THE OPERATIONS OF SALES & MARKETING OF HOTEL INDUSTRY

8/13/2019 THE OPERATIONS OF SALES & MARKETING OF HOTEL INDUSTRY

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SIP REPORTON

THE OPERATIONS OF SALES & MARKETING OF HOTEL

INDUSTRY (For 20132014)

Submitted in partial fulfillment of requirement of Bachelor ofBusiness Administration (B.B.A) General

BBA V Semester (Evening)Batch 2011-2014

Submitted to: Submitted by:Mrs Ruchi Singhal Sahil Shukla

Assistant Professor 14124501711

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOLKALKAJI, NEW DELHI


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ACKNOWLEDGEMENT

I am deeply indebted to Mr.Ishan Tanejafor his constant support, guidance and

inspiration in completion of the internship program and preparation of thisdocument.

My sincere thanks to him for finding time out of his busy schedule and giving us

invaluable suggestions. I am also grateful to other employee of Aviva Life

Insurance for their encouragement and help.

I would like to send my sincere thanks to Ms. Ruchi Singhalfor her helpful hand

in the completion of my project.

Last but not the least; I would like to thank my parents and friends for their moral

support throughout the project.

SAHIL SHUKLA


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DECLARATION

I, SAHIL SHUKLA student of Bachelor of Business Administration from

Jagannath International Management School, GGSIP University hereby

declare that I have completed Summer Internship project on THE

OPERATIONS OF SALES & MARKETING OF HOTEL INDUSTRY as part of

the course requirement.

I further declare that the information presented in this project is true and original

to the best of my knowledge.

Ms. RUCHI SINGHAL SAHIL SHUKLA

(Assistant Professor) (14124501711)


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CONTENTS

Description Page No.

Executive Summary 5

Introduction to topic 6

Objectives 8

Literature review 10

Research Methodology 19

Data analysis 31

Limitations 33

Conclusion 34

Appendices 36

Bibliography 50


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Executive summary

LE Meridien hotel is an established luxury hotel located in the New Delhi city of

India. The hotel is part of a Starwoods chain of hotel. The hotel has been an

industry leader in the city since its inception in 1988.

The hotel follows the objectives that are consistent with the companys goals and

mission statement. In the year 2013, The Le Meridien Hotel is targeted to

contribute sales revenue of INR 165 Million against a projection of INR 140

Million. The Le Meridien Hotel, has to further maintain its market leadership in the

city by achieving the highest RevPAR Premium.

The marketing plan addresses following major attributes:

Growing need to increase the high rated businesses

Increasing the market share

Segment wise in depth analysis to gain competitors business

Channel wise in depth analysis to gain competitors business

Laying down the processes to ensure the customer is satisfied


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INTRODUCTION


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Introduction

The Le Meridien hotel located in NEW Delhi city offers breathtaking views of the

India Gate from the Terrace . ILe Meridien is a part of Starwood hotel chain of

Europe that has been a international market leader closely competing with 2

more major players. The brand recall among the travelers is high and customer

perception is of high service standards at a high price.

Le Meridien is the first five star hotel to have appeared in the city in year

1988followed by two additional competitors following similar price guidelines and

similar room occupancy patterns.


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OBJECTIVES


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OBJECTIVES

1. To study the Markrting procedure followed in The Le Meridian

2. To study the various means of marketing followed in The Le Meridian.

3. To learn what is the process of Marketing And Sales that should be

followed.

4. To increase the sales of the company.


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LITERATURE REVIEW


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Current Product Offerings

The LE Meridien is a well known 358 rooms small high end hotelthat not only

provides accommodation facilities to its guests but also a host of other services

such as food and beverage (One Chinese Specialty restaurant, one coffee shop

and one bar), spa, healthclub, pool, massage etc. 65% of the revenue share is

contributed by the room division sales. All the rooms in the hotel have recently

been refurnished and the technologies have been upgraded to ensure a better

guest satisfaction on the product front.

