Hospitality Services Meaning, Nature

Table of Contents:-

    1. Hospitality Services Meaning
    2. Nature of Hospitality Services
    3. Service Marketing Strategies for Hospitality Services
    4. Market Segmentation of Hospitality Services

Hospitality Services Meaning

Hospitality services refer to a range of services provided to customers or guests in the hospitality industry. The hospitality sector tailors these services to elevate the overall experience and customer satisfaction of individuals staying at hotels, resorts, restaurants, or other establishments.

Hospitality is a multifaceted concept that encompasses the dynamic relationship between guest and host, or the act and practice of being hospitable. Specifically, this includes the reception and entertainment of visitors, guests, or strangers, resorts, conventions, membership clubs, special events, attractions, and other services for travellers and tourists.

The hospitality industry comprises a broad category of fields within the service industry, including lodging restaurants, event planning, theme parks, cruise lines, transportation, and other fields within the tourism industry. The hospitality industry is a multi-billion dollar industry that heavily relies on the availability of leisure time and disposable income. A hospitality unit such as a restaurant, hotel, or even an amusement park consists of various groups responsible for its smooth functioning.

These groups include facility maintenance, direct operations (porters, servants, bartenders, housekeepers, kitchen workers and more), marketing, management, and human resources. The marketing of hospitality services includes various elements such as designing the core service product (package), creating an appealing physical environment, determining pricing strategies, implementing internal marketing efforts, promoting the services, and engaging in interactive marketing processes.

Nature of Hospitality Services

The nature of Hospitality Services is given as follows:

1) Perishability

The services provided by hotels, such as the availability of their rooms, are perishable. This means that if a certain number of rooms remain unoccupied for a day, their capacity goes unused. The capacity lost or wasted on that day cannot be utilized on any other day. Therefore, the hotel experiences a loss in revenue due to the unoccupied rooms for the day, rendering it impossible to recover.

2) Location

The location of a hotel is fixed and cannot be changed immediately or frequently. Hence, hotel owners must carefully choose strategic and easily accessible locations that cater to the needs of their customers. For example, the Taj Leisure Hotel in Madurai is located atop a hill, with a panoramic view of the temple city and the Kodai hills. This suits visitors who come to the place usually on religious or leisure trips.

3) Fixed Supply

Hotels have a fixed and limited number of rooms, which poses challenges for immediate capacity expansion. It has lost business if a hotel has no vacant rooms and customers still ask for them. Therefore, service providers should analyse and decide the number of rooms and their denomination (single bed, double bed, etc.) to optimise capacity utilisation.

4) Seasons

Hotel occupancy rates vary according to the seasons and the type of hotel. For example, a business hotel will have low occupancy on weekends, as corporate houses do not work on weekends, while a holiday resort has high occupancy rates during weekends as families are free for short trips.

5) High and Low Variable Costs

Constructing and furnishing a hotel demands an infusion of financial resources. It needs further investment in hiring, training and maintaining the employees and maintaining the hotel. The fixed costs are quite high when compared to the variable costs. Therefore, the profitability rises in direct proportion to the occupancy rate.

6) Competition

Globalization has intensified the competition within the industry, as many international chains have entered the Indian market. However, it has also improved the existing service conditions but has also established a fresh set of customer service benchmarks. Many global hotel chains like Hyatt, Kempinski and Sheraton have entered the Indian hotel business, most of them through collaborations with Indian partners.

7) Value-Added Services

Hotels have learnt to enjoy repeat business by retaining existing customers and attracting new customers by offering them value-added services like health clubs, amusement centres shopping malls and communication facilities.

Nature of Hospitality Services

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Service Marketing Strategies for Hospitality Services

One of the longest-standing industries, the hospitality industry, encompasses accommodation, food and beverages for holidaymakers and business people alike. This industry is characterized by an ongoing and everlasting demand. However, no business is exempt from facing common challenges. Moreover, when thrown into a recession, these challenges are compounded tenfold.

Challenges go beyond seasonality and include uncertainties in costs and pricing, profitability maintenance, increased wages versus productivity, and heightened competition. Then they can get customers and customer satisfaction. Marketing in the hospitality industry has some unique opportunities and where a company has a truly customer-oriented service they are well on its way to marketing success.

With all these factors in mind, hoteliers and marketers in this industry face a playing field that looks very different. They are marketing something intangible and this intangible thing is so multifaceted. They own broad customer segmentation all with different reasons for buying. Hence, marketing in the hospitality industry requires a different approach and a special marketing strategy.

