs food but wants taro, rice, yams and pork. A hungry person in the United States needs food but wants a hamburger, French fries and a Coke. Wants are described in term of objectives that will satisfy needs. As a society involves, the wants or its members expand. As people are exposed to more objectives that arouse heir interest and desire, producers try to provide more want-satisfying products and services.

     Demands: People have almost unlimited wants, but limited resources. They choose products that produce the most satisfaction for their money. When backed by buying power, wants become demands. Outstanding marketing organizations go to great lengths to learn about and understand their customer’s needs, wants and demands.

     Market offerings: tangible products, services and experiences: Consumer needs and wants are fulfilled through a market offering: a product that is some combination of tangible, services, information or experiential product components. We often associate the word product with a tangible product or one that has physical properties (e.g. the hotel room or the steak that we receive in a restaurant). In the hospitality industry, the intangible product including customer service and experiences are more important than the tangible products. Managers of resorts realize that their guests will be leaving with memories of their stay. They try to create experiences that will generate pleasant memories.

     A market offering includes much more than just physical good or services. Consumers decide which events to experience, which tourist destinations to visit, which hotels to stay in and which restaurants to patronize. To the consumer these are all products.

     Customer value and satisfaction: Customer value is the difference between the benefits that the customer gains from owning and using a product and the costs of obtaining the product. Costs can be both monetary and nonmonetary. One of the biggest nonmonetary costs for hospitality customers is time. Luxury hotels in Hong Kong such as the Shangri-La do not expect “executive guests” to stand in line to register. Instead, they are escorted to their room where hot tea is waiting. The registration is completed for them by the hostess.

     Customer expectations are based on past buying experiences, the opinions of friends and market information. If we meet customer expectations, they are satisfied. Marketers must be careful to set the right level of expectations. If they set expectations too low, they may satisfy those who buy fail to attract new customers. If they raise expectations too high, buyers will be disappointed.

     Customer satisfaction depends on a product’s perceived performance in delivering value relative to a buyer’s expectations. If a product’s performance falls short of the customer’s expectations, the buyer is dissatisfied. If performance matches expectations, the buyer is satisfied. If performance exceeds expectations, the buyer is delighted. 

2. The importance of marketing in the hospitality industry

 

     Designing customer-driven marketing strategy: To design a winning marketing strategy, the marketing manager must answer two important questions: What customers will we serve (what’s our target market?) and how can we serve these customers best (what’s our value proposition?).

      Selecting customer to serve: The Company must first decide who it will serve. It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing). Some people think of marketing management as finding as many customers as possible. But marketing managers know that they can not serve all customers. By trying to serve all customers, they may not serve any customers well. Instead, the company wants to select only customers that it can serve well.

      Marketing management orientation: There are five alternative concepts under which organizations design and carry out their marketing strategies: the production, product, selling, marketing and societal marketing.

      The production concept: The production concept is one of the oldest philosophies guiding sellers. The production concept holds that consumers will favor products that are available and highly affordable, and therefore management should focus on production and distribution efficiency. The problem with the production concept is that management may become so focused on production systems that they forget the customers.

     A visitor was staying at a hotel in the Swiss Alps with a beautiful view of Lake Geneva. The dining room had an outdoor balcony to experience the beauty of the surroundings. Enjoying breakfast on the balcony was a perfect way to start a summer day. To the guest, the balcony was a great benefit; to the hotel, it as a nuisance. The balcony was at the edge of the dining room and thus the farthest spot from the kitchen. There were no service stations near the balcony, so all supplies had to come from the dining room. There was only one entrance to the balcony, making access difficult. Simply put, serving customers on the balcony was not efficient.

The hotel discouraged customers from eating on the balcony by not setting up the tables. If one asked to eat on the balcony, they received a pained expression from the service person. They then had to wait fifteen minutes for the table to be set. Once the food was served, the service person disappeared, never to be seen again. This was their way of reminding the guest that no one should eat on the balcony. Yet the hotel should have viewed the balcony as providing a competitive advantage.

     The product concept: The product concept, like the production concept, has an inward focus. The product concept holds that consumers will favor products that offer the most in quality, performance, and innovative features. Under this concept, marketing strategy focuses on making continuous product improvements.

     Product quality and improvement are important parts of most marketing strategies. However, focusing only on the company’s products can lead to marketing myopia. Consumers are trying to satisfy needs and might turn to entirely different products to better satisfy those needs, such as B&Bs instead of hotels or fast-food outlets in student centers instead of cafeterias. 

     The selling concept: The selling concept holds that consumers will not buy enough of the organization’s products unless the organization undertakes a large selling and promotion effort.  The aim of a selling focus is to get every possible sale, not to worry about satisfaction after the sale or the revenue contribution of the sale.

