Hotel marketing strategy in the UK

Hotel, Strategy

The Impact and Future Effects of the Recession on the Hotel Industry

Over the last several years, the hotel industry has faced a number of different challenges, as the sector would change focus and begin to concentrate on improving their earnings, by taking more of an international view. Where, everything from the location to the way the staff interacts with the guests are determining, how a company will be able to stand out from its competitors. (Brotherton 2006, pp. 6 -- 7) In most cases, this focus has meant that a variety of properties have been opened around the world by a number of different chains such as: the Four Seasons and Hilton. Part of this was in response to the increasing pressures various companies were under, as globalization was changing the way these organizations would interact with other customers. For the most part, this strategy worked well during times of economic expansion, when the number of available rooms was declining. Since the global recession took place, the industry has felt these severe effects of the slowdown in spending from leisure and business travelers, with the revenues per room figures consistently declaiming. These are the statistics that will tell you if the hotel profits are rising or falling, based upon what they are earning per room. During times of economic contraction if the declines are affecting major chains, this is sign that a series of different challenges could be impacting the industry. (Surviving the Recession 2009) For example during 2009, Marriot International would see a decline in revenues per room of 12.4%. This is following several years of having the overall levels of room revenues increasing, as the company would benefit from the surge in international travel. (Marriot International Reports Fourth Quarter Results 2010) This is significant, because it shows how large corporations have been hurt by the severe deceleration in consumer spending. The downturn in the hotel industry would be signified, by consistent declines in revenues per room. Evidence of this can be found by looking no further than, a study published in the Cornell Hospitality Quarterly, which found that foreclosures of various hotel properties are expected to increase in 2010. This is because the recession and slowing demand have had profound impact on profitability. (Smith 2010) To determine the effects of the slow down on the industry requires examining: the impact of the recession on the sector, how customer patterns are changing and how the recession is changing the business model of many corporations. Together, these different elements will provide the greatest insights, as to the how the economic contraction is impacting the hospitality sector.

Aims

This project is intended to see the overall effects that the recession is having on the industry. As a variety of hotel chains have been going into bankruptcy. During times like this, is when the sector can change as managers / executives need have innovative strategies to increase the overall bottom line. This causes a shift in the business model, as many different organizations will begin reflecting the lesson they learned from the recent economic contraction. To determine how the current recession is impacting the industry and its effects in the future, we must examine three different aims to include:

The impact of the recession on the hotel industry.

How the recession is changing the underlying business model.

How customer patterns / demographics are changing.

Once these different aims have been successfully achieved, they will provide the best insights, as to the overall scope of the challenges facing the industry and what it will more than likely look like in the future.

Significance of the Study

A major issue that has been affecting most hotel operators over the last several years has been large amounts of overbuilding. This is in anticipation of the large influx of new travelers expected from: Asian, North American and European markets. The reason why is because the period of economic expansion lasted for several years and interest rates were at historically low levels. This meant that an increasing number of projects would be built to illustrate the new trends in the industry. A good example of this can be seen with the Palm Resort in Dubai. This is an island that is being constructed for: various luxury hotels, shopping, dining and water sport activities in the Persian Gulf. During the boom years, this was supposed to be a symbol of the changing face of the hospitality industry. (Palm Island Dubai 2010) As every chain and resort, was looking for unique ways, to be able to reach out to various travelers. Now that consumer spending has impacted the industry, these different projects are starting to become relics of time that was based on unfounded principals and theories. In the case of Palm Island, the recession has hit the resort and the various hotels particularly hard, as nearly all of the different projects have been severely scaled back. At the same time, a variety of luxury villas have been seeing a wave of distress sales, as real estate prices for these properties hit an all time low. (Iconic Palm Island Reaches New Low 2010) This study is seeking to determine, if these kinds of projects are only seeing temporary setbacks that will return to normal, once an economic recovery begins or if a new trend is emerging. As a result, we must engage in some kind of examination that will determine if the industry can be able to recover and what the sector will look like once it begins.

