SIP REPORT ON THE OPERATIONS OF SALES & MARKETING OF HOTEL INDUSTRY (For 2013 2014)

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

BBA V Semester (Evening) Batch 2011-2014 Submitted to: Mrs Ruchi Singhal Assistant Professor Submitted by: Sahil Shukla 14124501711

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL KALKAJI, NEW DELHI

ACKNOWLEDGEMENT
I am deeply indebted to Mr.Ishan Taneja for his constant support, guidance and inspiration in completion of the internship program and preparation of this document.

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 Singhal for 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

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 (Assistant Professor)

SAHIL SHUKLA (14124501711)

CONTENTS

Description
Executive Summary Introduction to topic Objectives Literature review

Page No.
5 6 8 10

Research Methodology Data analysis Limitations Conclusion Appendices Bibliography

19 31 33 34 36 50

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

INTRODUCTION

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.

OBJECTIVES

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.

LITERATURE REVIEW

10

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 Product Ansoffs product growth matrix in appendix 2 indicates 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.

11

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 2nd quarter 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 3 refers 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 due to 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:

12

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 1s business (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 2nd quarter 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 2 nd quarter. Hotels will thus have to strive & increase as much revenue as the possible in the 1 st quarter itself in order to fill up the deficit that may arise from 2 nd Quarter of 2014 onwards.

13

Environment
The current environment in the city seems to be highly volatile with following forces changing the market dynamics on an uncertain basis:

Political Environment The 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 Environment The 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 Environment The hotel has acquired various initiatives for sustainability. 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. 14

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 that need to be looked into. The SWOT analysis below will discuss the same.

15

Market overview
Imagery hotel currently has six well defined market segments with eight subsegments 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.

16

Figure 2

17

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

18

RESEARCH METHODOLOGY

19

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 2013 2014

Competitive Objective: To achieve the market dominance by achieving the highest RevPAR premium in the competitive set.

20

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 this segment.

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 21

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.

22

Product and Brand Decisions

Product Marketing Decisions The 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 Decision Brand 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 promotional activities.

23

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.

24

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.

25

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.

26

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.

27

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.

28

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.

29

Marketing Programs
A calendar has been prepared for the marketing activities to be conducted in 2013 and can be referred to in Appendix 6.

30

DATA ANALYSIS

31

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%.

32

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

33

CONCLUSION
RPD ARR Rooms Sold per day 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 Also referred to as Occupancy Penetration Index. An index Percentage designed to measure a hotel's share of the segment's (comp set, market, tract, etc.) demand (demand = rooms sold). It is

34

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 Revenue per Available Room (RevPAR) is the total guest

Per room revenue divided by the total number of available rooms. Available Room) 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 capturing more 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).

35

APPENDICES

36

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.

37

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

38

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):

39

40

APPENDIX 3

41

42

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 High capital expenditure and costs

NEW PROJECT ATTRACTIONS 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 and

industry environment. Existence of existing brands with a first mover advantage

BARGAINING POWER OF BUYERS Very High - - High - - Moderate - - Low - - Very Low

FACTORS DISCOURAGING THE FACTORS ENCOURAGING THE CUSTOMER TO BARGAIN Top end brand perception. CUSTOMER TO BARGAIN Long term business potential 43

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 Size of the company using our close proximity to client premises service. Easy to commute. Similar pricing structure of More supply then demand

competitive set Ease of access for to senior

management

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 SUBSTITUTES

DISCOURAGING FACTORS SUBSTITUTES

ENCOURAGING

High service standards High brand perception High levels of security, cleanliness and staff training

Cost consciousness of consumers Increase in the transit travel

44

BARGAINING POWER OF SUPPLIERS Very High - - High - - Moderate - - Low - - Very Low

FACTORS

DISCOURAGING FACTORS

ENCOURAGING

SUPPLIER BARGAINING POWER Long term relationship Bulk purchasing from suppliers

SUPPLIER BARGAINING POWER Increasing inflation 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.

45

APPENDIX 5

46

47

48

Appendix 6
Marketing Activities Calendar

49

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: 1st January 2012]

Wikipedia,

2012.

Average

Daily

Rate

[Online].

Available

from

http://en.wikipedia.org/wiki/Average_daily_rate

[Accessed: 1st January 2013]

50