1. Competition in the Lodging Business
Chapter 12
Competition in the Lodging Business

2. 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).

3. 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

4. LEADING “BRANDS” Holiday Inn (InterContinental) – 188,000 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

5. 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
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

6. 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

7. 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

8. 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”

9. 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

10. 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

11. 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

12. 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

13. FOOD SERVICE Reasons to outsource: Financial considerations
Ability to focus on core competencies
Strategic intents

14. 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)

15. Special rates will include:
PRICE
Special rates will include:
Corporate
AAA
Government
Preferred
Association

16. 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

17. 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
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

18. PROMOTION
Advertising – much hotel advertising still focuses on 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 on-line advertising)

19. 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)
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