The Physical ProductAnsoffs product growth matrix in appendix 2indicates

the hotel to increase the market penetration. While considering the GE portfolio

matrix (As appended in Appendix 2), we should hold our position by holding

onto the current share and margins. In order to defend our share, following

strategies can be applied:

Maintaining the customer value

Maintaining the market communication

Continuous product improvement

The Brand The brand of The Imagery Hotel is well established and gives a

high end luxury perception in the market. The parent chain of The Imagery Hotel

uses House Branding strategy.


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Business Market, trends and expected future

NewDelhi, located on the Northern Part , is a tier 2 city of India. It is a major

centre for IT support, Defense, Logistics, Exports and heavy engineering

industries with a large large The city also serves as a major transit point for the

smaller industrial locations and set ups around the area and is about to witness a

flurry in hotel development with one additional 5 star hotel aiming to open by the

2ndquarter of 2014and another two big hotel projects to be operational by mid of

2015.

Taking in account the past data, domestic feeder markets to the city are Chennai,

Mumbai, Delhi, Hyderabad and Kolkata. Internationally, Russia, Spain, Italy and

China, are the major feeder markets. The recent economic meltdown affected all

these countries and thus the business in the sectors like IT support, Logistics and

Shipping was affected. However, the hotels managed to sustain due to an

increase in the visitors working on the long term government projects. This

however, decreased the hotel ARRs due to lower entitlement of these visitors (As

declared by the government). Imagery hotel believes that since hotel

accommodation service is highly perishable with a shelf life of just one day, it

needs to be sold at the highest possible rate for the day, thus it chose to accept

the lower rated government businesses in order to accommodate for the lost

chunk from higher paying sectors such as IT support, Shipping etc and attained

market leadership in the city.

Appendix 3refers to the past performance of the city hotels and industry trends.

The city occupancies have dropped by 15% over the period of last one year dueto economic instability. In order to sustain, hotels were forced to reduce their

prices and thus ARRs decreased by 10%. An overall decrease of 25% has been

cited in room revenues in the city. Imagery hotel has shown a 17% increase in its

RevPAR Premium owing to following factors:


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Imagery hotel decreased ARR by 19% in order to achieve 4% increase in

the market share.

Competitor 1 losing 25% of its market share because of its reluctance in

compromising with the rates (Competitor 1 has increased its ARR by 8%

over the Last year).

Least degrowth in room revenues of Imagery hotel.

Gaining the competitor 1sbusiness (Increased by 18%)

With a bumpy economic improvement in EU and an uncertain future of USA (IMF,

2010), the imagery hotel will have to continue with the last years strategy. During

the economic downturn, the potential of government sector did not suffer (as per

the past records available with the hotel). The sector kept contributing 128 rpd in

the city (64% of the total business for 5 star hotels) in the year 2010.

New projects (Majority of them being government backed) in the city is expected

to increase the footfalls inNewDelhi thus generating an increased demand as

compared to Last Year (The data collated from various market sources Various

MNCs, SMEs & industry development authorities of the state.). Data shows an

upward movement in RPDs from 200 in 2009 to 300 in 2010. From the data

collected, the 300 footfalls is expected to increase to 375 in 2011.

By 2ndquarter of 2014, however, ABC hotel will open up to add up another 120

room inventory (Increasing the available city supply from 358 rooms to 478

rooms). As per the calculation the overall occupancy percentage may go up by

1.2%. The addition of fresh inventory will allow end user to witness a better

playground of bargaining. As a result, while 1st quarter will show a consistent

upward trend in city ARR, it will start falling with the advent of 2ndquarter. Hotels

will thus have to strive & increase as much revenue as the possible in the 1st

quarter itself in order to fill up the deficit that may arise from 2nd

Quarter of 2014

onwards.


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Environment

The current environment in the city seems to be highly volatile with following

forces changing the market dynamics on an uncertain basis:

Political EnvironmentThe current state of politics in the state is highly

unstable with a group of politicians working in order to get the region

passed as a separate state. In such a case, there might be instances of

MNEs pulling off their investments around the city affecting the hotel

business adversely. However, on contrary, since the city will gain a

reputation of state capital, it may attract further investment thus generating

business for hotels. The matter is unpredictable and makes the future

highly uncertain.

