Chapter 02 Revised 5-13.ppt - The Modern Hotel Industry...

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The Modern Hotel Industry Chapter Two
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Price Elasticity of Demand Elastic Change prices – demand changes As prices drop, demand rises As prices rise, demand falls Fewer people can afford it Fewer people think it is worth it, even if they can afford it! True for most products and services Certainly true for leisure travel Inelastic Change prices – demand is static True only for a limited range of products True for business travel to a large extent Trip to finalize a million dollar deal will not be dropped if airfare rises by $1,000 True for medicines or surgery Remember: There is always a limit to increases! Increases drive customers to use substitutes or do without!
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Segmenting the Lodging Market Definition of Market Segmentation : Process of dividing a large heterogeneous market into two or more smaller homogenous market segments (Homogenous = Consumers with similar needs) Logic of segmentation: You can’t please all the people all the time. If you try to please everybody, you will end up pleasing nobody! No average guest and no average stay
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Brand and Brand Equity Brand: A name and logo recognized by customers A unique package of products, services, amenities, and ambience at a price point that is associated with that brand. Hotel companies establish brands based on market segmentation Exhibits 2-1& 2-2 Brand Equity: Inherent value that recognition gives to the brand, when associated with positive images. Brand equity can be increased by Instant identification Broad distribution Consistent quality An assured level of service Job the hotelier is to create and deliver something unique, targeted at the right customer. If you sell a bed for the night you can charge $85; if you sell a unique experience, you can charge $250!!
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Segmenting the Lodging Market Economy Hotels Hotels with minimal services (amenities) and low rates Problem: “Amenity Creep” to compete better/feed ego, resulting in increased prices Free soap to free soap+shampoo+conditioner+lotion 27-inch TV to 55-inch flat screen LCD Exhibit 2-3 Economy hotel becomes “Mid-Market” New “Economy Hotels” emerge Hard Budgets “Real” Economy Hotels Microtel Chain, Capsule Hotels in Japan, Easy Hotels in Europe
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Segmenting the Lodging Market All-Suite Hotels All rooms with separate living and sleeping areas; may include kitchenette Can conduct business in the rooms Appeals to many segments Business people, women, families, extended stay Available in many price categories and brands Extended Stay Hotels Average guest stays for 18 nights Corporate Housing Long stay apartments with hotel services May be permitted in residential areas Often exempt from hotel room taxes Example: Marriott Executive Apartments
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Segmenting the Lodging Market Mixed-Use Projects
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