Scope

The scope and breadth of this study are to see the underlying effects that the recession is having upon the hotel industry. Where, there will be an emphasis on finding out what specific factors could be affecting the industry and consumer trends. The geographic segment will be middle class / upper middle class leisure and business travelers. The hotels that will be targeted would include combination of: three, four and five star hotels. A few of the hotels that we will be examining would include: the Four Season, Hilton, Marriot and Hyatt. To determine which issues are creating the most amount of changes requires: conducting a survey of various leisure and business travelers. This will be accomplished by selecting a random sample of between 100 and 500 travelers. At which point, we will be seeking to see the effects that the recession has had upon: these views, how they have changed the opinions of the traveling public and how they are impacting the way hotels conduct business.

Research Questions and Objectives

The different questions and objectives of the study are: to focus the overall efforts of researchers, on specific aspects of the hospitality industry that are relevant to hotels. This is important, because the overall scope of the sector is so large, that any kind of study must focus on specific aspects in order to be as accurate as possible. In this case, we are going to be focusing on the on how the recession is impacting a variety of hotels around the world. Where, there will be an emphasis on how the various corporations are adapting to the changes they face, how this is changing the underlying focus of the business and how the current economic conditions are affecting consumer trends. To answer these different objectives, three questions will be utilized to direct the investigation to include:

How has the recession impacted hotel marketing strategies?

What are the effects that globalization is having upon consumer choices?

How has the current recession changed the business model of hotels?

Once these different questions have been answered they will allow researchers to be able to make accurate inferences about: how the industry is changing and what strategies can be utilized by hotels to adapt to what is taking place. This will provide an accurate assessment as to: how the recession has impacted the industry, how it is changing and what the business model will more than likely look like in the future.

Literature Search and Critical Review

The various pieces of literature can be corroborated with possible questions, to ask to respondents as a part of the survey. Where, there will be an emphasis on identifying specific and general factors that are causing the most dramatic changes to occur. As a result, the literature review will provide a basic foundation in focusing the various research questions.

When you examine the hotel industry it is clear, that the recession is causing many people to begin to question the underlying business model. Part of the reason for this, is because of the tremendous amounts of growth that have taken place in the sector throughout the 1980's and 1990's. The literature from Dierkiex, highlights how this shift is occurring, as the industry would see a change in the underlying business model after oil prices peaked in 1980. This would cause a variety of new tourism destinations, to quickly become reliant upon high air passenger arrivals. A good example of this can be seen in Thailand during this time, where the country would see a dramatic shift in economy. As tourism would surpass rice exports, in being the number one product or service that the nation provides. This has helped the industry to grow, with various tourists from around the globe going to these destinations and then talking about their trips when they return home. Over the course of time, this has caused many of these new travel destinations to increase dramatically in popularity. The information from this source is useful, because it highlights how globalization has been allowing more people, to be able to travel farther and to exotic places. As a result, this can be used to identify how the industry has changed and why a variety of hotels have taken more of an international focus. This helps to discover how globalization has changed the industry, as consumers are seeking out a more unique travel experience. In the case of the survey that is being conducted, this source will help to create a variety of questions that can be used to corroborate these findings to include:

What factors affect the choices that you will make when selecting a particular hotel?

Do you often look for various package deals when planning any kind of stay at a hotel?

Does the location of a particular hotel chain in an area affect your travel decisions?

This is significant, because the information from the source can be used to create possible questions that can satisfy the various aims and questions of study. As this would provide basic foundation, that could be used to go into other areas. Once these different questions have been answered, this will provide more specific information as to how globalization and the different marketing efforts are affecting hotel chains. (Dierikx 2008, pg. 137)