Economical EnvironmentThe regional economy is going through the

ripples of economic instability of EU and USA and affecting the business

as discussed initially.

Social Environment The parent hotel chain is run by a trust under a

bigger brand. The trust believes in social causes and donates a part of

Profit into a charity that helps the victims of any terrorist attack across the

world.

Technological Environment Continuous improvements and

technological enhancements call for a need of constant updating in order

to maintain the product superiority over competition.

Legal Environment With an unpredictable political future, the legal

environment also is subjected to controversy since new legislative

regulations will come into play ones the verdict is given by the government.

Ecological EnvironmentThe hotel has acquired various initiatives forsustainability. Some of these are waste reduction, reusing and recycling,

constant monitoring of gas, oil and electricity usage etc.

The environmental factors can further be explained on the basis of Porters five

forces model in the appendix 4.


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SWOT Analysis

Imagery hotel, on one hand has various advantages to its side that it can

leverage to its advantage, while on other hand; it has some disadvantages thatneed to be looked into. The SWOT analysis below will discuss the same.


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Market overview

Imagery hotel currently has six well defined market segments with eightsubsegments as shown in the model below:

Figure 1

Each of the market segment has been coded (Codes are mentioned next to each

segment) for an ease of reference at later stages. The structure of the past

segment mix for competition was also made in year 2010 2011 based on the

market feedback, resident guest feedback, taking information from competition

employees, our own employees and meeting competition guests on various

occasions. The data was then verified with the market figures being shared on a

regular basis to prove the genuineness of figures. Following graphs give a

segment mix of the competitive set in the city in terms of occupancy level

contribution and revenue contribution.


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Figure 2


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Sales and Distribution

The segments as mentioned above utilize our services from the following

distribution channels (Please refer to segment codes in Market Overview):

Figure 3


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RESEARCH

METHODOLOGY


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Mission, Direction and Objectives

The parent companys vision is to operate 30,000 hotel rooms in 50 major

destinations across the globe to earn a group turnover of 2 billion USD and to

maintain market dominance in each of the locations.

In line with the parent companies vision, The Imagery hotel follows following

objectives:

Financial Objective: To achieve the budgeted revenues of INR 165 Million

for the financial year 20132014

Competitive Objective: To achieve the market dominance by achieving the

highest RevPAR premium in the competitive set.


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Targeting and Positioning Decisions

Referring the market overview section (Figure 2), our targeting and positioning

should be based on different strategies depending on the market segment, viz:

Corporates: Since corporate market segment contributes maximum share

to the revenues (55%) and has the highest paying capacity, hotel should

continue to retain its share. Another notable aspect is the historical data

that shows the paying capacity is higher in Non Negotiated Territory

Accounts and Negotiated National Accounts is higher in comparison to

Negotiated Territory accounts. So the efforts should be more concentrated

on the earlier 2 subsets. The segment contributes maximum on weekdays

(i.e. Monday to Friday). Competitor 1 has traded off this segment with

groups since the location of the competitor gives it an advantage to attract

leisure groups to fill up on the weekends. The competitor 2 has traded this

segment with Long stay.

Long Stay: The imagery hotel has taken a conscious decision to use this

segment as filler so that the gap created by corporates on weekends can

be traded off with this segment. In case of Imagery hotel, this segment

contributes to 35% occupancy share but only 20% revenue share. There

is a huge gap evident in this case when this figure is compared to the

competition figures. Competition hotels seem to have customers who are

paying comparatively more to them. The reason of the same could be our

historical data that shows we do not receive support from Negotiated

National Accounts sub segment. This segment has higher paying capacity

and our reports confirm their usage of competitors. The field sales team

will play a major role in identifying the competitor customers in thissegment.

Conferences: The imagery hotel has maintained highest share from the

conferences due to the largest conference hall that the hotel built 20 years

ago within its premises. Since the hotel has largest conference hall, it

charges a premium to the guests attending the conference and using its


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accommodation facilities. This segment contributes to 15% to occupancy

and 15% to the revenue of The Imagery hotel. The strategy of charging

slight premium to this segment will be continued.