Marketing strategy provides the direction and guidance to achieve the marketing objectives of the firm The analysis of marketing strategy can identify major competitors such identification of major competitors would enable the firm to offer its appropriately designed marketing mix to attain the objectives of the firm.

The marketing strategy also has functions of market segmentation. The marketing strategies help to identify the market segmentations a well-defined marketing strategy clearly describes whom (customers and markets) to serve and whom to exclude, what to serve (products and services) and what to serve (which services to avoid or stop serving if such a service does not bring the expected returns to the firm).

Market Segmentation of Hospitality Services

Gaining and maintaining a competitive advantage in the broad consumer market for hospitality and travel products is an immensely challenging endeavour. Achieving success becomes significantly easier when a firm tries to carve out a smaller, specialized niche or segment within the market. By doing so, the firm can establish a competitive edge and can therefore differentiate itself from competitors.

Marketing managers have long used market segmentation as a strategic approach to divide the market into smaller, relatively homogeneous groups. Therefore, market segmentation is a fundamental marketing strategy that involves dividing the overall potential market into different and homogeneous subsets of customers. These subsets respond differently to the marketing mix of the organisation.

Segmentation can be used effectively in all facets of the tourism and hospitality industry, even in areas that may appear to be less suitable for segmentation. For example, Airline travel may not be well suited to segmentation. Each year, millions of travellers board aircraft to take them to their destination. At first glance, one might assume that airline travel is a fairly homogeneous product serving the same basic needs for most travellers.

However, airlines have achieved remarkable success in segmenting their customer base by considering frequency of use and price sensitivity. As a result, today’s aircraft are equipped with three different levels of service: first class, business class, and coach. Each level offers differences in scale, size and comfort, the level of amenities, and the ratio of flight attendants to passengers. The individual consumer can select the level of service desired and is charged a different price for each airline also segment the market based on the frequency of travel.

Segmenting a market is a multifaceted task, there is no single way to segment a market. A marketer has to explore various segmentation variables to effectively target specific consumer markets. Major variables that might be used in segmenting consumer markets include the following factors:

1) Geographic Segmentation

Geographic segmentation calls for dividing the market into different geographic units, such as nations, states, regions, cities, or neighbourhoods. A company strategically chooses to operate in one or several geographic areas paying attention to geographic differences in customer preferences.

Retailers know that shoppers from one geographic area may purchase an item such as wallpaper while those from another may prefer tiles or paint. Hospitality companies make effective use of database mining management.

Unfortunately, many hospitality companies make little or no use of this valuable analytical tool. Imagine the wealth of information about their customers available to a spa, a ski resort, or a sightseeing train. This information can be used to develop highly targeted promotions, and special packages, and to offer regional foods to guests. The lack of efficient database utilization forces companies to rely on mass marketing tactics that are often of no interest to the majority of recipients.

Knowing geographic customer preferences enables a company to modify or change its product offering. This is particularly important in North America and Europe where immigration has created pockets of customers with very different product/service preferences. For example, the growth of Muslim markets has created a need for prayer rug areas within some hotels.

2) Demographic Segmentation

It consists of dividing the marketing into groups based on demographic variables such as age, lifecycle, gender, income, occupation, education, religion, race, and nationality. Demographic variables are the most common bases for segmenting customer groups, making them the most prevalent approach. One reason is that consumer preferences and use rates often vary closely with demographic variables. Another is the demographic variables are easy to measure. Even when market segments are first defined using other bases, such as personality or behaviour, demographic characteristics must be known to assess the size of the market and to reach it efficiently. Particular demographic factors have been used in market segmentation.

1) Age and Lifecycle Stage

Consumer preferences change with age. Some companies provide a range of different products or marketing strategies to target different age groups and stages of life. For example, McDonald’s offers Happy Meals that include toys aimed at young children. McDonald’s knows that 79% of the family’s decisions to eat out are influenced by children and households. These toys are offered as part of a series, encouraging children to return until they have collected the entire set. This chain has also added salads and other products to attract the health-conscious adult market.

ii) Gender

Gender segmentation has been a longstanding strategy in marketing for clothing, hair, cosmetics, and magazines. Its application has extended to the hospitality industry. In 1970, women accounted for less than 1 per cent of all business travellers. Today women constitute an exceedingly important market segment. Hotel corporations now consider women in designing their hotel rooms. Design changes include lobby bars, fitness facilities, hair dryers, and rooms decorated in lighter colours. Although these changes are attractive to women, they also possess an allure for men. Hotel corporations are also subtly including more women executives in their advertisements.

iii) Income

Income segmentation has been a longstanding strategy for marketers of products and services. The lodging industry excels in utilising income segmentation as an effective strategy. Country clubs, boxes at sports stadiums, and upscale hotels and resorts cater to affluent people and corporations. These establishments especially target upper-income guests, by providing them exclusive experiences and luxurious amenities. Tie-in promotions have proven effective when matching a product such as an exclusive golf resort with an upscale product such as a Mercedes automobile.

