A traveler can manage to get a home away from his/her home by for all the facilities and services made available in the form of a hotel.
Over the years, the hotel industry has grown in size, witnessing a large number of hotels being established in different parts of the globe to assist travelers with better facilities and services.
The development of hospitality services is a result of the steady growth and development of the tourism sector. Hospitality is a commercial venture.
Countries offering dynamic and progressive tourism services also provide advanced and cumulative hospitality services.
The hotel industry has emerged with excellent prospects on the basis of multi-dimensional growth and expansion of the travel and tourism industry worldwide.
It is because a need was felt in the hotel and catering industry to attract trained and skilled manpower.
The past couple of years have witnessed the hotel industry accomplishing some incredible progress and development. Several new hotels have also been established in India during the past few years.
The Oberoi Group was the pioneer in the new hotel era that dominated the hotel industry in India. ITC, Hotel Corporation of India, ITDC, and another luxurious group of hotels were the other players that instantly followed suit.
Being on par with this trend, the hotel industry escalated all throughout the country. The industry has slowly become more inviting to private investors even though the present-day building costs in how the industry is quite significant.
This is possible due to the financial incentives provided by the Government.
Market Segmentation of Hotel Services
For almost every service firm, it is difficult to gain and maintain a competitive advantage for travel and hospitality products/services in the wide consumer market.
For a firm, it is much easier to become successful if it serves a small market segment (or niche market) in which it has competitive individuality, thereby developing the market segmentation.
For dividing a market into homogenous and smaller groups, marketing managers effectively perform the activities involved in market segmentation.
Hence, the implementation of a marketing strategy under which the overall market is separated into different homogeneous sub-groups, where each sub-group reacts differently to the company’s marketing mix, can be regarded as market segmentation.
Marketing segmentation is applicable in all fields of the tourism and hospitality industry, even in those areas which have lesser suitability of segmentation.
For example, the airline industry may not seem to be fit for segmentation as it offers a fairly homogenous service where travelers board aircraft and reach their destinations and thus fulfilling the needs of its customers.
However, depending upon the frequency of use and price sensitivity, the airline industry has been segmenting the market.
Most of the aircraft have three service levels, i.e., first-class, business class, and economy class, where every class has different comfort and amenities.
Customers can choose their desired level of service and are charged for the same. Likewise, the airline industry also segments the market according to the frequency of travel.
Market segmentation can be done in numerous ways. There are different variables of segmentation that a marketer should try. Following are the main variables that are usually used for market segmentation:
1. Geographic Segmentation: When the market is divided into different segments according to their geographic locations like countries, states, cities, regions, neighborhoods, etc., it is known as geographic segmentation.
By focusing on geographic differences in the preferences of customers, a service firm can operate in more than one geographic region.
Most of the retailers know that customers may buy one product from a particular place and another from a different place.
For example, customers may have dinner at a particular restaurant and go to an ice-cream parlor for having dessert. Hospitality businesses are well aware of this fact, and they efficiently use database management and data mining.
However, many hospitality firms exist that do not use this information. The amount of data that are retained by service providers like spa, resort, etc., can be effectively used for developing special packages, high targeted promotions, etc.
Lack of using the database often pushes service firms to adopt mass marketing strategies that are not much effective on target audiences.
An organization can change or modify its product/service offering by gaining knowledge of its customers’ preferences.
For example, the increase of Muslim customers has created a requirement for prayer rug areas at airports and hotels.
2. Demographic Segmentation: Demographic segmentation means dividing the market into small clusters/groups based on different demographic variables like age, gender, income, lifestyle, occupation, religion, education, nationality, etc.
Under this segmentation, these variables are the most usual bases for segmentation of customer markets. This is because there is a difference between customer likings and frequency of use.
Also, these variables are much easier to control and measure. The demographic features of market segments must be known for evaluating its size and effectively reaching it, even when they were first described on different bases.
The following demographic factors are mostly used in market segmentation:
i. Age and Lifecycle Stage: With age, the preferences of customers change. For catering to different lifecycle and age segments, some service firms offer different services.
For example, Happy Meals offered by McDonald’s, provide toys for kids as an average of 79% of family decisions of dining out are forced by their children. Similarly, they have also offered healthy salads and similar items for attracting adults.
ii. Gender: Segmentation based on gender has been used long ago in promoting clothing, hair saloon, cosmetics, etc. Now, it is used in the hospitality industry. Back in 197Q, less than 1% of women were business travelers.
But now, women signify an important market segment of the hospitality industry. Nowadays, many hotels take women’s choices and preferences into consideration for designing rooms, balconies, lobby bars, fitness facilities, etc.
Hairdryers are now common in all rooms at hotels. Further, many hotel corporations put women business executives in their ads.
iii. Income: Income is a common demographic factor for mark# segmentation. This type of segmentation is easily observed in the lodging industry.
People having higher incomes are the target customers for luxury hotels, resorts, country clubs, etc. When matching a product (like a golf club) with an upscale product (like a luxury car), tie-in promotions are effective.
Inter-state bus services, budget hotels, and similar businesses usually target the lower-income segments as they are much easier to be targeted.
While designing and promoting income as a demographic factor, an old saying should be remembered, which states that “whoever sells to kings may dine with peasants, but whoever sells to peasants, may dine with kings.”
The largest segment for the hospitality industry is the middle-income consumer. However, it is usually difficult to attract and retain them.
Here, middle-income includes a broad variety of lifestyles and incomes, thereby making marketing strategies more complex.
There are a variety of products/services that are offered to this segment, and numerous businesses cater to this segment.
The marketers often face difficulties while serving this segment as it has varying tastes and preferences, immediate reactions, economic cycles, etc.
