Task 3 – Be able to plan the development of hospitality businesses LO3 • You are to prepare a rationale for the development of a new hospitality outlet which is based at Centre Parcs, Netherlands. You need to decide which type of outlet will best suit the target markets which are attracted to this resort. The rationale will need to outline: the concept, market research, target market, location, scale, funding, and products and services (for examples the menu, licensing) (3.
1) Developing the Concept The first stage in the development of a new concept is to carry out an analysis of the market in w hich the product or service will be offered. This will provide details of the needs of the market so that the product or service can be targeted at the correct market and in the correct way. Figure 3. 2. 1 shows the overall marketing planning process. To understand the market, we use a SWOT analysis.
The extensive marketing audit – comprising both internal and external analysis – will enable the particular company to put together a SWOT analysis for the business. The SWOT serves to relate the internal strengths and weaknesses of the business in relation to the external opportunities and threats evident in their marketplace. In essence, the company needs to maximise the application of their capabilities in order to create a differential advantage over their competitors in delivering their goods and services to customers. The SWOT should steer the company towards suitable, achievable objectives for the business. In this way the company should not be trying to compete in areas where it is weak, and should enable them to set clear objectives that the business and the people within it will be able to achieve.
Prior to looking at the objectives that organisations can set for themselves in different types of markets, we will examine in more detail the specifics of SWOT analysis. The SWOT analysis enables a company to combine the key factors that emerged from the extensive internal and external analyses that were carried out. The SWOT summarises only the very important factors from the initial analysis. Illustration 2. 2 outlines how this SWOT analysis looks, whilst investigation can also be split into: The competition. , Suppliers and intermediaries, The political environment.
The economic environment, The legal environment , The technological environment, The social and cultural environment. The examination of the external environment will again be individual to a particular organisation, as the influences of the external environment will vary according to the company being considered. As a brief example look at the current external environment faced by the telecommunications industry (price erosion, high charges for technology, massive premiums to gain airspace, low demand). Developing objectivesThe development of the SWOT should enable the organisation to consider the different objectives that it can set for the future. Different permutations are possible to link the different quadrants from the SWOT analysis.
This series of permutations, plus the outline objectives that are able to be set, can be onsidered as follow s: Strength + opportunity = the company needs to exploit this situation. Strength + threat = the company needs to minimise the threat, perhaps by diverting resources to or aw ay from the aspect of the threat. Weakness + opportunity = develop the weaknesses into strengths through enhanced capabilities. Weakness + threat = the company needs to consider what merits there are in continuing with this aspect of the business. The next step in the marketing planning process is, therefore, to set the marketing objectives.
These marketing objectives will mirror the corporate objectives that the organisation has set for itself. The five levels of a new product development can be seen in Figure 3. 2. 4. The key for companies is to continually renew and add to their product offerings. Levitt (1975) suggests that augmentation is the w ay forw ard for companies w ishing to use their products to compete: ‘ The new competition is not between w hat companies produce in their factories, but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing and other things that people value.
‘ Doyle (2000) looks at the next level of the product and describes a firm’s brand (or brands) as representing its major reputational asset. He goes on to say: ‘ A brand is different from a label. A label is a name, symbol or design that is used to distinguish the firm’s product or service. But in marketing a brand has another element besides being recognisable: this is the promise of added values to the customer – advantages not possessed by competitors. A strong brand is more desirable to its target customers.
This affects each of the core business processes. It facilitates the product development process by giving customers more confidence in the quality and attributes of the products. ‘ Market researchSegmentation is an important means of dividing up the market and determining which areas an organisation should direct its marketing efforts towards. To be selected for attention, any segment should have three characteristics: 1. It must be measurable, 2.
It should be easy to reach through advertising and distribution systems, 3. It should offer a sustainable flow of business which w ill more than repay the costs of developing it. Effective market segmentation depends on research to identify the characteristics of the types of visitor who seeks particular benefits from the hospitality at a particular destination. A typical method is to draw up a list of primary and secondary hospitality attributes. People with relevant demographic characteristics are interview ed to explore their interests, opinions and preferences. Each respondent also ranks the hospitality attributes, and the results are analysed.