Groups: SinceLe Meridien is a business hotel, the share of groups is

lower it. The highest share for Groups is for Competitor 1 due to its

location advantage (Located on the beach). It will be wise not to disturb

that segment from competition since The Imagery Hotel is not fully

equipped to provide a beach resort experience. However, the plans could

be taken up by the corporate office at a later stage to revamp the facilities

and connect the hotel directly to one of the close by beaches.

Events: The XYZ city due to its size is not able to attract a lot of events.

This is evident in the overall city performance as well. Being a competitive

product in terms of brand value and domestic recognition, Imagery hotel

can continue charging a premium to this segment.

Crew/ Layover: Newdelhi does not have any crew base due to its size

and location.


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Product and Brand Decisions

Product Marketing DecisionsThe Imagery Hotel offers distinct product with

exclusive service levels. Renovation and product upgrade was finished in the

2010. In the forthcoming year, the hotel plans to promote its product by its

improved interiors and established service levels. Following aspects will be

covered:

Theme of advertisement and media releases will focus on upgrades done

at the hotel. Concentration will be on print media.

Printing of new brochures to be distributed across the hotels in the chain,

sales offices and to be handed over to the major business sources.

Organizing familiarization trip for sales office employees working in

different locations and major business sources in order to showcase the

actual product offering

Brand Marketing DecisionBrand value enhancement to be undertaken in line

with the corporate marketing strategy. Owing to renovation and product

upgrading, brand value can be revamped this year to maximize the room

revenue. On a local level, the hotel will get associated with the high end

exclusive shopping arcades, monthly magazines etc for joint promotionalactivities.


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Pricing Decisions

In line with the overall company strategy, The Imagery Hotel plans for 10%

increase in published tariff. The expected published tariff is attached in

Appendix 5. It also carries the pricing template to be followed in order to load

rates on all the channels. For corporate rate negotiations, rate tie up negotiation

guidelines are also given in Appendix 5. The hotel has prepared an expected

demand calendar that considers the past occupancy trends and future Business

on Books. Accordingly, dynamic discounted price (Rate of the Day) has been set

against each day of the year. The rates are to be loaded on the system and will

be visible on all the distribution channels simultaneously. These rates can be

changed by the hotel as and when required.


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Channel Decisions

Figure 3 shows the distribution system of The Imagery Hotel. As per historical

data, maximum revenue for the city hotels is achieved from reservations offices,

sales offices and electronic channels (GDS Channels). The Imagery Hotel will

attain a strong channel support by concentrating on following aspects:

Sales Offices: Sales blitz to the domestic feeder markets to be done by

the hotel sales team. An aggressive push is required from Sales offices to

increase the business. For this, new brochures will be helpful.

GDS Channels: The hotel receives GDS/ Electronic channel booking

requests from Galileo, Sabre, Worldspan and Amadeus. Out of these,

Galileo and Amadeus contribute maximum to the city hotels. In year 2010

The Imagery hotel received a fair share of 46% from Galileo which is

highest in the city, however, there is a scope of improvement in the

Amadeus channel wherein the hotel received only 24% of fair share. In the

year 2011, The Imagery Hotel needs to promote itself more aggressively

on Amadeus by joint marketing programs and tie ups, online virtual store

and channel advertising.


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Marketing Communications Decisions

Advertising: Advertisements to appear in print media in feeder markets.

Advertising this year will concentrate on the enhanced product features

which have been added during the renovation of the hotel.

Public Relations: Press meets will be conducted before every food

promotion and will include all publications from the city. The press meet

will also be conducted in order to showcase the renovated rooms to the

general public. Cricket teams that are scheduled to stay with us in March,

June, August and September will increase the buzz surrounding the hotel.

Sales Promotions: Channel selective sales promotion for Amadeus will

be initiated as earlier discussed. Familiarization Trip is to be arranged for

the major business sources in order to showcase the improved product

(As discussed earlier).

Personal Selling: Sales team will continue to visit the corporate houses

and PSU;S maintain the relationship with existing users (Retention

Accounts) and to flourish the relationship with the competitor users (Hit

Accounts).