3. Psychographic Segmentation: Under this segmentation, customers are divided into various groups depending upon lifestyle, personality, and social class.
Customers having the same demographic segment may have different psychographic outlines:
i. Social Class: Most of the time, it is the social class that influences the customers’ preferences for clothes, cars, home furnishings, choice of retailers, leisure activities, etc.
Usually, people of the upper-middle and upper class go for an evening coffee at a 5-star hotel. Similarly, a bar near an office targets working-class employees.
Customers of one social class may feel uncomfortable or anxious if they are offered the services targeted to other social classes.
ii. Lifestyle: The lifestyles of customers affect their choice of products/services. Lifestyle is a strong demographic factor that marketers use to divide consumer markets.
For example, a number of bars and pubs have a common purpose of serving young singles who search for their partners or to couples who want each other’s company.
iii. Personality: Similar to lifestyle, marketers, also segment the consumer market according to personality factors.
4. Behavioural Segmentation: Under this segmentation, customers are divided into different segments depending upon their attitude, response, and knowledge of the product.
It is widely believed that behavioral variables are the most suitable initiating points for creating market segments. Behavioral segmentation includes the following:
i. Special Occasion Segmentation: Customers can be divided on the basis of occasions on which they buy or consume a product/service. This helps marketers to create product use.
For example, air travel is often stimulated on the occasion of holidays, festivals, business, etc. Thus, an airline advertisement aimed at holidays will advertise exciting destinations, price economy on round trips, pre-packaged holidays, etc.
Similarly, airline advertising aimed at business travelers will advertise on-time departure and arrival, convenience, amenities, etc.
ii. Benefits Sought: Customers may also be segmented on the advantages they seek from the products/services. Such an advantage can be a positive result obtained from a products’ characteristic that creates a value.
Product characteristics that do not offer any positive outcomes add no value to the customers.
iii. User Status: According to user status, marketers segment the consumer market as potential users, non-users, former users, first-time users, and regular users.
Companies having a large market share, as the airline industry, are highly interested in attracting potential users and retaining the regular ones. A different marketing approach is required for both potential users and regular users.
iv. Usage Rate: Marketers often segment the market as light, medium, and heavy user groups. Light users account for the low percentage of total purchasing, while high user groups show a high percentage of total shopping/purchasing.
High user groups usually cover a small amount of the market. Various researches have shown that 70.4 percent of airline trips are done by 4.1 percent of airline travelers.
While 59.4 percent of hotel rooms at night are accommodated by 7.9 percent of travelers for pleasure trips.
v. Loyalty Status: Segmentation can also be done depending upon the loyalty of customers. Many customers buy other products even if they are loyal to four or five brands.
Thus, many purchasers do not show any brand loyalty. They need different varieties or buy the cheapest or most convenient one.
Customers who are loyal are usually insensitive to price as compared to brand-shifting patrons. Most of the travel and hospitality industries rely upon relationship marketing for building brand loyalty.
However, in the production industry, there is no such direct contact with the consumers as in the hospitality industry. Thus the tourism and hospitality firms can create a database of guest history and use it for customizing package offers,
vi. Buyer Readiness Stage: When observed from a particular time interval, customers exist in different phases of readiness w purchase a product/service.
Some of them are informed of the product; some of them are unaware, some intend to purchase while some want the product. The relative number in every phase can create a large difference in developing a marketing program.
Marketing Mix of Hotel Services
The marketing mix of hospitality services includes the following:
1. Product: This component includes all the tangible products along with the intangible services that accompany the goods to manufacture the final product.
A product can be understood as a bundle or package of different goods/services that entails the overall offering.
For example, when a customer buys a room at a resort, it includes every facility like valet parking, housekeeping services, swimming pool, fitness center, etc.
2. Price: Price can be understood as the value of a product or service. Here, value signifies the trade-off between quality and price, i.e., the advantages received by the consumers against the paid prices.
Price variables include list price, allowances, discounts, payment methods. The basic reasons for offering discounts and price segmentation can be a time of purchase, customer identification, bundling, and buying location.
3. Place: This component includes the logistics and distribution of making a product/service available to the final consumers.
Services usually have short distribution channels and emphasize more upon the efforts on searching convenient retail locations for customers.
For example, restaurants usually chose high traffic regions near shopping centers and other attractions. Likewise, hotels and resorts locate their amenities in regions near airports, industrial centers, tourist attractions that are easily accessible.
4. Promotion: Hospitality companies determine their promotion mix depending upon the trading areas and customer base.
Restaurants draw buyers from the population (local or regional) and benefit by using the local media (radio and newspapers). Advertising on a national scale can only benefit large-scale chain restaurants spreading over a broad geographical region.
5. Physical Evidence: Physical evidence is any such tangible item that is used for marketing a product. It includes the environment of service operation.
For example, hotels and restaurants decorate their dining and other areas by using marketing materials for promoting a particular ‘theme.’ Similarly, McDonald s promote their services by providing fresh prepared burgers and snacks.
6. People: This component entails that people are an integral part of the delivery process and service production. For a service encounter to happen, both the consumers and the employees should be present.
Proper training and education should be provided to the employ of the hospitality companies so as to manage and meet the expectations of customers. By doing this, hospitality companies can significantly add value to their offerings/services.
7. Process: This component encompasses all the aspects of delivering services to the final consumers. It involves the elements of process design like franchising policies, supply chain cycles, the process of employee training, payment policies, etc.
Large hospitality companies, such as Marriott or Dominos, make efforts to standardize their process of service delivery so as to provide reliable and consistent service in their procedures.
Likewise, IRCTC and airline services have integrated e-tickets booking and inventory control mechanisms for standardizing their processes.