The relative importance of various hospitality features for different segments is determined in this way, and their marketing implications can then be examined in the context of the subject’s media habits, because successful advertising depends on a detailed knowledge f a target market’s reading and television viewing as a basis for deciding where to place advertisements. Research carried out in this way provides sufficiently reliable information for the development of a promotional campaign. However, no market research results are ever completely perfect, and it is always to assume that there is some degree or unreliability in the information used. Find out more about how market research is carried out in different markets. Try to find out specific details about market research carried out for the tourism industry. Can you comment on the reliability of such information? Target market Target marketing involves the analysis and understanding of some of the factors that can affect organisations as they serve the interests of their markets and individual consumers.
Segmentation is a key element of marketing – particularly in the very competitive markets that many travel companies find themselves in today. In this section we will review segmentation and look in more depth at the different types of markets that a company may involve itself with. There are many different types of market involved in tourism and we w ill concentrate on looking at four broad market segments: Consumer markets, Organisational markets , Services, International markets. It will be evident that some companies w ill be involved in more than one of these market segments. For example, a company involved in consumer marketing may also export to other countries. A service company may have consumers and business customers as part of its portfolio.
In this section we will look at the main attributes of these different market segments and the issues that a firm will need to address if it decides to take part in the particular market segments. For a hotel or restaurant of your choice, what w ould you consider to be the target market? Repeat this exercise for three other establishments in the hospitality industry. What differences do you notice between your target markets? Location Location is a relatively general term that describes the geographic area containing a site where a business can be developed. Unlike production industries, where products can be transported to their place of sale, hospitality organisations must be sited where tourism is centred. Therefore, decisions on location are more important for service organisations. ConradHiltonis often quoted as saying that ‘… there are three things important in the hotel business: location, location and location. ‘ Selection of the correct location is an important long-term strategic decision, often involving significant capital investment and an strong commitment to the market within the region.
The key consideration in the selection of a location is its potential to return a sound profit as a result of the organisation’s investment. There will also be a need for support from government in relation to commercial investment to enable an effective operation to be undertaken. Other important factors include: Rules relating to site development, Taxation, Domestic labour Import duties , Repatriation of profits , Stable foreign exchange rates If there is a pool of low-cost labour and supplies, it will be possible to reduce the need for importing goods, and thus increase the likelihood of profitability. In addition, the availability of utilities, transportation and communication infrastructure will have the effect of reducing the capital investment and operating expenses. Consumer demands w ill place an emphasis on location attributes such as , Climate , Terrain , Activities , Culture, Uniqueness , Safety Scale Improved profitability is a key target in the hospitality industry. Consequently, economies of scale are an important consideration.
This means that productivity can achieve an increase as a result of proportional increases in all production inputs. Large tourism attractions, such as theme parks or marinas are good examples of real economies of scale. However, the hospitality industry does not necessarily always follow existing patterns, and it may not consistently be the case that this general rule is followed. As a result of the segmentation of demand characteristics, efficiency issues arising from excessive bureaucracy, and overhead costs, the industry has encountered many shortcomings. The arguable overuse of economies of scale within the industry has had a negative effect on social and environmental considerations, reducing market competitiveness in some cases. Sustainable profitability of organisations and destinations demands other methods, responding much better to the rapidly changing environment of tourism markets.
Funding Funding is an essential element of any development project for hospitality in a particular region. Sources of appropriate funding w ill often include local sources, such as local government and other industries. How ever, one of the key concerns is the threat of a change of attitude tow ards long-term project investment, especially where overseas developers are involved. Such changes occur as a result of changes in economic or political climate. It is, therefore, important to keep project length as short as possible and to acknowledge that there is a considerable element of risk involved in procuring appropriate funding. Examples of problems encountered with funding can be seen throughout the hospitality industry by noting the large numbers of incomplete hotels in developing tourist areas across the globe.
Products and services More than sixty percent of the UK GDP (national income) comes from the service sector of the economy. Services bring great wealth to the country, and further represent massive elements of the employment market. Even though there are ‘ pure’ services such as massage, many of the products and services referred to in an established economy will actually be made up of a combination of product and service elements. Indeed, many companies now see offering services as an important way to add value for the customer and seek to gain competitive advantage by offering such additions to an existing product. It is the special nature of services – derived from several distinct characteristics – that serve to have a major impact on marketing strategies. We will now look at each of these in turn.