Direct Marketing: Reservation department has been given an

authorization to go 1 level below the approved Best Available Rate as

mentioned on the Demand Calendar in case they feel the customer is not

willing to pay the rate of the day.


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Customer Service and Internal Marketing

Customer Feedback System is in place as per the corporate office guidelines. All

the feedback as received is being addressed by the General Manager within 24

hours of feedback receipt. The practice will continue to be followed. The sales

team will send E Mailers to their respective clients about any new activity taking

place in the hotel or is related to the hotel. The sales team will take customer

feedback after the sale and feed it into the online Customer Feedback System as

per the process.


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People Decisions

The Le meridien hotel attracts a healthy talent pool due to its brand and

generous salaries. In the forthcoming year, employees in direct guest contact

especially the once from Front office and reservations will be authorized to take

their own decisions which is discussed further in the next section.


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Process Decisions

In order to make the decision process faster, employees working in the Front

Office Department are authorized to do the following in order to do customer

recovery in case of a complaint:

Charging one slab lower than the Best Available rate of the day.

Including a breakfast/ lunch/ dinner complimentary in the rate

Including a complimentary airport pick up/ drop in the rate.

Including a complimentary fruit basket/ cookies platter in the room.


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Marketing Programs

A calendar has been prepared for the marketing activities to be conducted in

2013 and can be referred to in Appendix 6.


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DATA ANALYSIS


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Forecasts and Financial Details

Budgeted forecasts show room revenue of INR 140 Million for the Financial Year

2013 2014

with an average occupancy rate of 74%.


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LIMITATIONS

The data collection was little bit tough because latest data is not available

on the internet.

Finding the data of Insurance sector is very difficult.

Problem occurred due to lack of time and facility of internet


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CONCLUSION

RPD Rooms Sold per day

ARR Also known as ADR is a statistical unit that is often used in

the lodging industry. The number represents the average

rental income per occupied room in a given time period. ADR

along with the property's occupancy are the foundations for

the property's financial performance. The ADR can be

calculated by dividing the room revenue by the number of

rooms sold (Wikipedia, 2012).

Occupancy Occupancy is the percentage of available rooms that were

sold during a specified period of time. Occupancy is

calculated by dividing the number of rooms sold by rooms

available (STR Global, 2012).

Competitive set A competitive set consists of a group of hotels by which a

property can compare itself to the groups aggregate

performance. There must be a minimum of three hotels in

any competitive set and a minimum of four hotels in Europe,

excluding the subject hotel. To protect proprietary data, a

single hotel or brand can not exceed 40% of the competitive

set for North American hotels and 50% for hotels outside of

North America. A single hotel company (i.e. Marriott brands,

Choice brands, etc.) may only comprise 60 percent of the

competitive set room supply (STR Global, 2010).

Market Share

Percentage

Also referred to as Occupancy Penetration Index. An index

designed to measure a hotel's share of the segment's (comp

set, market, tract, etc.) demand (demand = rooms sold). It is


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calculated as: (Hotel Occupancy / Segment Occupancy) x

100 = Occupancy Index. (STR Global, 2010)

Other Revenue Includes all other revenue excluding room revenue and F&B

revenue (STR Global, 2012).

RevPAR

(Revenue Per

Available Room)

Revenue per Available Room (RevPAR) is the total guest

room revenue divided by the total number of available rooms.

RevPAR differs from ADR because RevPAR is affected by

the amount of unoccupied available rooms, while ADR shows

only the average rate of rooms actually sold (STR Global,

2012).

RevPAR

Premium

Also referred to as RevPAR (Yield) Index. A RevPAR (Yield)

Index measures a hotels fair market share of their segments

(competitive set, market, submarket, etc.) revenue per

available room. If a hotel is capturing its fair market share,

the index will be 100; if capturing less than its fair market

share, a hotels index will be less than 100; and if capturingmore than its fair market share, a hotels index will be greater

than 100 (STR Global, 2012).

Room Revenue Total room revenue generated from the sale or rental of

rooms (STR Global, 2012).