     The selling concept does not establish a long-term relationship with the customer because the focus is on getting rid of what one has rather than creating a product to meet the needs of the market. Restaurant often advertise when sales start to drop, without first analyzing why sales are dropping. They do not try to change their product to fit the changing market. They sell harder, pushing their products on the customer through increased advertising and couponing. Eventually, the go out of business because their product no longer satisfied the needs of the marketplace.

     The selling concept exists within the hospitality industry. A major contributing factor is overcapacity. Virtually every major sector of this industry has suffered from overcapacity. When owners and top management face overcapacity, the tendency is to sell, sell, and sell.

     The marketing concept: the marketing concept is a more recent business philosophy one that is being rapidly adopted in the hospitality industry. Many companies have adopted the marketing concept. We know that four Seasons Hotels and McDonald’s follow this concept fully. The marketing concept holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors.

     Amazingly, niche opportunities sometimes remain available long after suppliers recognize the need. This is probably due to difficulties in changing the behavior of those who supply the products, such as the wait staff in a restaurant.

     The societal marketing concept: The societal marketing concept, the newest marketing concept, holds that the organization should determine the needs, wants and interests of target markets and deliver the desired satisfactions more effectively and efficiently than competitors. The societal marketing concept questions whether the marketing concept is adequate in an age of environmental problems, resource shortages, rapid population growth, worldwide inflation and neglected social services. It asks if the firm that serves and satisfies individual wants is always doing what’s best for consumers and society in the long run. The pure marketing concept ignores possible conflicts between short-run consumer wants and long-run societal needs.

     Advocates of the societal marketing concept would like public-interest groups to guide corporation toward decisions that will benefit society over the long term. Societal pressures are already manifested in the marketing of cigarettes and liquor. Hotel chains have established no-smoking floors and no-smoking sections in their restaurants. Restaurant and their state associations have developed training programs on how to serve alcohol responsibly. The cocktail reception may become phenomenon of the past. Today at many receptions mineral water, fruit juices and soft drinks are served.

3. Service Characteristics of Hospitality and Tourism Marketing

 

     The service culture: One of the most important tasks of hospitality business is to develop the service side of the business, specifically a strong service culture.

     The service culture focuses on serving and satisfying the customer. Creation of a service culture has to start with top management and flow down. For example, an organization wants to deliver a quality product, so the management must support and reward attention to customer needs. This means the business mission contains a service vision. It also means an organization hires employees with a customer service attitude, and then it works with employees to instill the concept of service.

     Characteristics of service marketing: Service marketers must be concerned with four characteristics of services: intangibility, inseparability, variability and perishability.

         Intangibility: Unlike physical products, services cannot be seen, tasted, felt, heard or smelled before they are purchased. Prior to boarding an airplane, passengers have nothing but  an  airline ticket and  the  promise of safe delivery to their destination. Members of a hotel sales force cannot take a hotel room with them on a sales call. In fact, they do not sell a room. Instead, they sell the right to use a room for a specific period of time. When hotel guests leave, they have nothing to show for the purchase but a receipt. Robert Lewis observed that someone who purchases a service may go away empty-handed, but they do not go away empty-headed.

         Inseparability: In most hospitality services, both the service provider and the customer must be present for the transaction to occur. The food in a restaurant may be outstanding, but if the service person has a poor attitude or provides inattentive service, customers will not be satisfied with their experience.

         Service inseparability also means that customers are part of the product. A couple may have chosen a restaurant because it is quiet and romantic, but if a group of loud and boisterous conventioneers is seated in the same room, the couple will be disappointed. Managers must manage their customers so they do not create satisfaction for others.

     Another implication of inseparability is that customers and employees must understand the service delivery system because they are coproducing the service. Customers must understand the menu items in a restaurant so that they get the dish they expect.

     Variability: Services are highly variable. Their quality depends on who provides them and when and where they are provided. There are several causes of service variability. Services are produced and consumed simultaneously, which limits quality control. Fluctuating demand makes it difficult to deliver consistent products during periods of peak demand. The high degree of contact between the service provider and the guest means that product consistency depends on the service provider’s skills and performance at the time of the exchange.

     A guest can receive excellent service one day and mediocre service from the same person the next day. In the case of mediocre service, the service person may not have felt well or perhaps experienced an emotional problem. Lack of communication and heterogeneity of guest expectations also lead to service variability.

         Perishability: services can not be stored. A 100-room hotel that sells only 60 rooms on a particular night cannot inventory the 40 unused rooms and then sell 140 rooms the next night. Revenue lost from not selling those 40 rooms is gone forever. Because of service perishability, airlines and some hotels charge guests holding guaranteed reservations when they fail to arrive.