Budget motels and interstate bus services find it relatively effortless to target lower-income segments.  In marketing and designing by income, it is well to remember an old proverb, “Whoever sells to kings may dine with peasants, but whoever sells to peasants may dine with kings.” The middle-income consumer is by far the largest segment of the hospitality industry but can be difficult to attract and retain.

The term “middle income” encompasses a wide range of incomes and lifestyles, thus complicating marketing strategy and tactics. Many competitors serve this segment, and product/service offerings are numerous. Changing preferences, economic cycles, and an immediate reaction to terrorism and violence by this segment complicate any marketer’s life.

3) Psychographic Segmentation

This segmentation divides customers into different groups based on their lifestyle, social class, personality and characteristics. People in the same demographic group can have diverse psychographic profiles:

i) Social Class

Social class has a strong effect on preferences for clothing, automobiles, leisure pursuits, home decor, reading habits, and choice of retailers. Afternoon tea at the Ritz-Carlton is aimed to cater the individuals from the upper-middle and upper classes. A neighbourhood pub close to a factory targets the working class. The customers of each of these establishments would likely experience a sense of unease if they were to visit the other establishments.

ii) Lifestyle

Individuals’ lifestyles greatly influence their purchasing decisions when it comes to goods and services. Marketers are increasingly segmenting the markets by buyer lifestyles. For example, Bars and watering holes are designed to cater to the preferences of different groups of individuals. These establishments aim to attract young single people who are interested in meeting someone of the opposite gender, as well as singles who are seeking like-minded companions.

iii) Personality

Marketers use personality variables to segment markets and align their products with specific consumer personalities. 

4) Behavioural Segmentation

Behavioural segmentation involves grouping buyers based on their knowledge, attitude, and use or response to a product. Many marketers believe behavioural variables are the best starting point for building market segments.

i) Special Occasion Segmentation

Occasion-based segmentation involves categorizing buyers by the times they make purchases or use products. Occasion segmentation helps firms to build product use. For example, Occasions such as business trips, vacations, or family events trigger air travel. Airline advertisements aimed at the business traveller often incorporate service, convenience, and on-time-departure benefits in the offer. Airline marketing aimed at the vacation traveller utilises price, interesting destinations, and pre-packaged vacations. Effectively categorizing different occasions, can be a valuable strategy for businesses aiming to enhance product utilization.

ii) Benefits Sought

Buyers can be classified according to the specific product benefits they are after. Product features generate positive outcomes, identified as benefits. Those product features that create positive outcomes for guests are instrumental in creating value. Features that do not offer positive results for the visitor will have no value.

iii) User Status

Segmentation of multiple markets can involve categorizing consumers as non-users, former users, potential users, first-time users, and regular users. Companies with substantial market shares, like major airlines, focus on retaining regular users and drawing in potential users. Potential users and regular users often need to tailor marketing appeals, as their preferences and requirements often diverge.

iv) Usage Rate

Market segmentation organizes markets into segments of light, medium, and heavy users. Heavy users usually make up a small percentage of the market but account for a high percentage of total buying. Researchers discovered that 4.1 per cent of airline travellers account for 70.4 per cent of airline trips, whereas 7.9 per cent of pleasure trip users of hotels and motels account for 59.4 per cent of room nights.

v) Loyalty Status

Consumer loyalty can serve as a basis for segmenting a market. Consumers may be loyal to two or three brands or favour one brand over others. However, some buyers show no brand loyalty at all. They want variety or buy whichever brand is cheapest or most convenient.

A major reason for increasing customer brand loyalty lies in the fact that loyal customers exhibit a higher degree of price insensitivity when compared to customers who frequently switch brands. In the hospitality and travel industries, marketers build brand loyalty through relationship marketing. Whereas manufacturing companies often lack direct contact with their customers, most hospitality and travel marketers do have direct contact. They can develop a guest history database and use this information to customise offers and customer communications.

vi) Buyer Readiness Stage

People are in different stages of readiness to buy a product at any given time. There exists a range of levels of awareness and interest regarding the product. While some people remain unaware, others possess a basic understanding, and a few are well-informed. The relative number in each stage makes a big difference in designing a marketing program.

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