Profitability in hospitality organisations

Discuss about the Research for Business and Tourism.

Marketing has become apparent that it is crucial for the development of the business and profitability is the bottom line for the development of the business. The quest for the profitability of the hospitality organisations is contributed by marketing strategies and the strategies need to be diversified to survive in these inferior and modern economies. As stated by Kimes and Writz (2015), marketing concept is the totality of planning of the marketing strategies and executing of the marketing mix in proper way. Therefore, the target of the hotels is to reach the larger audiences and to provide the satisfaction of the guests. The more guests will visit the hospitality organisations, the more it will make the revenue. The organisations need to reduce the operational cost and marketing cost so that the profitability becomes higher. According to Jaeorski (2018), traditionally marketing concept is associated to the performance of the organisation that direct the flow of the services or products from producers to consumers, whereas, of late, marketing strategy is concerned with transactions those are stimulated, created, valued and facilitated. Moreover, over the past five years, inbound tourism in Australia has supported operators as the rising numbers of tourists have accelerated the demands for the five-star luxury hotels. The depreciation of the Australian dollars made the hotels cheaper for the international tourists to afford the luxury hotels. This study, therefore, focuses on the marketing strategies taken by five-star hotels in order to make profitability in the competitive environment in Australia.  

Profit is left after all expenses have been removed from the accrued revenues (Leung et al. 2015). Therefore, the five-star hotels in Australia have been focusing on making the profit; however, rising in the cost can lower the profit of the organisation. The marketing strategies of the organisation need to satisfy the wants and needs of the individuals who are the target market of the hospitality organisations. Hospitality is the service-oriented organisation where the guest satisfaction is the ultimate. This study will be significant for the management of the five-star hotels as they can gather the secondary information regarding the marketing strategy and profitability. This study will be significant as maximum secondary sources have been focused on marketing strategies on luxury hotels and profitability of the hospitality sector has been discussed separately. There are already enough literature based on this topic; however, this research puts a significant amount of emphasis on only in Australia five-star hotels. The concentration of the study will be put on the traditional as well as online marketing strategies that would help the organisations to have profitability to create positive ambience for the five-star hotels in Australia. This study will be significant for the marketing managers of the five-star hotels as they can learn about the process of making a profit using both traditional and modern marketing methods. This study is different from other researchers as this study will give emphasis on reasons behind frequent changes of marketing strategies in five-star hotels in Australia.

Marketing Mix Strategies

The demographic scope of the study lies in finding out the marketing strategies of the five-star hotels and the associated variables that are related when they make strategies for the organisation. The luxury hotels only target the corporate travellers and upper-class people who can only afford five-star hotels. Therefore, this study would focus on factors that are associated with the target market of the five-star hotels. The geographic scope of the study is to find out the marketing strategies of the five-star hotels in Australia to impact on profitability. The core focus of the study is limited to only Australia-based five star hotels. Maximum five-star hotels in Australia situated in Perth, Sydney and Melbourne. Temporal scope of the study is to do the reach between June and August 2018 at this time will be winter in Australia. Maximum leisure travellers visit in Australia during winter; therefore, it is the peak season for the five-star hotels and the five-star hotels make new marketing strategies to attract the guests.

Value of the Australian dollars has reduced in last five years and many of the five-star hotels have become cheaper comparing to other Asian countries. Now, many of the middle classes from several Asian countries have supported to visit Australia and it has increased the rising inbound tourism. Mainly Chinese and Indian tourists have strived growth in tourism expenditure and luxury hotels industry revenue reached to AU$4 billion in the year 2017 (McPhail et al. 2017). Annual growth is 2.9% in the five-star hotel industry in Australia; therefore, the five-star hotels in Australia are trying to attract the guests (Ibisworld.cpom.au 2018). Industry competition becomes high and domestic tourists have reduced as a share of industry revenue in the last five years. Therefore, substantiate market growth is needed for the five-star hotels to become profitable in the future. Another issue of five-star hotels in Australia facing is to frequent changing of marketing strategies.

Objectives:

• To explore the marketing strategies used by five-star hotels in Australia
• To find out the impact of marketing strategies on the profitability of the five-star hotels

The concept of marketing strategy and profitability in hospitality

In the hospitality industry, the organisations mainly focus on the quality services and skilled employees. The marketing strategy of the hospitality industry is to provide personalised service or to provide discount pricing. The marketing strategy leads maximum guests to visit the hospitality organisation and the revenue of the hospitality organisations increases through this. As stated by (Kusluvan et al. 2017), marketing is the activities, processes and set of institutions for creating, delivering, communicating and exchanging the offers that can provide value for the clients, customers and partners of the organisation. In addition, the marketing strategy of the organisation helps the organisation to connect and communicate with the target audiences to convey the value of the organisation to sell the services and products and with the emergence of digitalisation, the process of marketing becomes easier in particular with the technological innovation. Before starting the marketing strategy, the marketing team of the hospitality sector research, communicate and target the audiences and make a strictly public relations to accelerate the sales and make string customer base (Kandampully et al. 2015). Moreover, the profitability of the organisation is to generate the more money that it expands and profitability of the organisation can be gained through various tactics calculating through ROI (Return on Investment) that helps the business o determine to generate the profit.