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APPENDICES


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APPENDICES

APPENDIX 1

The 7 Ps Marketing model

The Sales and Marketing plan uses the above 7 P model to attain the objectives

as mentioned in the plan.


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APPENDIX 2

Ansoffs Matrix

The Ansoffs Matrix is showing the current hotel positioning in the market. The

product exists in an already existing market. So the strategy should be of market

penetration


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GE Portfolio Matrix

The GE Portfolio matrix above shows the positioning of the 3 hotels in the city.

The circles carry the revenue share of each of the hotels. The Le Meridien Hotel

has a very high competitive edge but located in an unattractive market due to low

demand. Thus, as per GE portfolio matrix, it falls under zone 2, which suggests

following strategy (Maximize profits while maintaining position):


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APPENDIX 3


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APPENDIX 4

PORTERS FIVE FORCES ANALYSIS

Following is an analysis done in order to find the effects of factors on hotel

industry in the city as per Porters 5 forces model:

THREAT OF NEW ENTRANT

Very High - - High - - Moderate- - Low - - Very Low

ENTRY BARRIERS NEW PROJECT ATTRACTIONS

High capital expenditure and costs Long term perspective of increase in

demand

High investment recovery time Government efforts in creating

attractive environment by tourism

promotion channels

Political instability in the state Development of corporate andindustry environment.

Existence of existing brands with a

first mover advantage

BARGAINING POWER OF BUYERS

Very High - - High- - Moderate - - Low - - Very Low

FACTORS DISCOURAGING THE

CUSTOMER TO BARGAIN

FACTORS ENCOURAGING THE

CUSTOMER TO BARGAIN

Top end brand perception. Long term business potential


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High service delivery standards Overall brand usage of the

company (Customer using services

at all the locations)

Superior product standards Bulk Businesses

Physical location of the hotel In

close proximity to client premises

Easy to commute.

Size of the company using our

service.

Similar pricing structure of

competitive set

More supply then demand

Ease of access to senior

management for feedback.

Opportunity to negotiate effectively

in future.

Highly perishable product

THREAT OF SUBSTITUTE PRODUCTS AND SERVICES (Example Guest

houses, alternate accommodation etc)

Very High - - High - - Moderate - - Low- - Very Low

FACTORS DISCOURAGING

SUBSTITUTES

FACTORS ENCOURAGING

SUBSTITUTES

High service standards Cost consciousness of consumers

High brand perception Increase in the transit travel

High levels of security, cleanliness

and staff training


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BARGAINING POWER OF SUPPLIERS

Very High - - High - - Moderate - - Low- - Very Low

FACTORS DISCOURAGINGSUPPLIER BARGAINING POWER

FACTORS ENCOURAGINGSUPPLIER BARGAINING POWER

Long term relationship Increasing inflation

Bulk purchasing from suppliers Flexibility for supplier in order to

meet demands as per fluctuations

More supply then demand

On analyzing the above five factors, we

can establish the given diagram on the

basis of Porters Five Forces model.


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APPENDIX 5


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Appendix 6

Marketing Activities Calendar


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Bibliography

International Monetary Fund, 2012. World Economic Outlook 2012, Chapter 2.

Washington DC: International Monetary Fund.

STR Global, 2012. A Guide to our terminology [Online]. Available from

http://www.strglobal.com/Resources/Glossary.aspx#R [Accessed: 1stJanuary 2012]

Wikipedia, 2012. Average Daily Rate [Online]. Available from

http://en.wikipedia.org/wiki/Average_daily_rate [Accessed: 1st January 2013]
http://www.strglobal.com/Resources/Glossary.aspx#Rhttp://www.strglobal.com/Resources/Glossary.aspx#Rhttp://en.wikipedia.org/wiki/Average_daily_ratehttp://en.wikipedia.org/wiki/Average_daily_ratehttp://en.wikipedia.org/wiki/Average_daily_ratehttp://www.strglobal.com/Resources/Glossary.aspx#R

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THE OPERATIONS OF SALES & MARKETING OF HOTEL INDUSTRY