     Restaurants are also starting to charge a fee to customers who do not show up for reservation. They, too, realize that if someone does not show up for a reservation, the opportunity to sell that seat may be lost.     Ritz-Carlton: taking care of those who take care of customers: Ritz-Carlton, a chain of eighty-five luxury hotels located around the world. Ritz-Carlton caters to the top 5 percent of corporate and leisure travelers. The company’s credo sets lofty customer service goals: “The Ritz-Carlton hotel is a place where the care and comfort of our guests is our highest mission. We provide the finest personal service and facilities for our guest, who will always enjoy a warm, relaxed, yet refined ambience.”

     Since its incorporation in 1983, the Ritz-Carlton Hotel Company has received all the major industry awards the hospitality industry.

     At Ritz-Carlton, more than 90 percent of Ritz-Carlton customers return. Despite its hefty room rate, the chain enjoys a 70 percent occupancy rate. Most of the responsibility for keeping guests satisfied falls to Ritz-Carlton’s customer-contact employees. Thus the hotel chain takes great care in selecting its personnel.

     Ritz-Carlton employees are empowered to handle problems on the spot, without consulting higher-ups. Each employee can spend up to 2.000$ to redress a guest grievance and each is allowed to break from his or her routine for as long as needed to make a guest happy. “We master customer satisfaction at the individual level. This is our most sensitive listening post… our early warning system”. Thus while competitors are still reading guest comment cards to learn about customer problems, Ritz-Carlton has already resolved them.

     Ritz-Carlton instills a sense of pride in its employees. “You serve”, they are told, “but you are not servants”. The company motto states, “We are ladies and gentlemen serving ladies and gentlemen”.

     Ritz-Carlton’s success is based on a simple philosophy: to take care of customers, you must take care of those who take care of customers. 

4. Marketing Information Systems and Marketing Research

 

     The marketing information system: A marketing information system consists of people, equipment, and procedures to gather sort, analyze, evaluate and distribute needed, timely and accurate information to marketing decision markers.

     Assessing information needs: A good marketing information system balances that managers would like to have against that which they really need. A company begins by interviewing managers to determine their information needs. For example, Mrs Field’s Cookies provides their managers with sales forecasts each hour. When sales are falling, the computer suggests merchandising techniques such as sampling in the mall to pick up sales.

     Some managers ask for whatever information they can get without thinking carefully about its cost or usefulness. Too much information can be as harmful as too little. Other busy managers may fail to ask for things they need to know, or managers may not ask for some types of information that they should have.

     Developing information: information needed by marketing managers can be obtained from internal data, marketing intelligence and marketing research.

     Internal data: Many companies build extensive internal databases, electronic collections of consumer and market information obtained from data sources within the company network. Marketing managers can readily access and work with information in the database to identify marketing opportunities and problems, plan programs and evaluate performance.

     Internal database usually can be accessed more quickly and cheaply than other information sources, but they also present some problems. Because internal information was often collected for other purposes, it may be incomplete or in the wrong form of marketing decision.

     Marketing intelligence: Marketing intelligence includes every day information about developments in the marketing environment that helps managers prepare and adjust marketing plans and short-run tactics.

     Marketing research: Marketing research is a process that identifies and defines marketing opportunities and problems, monitors and evaluates marketing actions and performance, and communicates the finding and implications to management.

     The marketing research process consists of four steps: defining the problem and research objectives, developing the research plan, implementing the research plan, interpreting and reporting the findings.

     Defining the problem and research objectives: Managers must know enough about marketing research to interpret the finding carefully. If they know little about marketing research, they may accept the wrong information. Marketing research can help the managers define the problem and use the findings correctly.

     Developing the research plan: To meet a manager’s information needs, researchers can gather secondary data, primary data, or both. Secondary data consist of information already in existence somewhere, having been collected for another purpose. Primary data consist of information collected for the specific purpose at hand.

     Researchers  usually start by gathering secondary data. Secondary data are usually obtained more quickly and at lower cost than primary data. Basing decisions on secondary data, however, can also present problems. The required information may not exist. Even when it exist, it might not be very relevant and accurate.

      There are three basic research approaches of primary data: observations, surveys and experiments. Observational research is the gathering of primary data by observing relevant people, actions and situations.

     Survey research is the approach best suited to gathering descriptive information. Survey research can be structured and unstructured. Structured surveys use formal lists of questions asked of all respondents in the same way. Unstructured surveys let the interview probe respondents and guide the interview according to their answers.

     Marketing research in smaller organizations: Managers of small businesses often believe that marketing research can be done only by experts in large companies with large research budget. But many marketing research techniques can be used by smaller organizations and a little or no expense.

     Managers of small businesses can obtain good marketing information by observing what occurs around them. Thus, restaurateurs can evaluate their customer mix by recording the number and type of customers in the restaurant at different times during the day.