The strategic marketing planning process

Marketing Mix Strategies

Proper marketing mix for a hospitality sector is crucial for development and success. As opined by Litvin et al. (2018), marketing mix is utilised to indicate the marketing variables which are used by the sales team to aim the specific guests or target the market segment. The authors further argued that five-star hotels provide service or facilities to the guests and offered services are food and beverage, guest room, banquet rooms, recreational facilities, conference room, health and wellness facilities, travel desk, executive lounge, business centre and parking facilities. Five-star hotels offer services to different market segments and each of the segments has different requirements. Place refers to the accessibility of the service to the guests; therefore the location of the hotels must be good and easily accessible. Direct methods of reaching hotels are sales through hotel team, online pay and personal telephone calls. Promotions can be done through direct sales or social media techniques. Promotional and communication channels used by the hotels are television, hotel websites, twitter, Facebook page, billboards, brochures and SEO. The promotional strategies are important as it helps the hotels to reach the customers. Lastly, pricing strategies of the five-star hotels depend on the marketing strategies of the hotels as some of the hotels keep the competitive pricing and some of the hotels keep premium pricing. The hotel rate and packages are defined to impress the guests and to attract more guests (Kimes and Writz 2015). In peak season, the pricing rate is kept as high and in the lean season, the pricing of the hotels keep a bit lower.

The strategic marketing planning process

The marketing strategy of a hospitality sector is done keeping in mind the company’s mission and vision. The objectives of the company are set by the management and the managers try to meet the objectives. In order to meet the objectives; the management makes a marketing strategy. As stated by Leung et al. (2015), the management of the hospitality sector research about a prospective study like external opportunities and intra-company strengths and weaknesses.  The critics stated that marketing strategies start from the marketing segmentation where the organisation decides the target market. After targeting a segment of the customers, the organisation does positioning by service line strategy. The organisation can make a direct comparison of the hotels and pricing strategy needs to be competitive in order to survive in the industry (Jaworski 2018). If the five-star hotels have a board of directors; therefore, this plan needs to be approved and the implementation of the plan starts afterwards.

Five-star hotels mainly take the strategy of differentiation where their services will be different from another competitor in the market. Of late, five star-hotels are taking the strategy of personalised service where the guests’ services are making personalisation. International guests often need consistency services when they travel the world. Therefore, differentiation makes the hotel unique as per the requirement of the customers (Kusluvan et al. 2017). In addition, Sydney is the place where maximum five-star hotels of different international brands are situated. These hotels mainly take the strategy of innovation as the hotels always try to innovate with the service and their advertisement of websites and social media present the innovative services. Marriott, Hilton, Hyatt, Park and Four Seasons Hotels are some of the examples where the guests can have innovative service concept. Moreover, cutting cost to increase the profits is the marketing strategy during the time of the lean season when numbers of guests are lower. Additionally, the hotels are trying to build the loyal customers base so that the customers visit the hotels again and again. Hyatt Hotels give the guests ‘Privilege Membership Card’ with which the guests can have the services at reduced price throughout the year. Building loyal customers can increase the room occupancy throughout the year and it will eventually make the hotels profitable. As opined by Bowie et al. (2016), in their article that the hospitality organisations must try to keep the employees happy so that they can provide luxury services and good behaviour to the guests. The authors further stated that hotels must provide superior quality services to the guests so that they guests must come again and superior services lead to satisfaction of the customers. Lastly, social media content strategy of the hotels help the hotels to increase the customers as the guests can be enthusiastic to watch the images, services and offerings.

The marketing strategies help the hospitality organisations to gain the competitive advantage. Mainly, competitive advantage can be gained through two ways, first differentiation strategies and second through cost-leadership. Five-star hotels mainly take the strategy of service innovation and creating differentiation. Measuring marketing strategy effectiveness, the organisation has to break down the functions of marketing into constituent parts. By doing this, the managers can analyse the marketing expenses, ROI and value of shareholders. The managers will further understand the internal motives that will propel to have value for the business (Ward 2016). The authors further argued that the hotel industry is about the service marketing, here profitability of the organisation is decided through numbers of guests visit the hotels. In Australia, the five-star hotels are expanding to larger geographic areas so that they can increase the brand image and customer base. User-friendly website helps the guests to book the room and decide the services and search-friendly content strategy provides the travellers to understand the offers and discounts. Therefore, the marketing strategy of the five-star hotels is to increase the customer base so that more guests can be aware of the hotels. Chiliya et al. (2015), stated in their article that maximum occupancy in hotels can provide good profitability and in upscale hotels; achieving peak gross needs operating profit also.  

Reference List

Ibisworld.com.au. 2018. Luxury Hotels – Australia Industry Research Reports | IBISWorld. [online] Available at: https://www.ibisworld.com.au/industry-trends/specialised-market-research-reports/consumer-goods-services/luxury-hotels.html [Accessed 26 Apr. 2018].

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Kandampully, J., Zhang, T. and Bilgihan, A., 2015. Customer loyalty: a review and future directions with a special focus on the hospitality industry. International Journal of Contemporary Hospitality Management, 27(3), pp.379-414.

Kimes, S.E. and Wirtz, J., 2015. Revenue management: Advanced strategies and tools to enhance firm profitability. Foundations and Trends® in Marketing, 8(1), pp.1-68.

Leung, X.Y., Xue, L. and Bai, B., 2015. Internet marketing research in hospitality and tourism: a review and journal preferences. International Journal of Contemporary Hospitality Management, 27(7), pp.1556-1572.

Litvin, S.W., Goldsmith, R.E. and Pan, B., 2018. A retrospective view of electronic word-of-mouth in hospitality and tourism management. International Journal of Contemporary Hospitality Management, 30(1), pp.313-325.

McPhail, R., Patiar, A., Herington, C., Creed, P. and Davidson, M., 2017. Development and initial validation of a hospitality employees’ job satisfaction index: Evidence from Australia. International Journal of Contemporary Hospitality Management, 27(8), pp.1814-1838.

Solnet, D., Kralj, A. and Baum, T., 2018. 360 degrees of pressure: The changing role of the HR professional in the hospitality industry. Journal of Hospitality & Tourism Research, 39(2), pp.271-292.