Over the last several years, globalization has been causing a variety of hotel chains to take an international focus, when it comes to their underlying business models. As a variety of travelers have emerged between the 1960's and today, with consumers requiring different levels of services and amenities. The information discussed by Salver, highlight how recessions and overbuilding in the number of available rooms, has caused a variety of chains to face pricing pressures. This is because, the expected upsurge in demand never came, which would leave a number of hotels, with empty rooms that they are having difficulty filling. Where, all of the different chains would follow the same basic model of: providing a variety of services to different demographics of travelers, ensuring that the product is easy to identify, making certain that prices are competitive, using technology to standout from competitors and focusing on maintaining a favorable image of the company. (Salaver 2009, pp. 13 -- 21) This is problematic, because the large amounts of overbuilding and the contraction in consumer spending, would mean that travelers would compare prices before selecting their choice of hotels. As a result, this information can be used to establish a foundation, as to how the current recession is impacting the marketing strategies of various hotels and how it could be affecting the underlying business model of a number of organizations. During the course of conducting the survey, this information can help to create targeted questions that can answer the various aims / questions of the study to include:

What are the most important factors you consider when selecting a hotel room?

How has the recession impacted your travel plans and what hotels you are staying at?

Do various package deals and discounts play an important role when selecting one hotel over another?

How important are the overall amount of services offered and the reputation of the company when selecting a particular hotel?

This is significant, because the information from this source can target how the recession is changing consumer perceptions, what issues are most important to travelers and how the services / reputation of the company will affect these choices. Once these different questions have been answered, this will provide more specific insights that can help identify the different aims to include: the impact of the recession on the industry, how it changing the business model and how consumer tastes are affecting the companies.

The overall prices that are being charged can have an impact upon travelers, as they have a number of different choices and ways to shop for the lowest available rate. With an increasing number of consumers, using various web sites as a way to quickly the find lowest prices and the kinds of services they are looking for. The research from O'Fallon, uncovers how a variety of hotels are not accounting for this aspect of their business model, as most will have their prices listed on the internet. This is problematic, because they have no organized pricing structure. When someone is looking for a hotel room, this could be discouraging, as they cannot see the kind of consistent low rates they are looking for. Instead, they see a variety of rates from one web site to the next. This confuses most consumers, who will more than likely select a hotel that they are most familiar with. (O'Fallon 2010, pg. 28) This information is important, because it highlights how the range of prices offered by hotels can affect consumer choices, as they are looking for consistency and good service. When you have different prices for the same room, this will undermine the confidence that someone will have in a particular hotel chain, as there is no consistency in their rates. To avoid having to pay more than what they want for a room, most will more than likely choose a hotel they are familiar with. As a result, the information can be used to identify how consistently low rates can affect what type of hotel, travelers will be utilizing. At which point, specific questions from the surveys could be used to find out the extent that this trend is having on perceptions. A few of the various questions that could be asked of participants would include:

What is the preferred method you use when booking hotel reservations?

Do find that room rates for the same hotel can vary from one web site to the other?

Do these different rates impact what kind of hotel you will select?

Are you more likely to book with a hotel that has more consistent room rates?

This is significant, because the information can be used to highlight what specific issues could be affecting the consumer trends and tastes. At the same time, it can be used to determine how the recession is changing business model of these hotels, as they seek out innovative ways to remain full.

Methodology

Research Design

The various findings of the research will be analyzed using qualitative analysis. This is when you are looking at a variety of non-measurable data, to see the effect that the recession as well as changes in consumer trends is having on: reputation, image and feelings that customers will have about various products. (Qualitative Analysis 2010) The research will be conducted over the internet, by having various travelers fill out an anonymous survey. The hospitality sector of the economy was chosen, because of its sensitivity to changes in the economy and the commodities prices. Given the fact that a variety of new destinations are involved in tourism, means that this is a major source of revenues for a number of countries around the globe. This survey is seeking to understand how the changes in the economic cycle, globalization and how consumer trends will have an impact for these countries; along with the hotels that serve this demographic. The population sample will be leisure and business travelers that have booked as well as stayed, at least once at these hotels during the last year. Like what was stated previously, all research will be conducted through an online survey of the different demographics of travelers. The instruments that will be used to help to determine the different views of consumers will be: specifically targeted questions that are based off of the literature review. Once the various surveys have been completed, an analysis will be conducted by looking at the findings from the literature review and then comparing it with the specific findings of the research. This will identify the specific as well as general trends that could be occurring in the industry and among consumers. Once this take place, it will help to answer the various aims / questions of the study, by determining how the recession has impacted the sector and what the business model will more than likely look like during the future.