Chapter I

INTRODUCTION

Background of the Study

Growth in the small-scale industries plays a vital role and feature in any economy

especially considering developing countries like the Philippines. These industries provide

a wide range of activities and act a pivotal part in employment generation with low cost

capital investment. However, due to their nature of low cost budget operations, these

industries are susceptible to risks of non-sustainability and early business liquidation.

Among these small-scale industries are tourist inns that offer cheaper

accommodation and dining experience compared to hotels and resorts. In the modern

times, the way people spend their vacations has undergone a great change. People like to

spend good times with family and friend while at the same time exploring various tourist

places across the globe. As a result the tourism industry across the globe has seen an

unprecedented growth which in turn has also resulted in tremendous growth in

accommodation facilities. Comfortable hotels and accommodation facilities play a very

important role in popularizing any tourist destination. While five star hotels can cater to

the needs of affluent visitors, small and medium range hotels and lodging houses are

available for use by middle class travelers (Ejeani, 2015).

In contrary to the traditional perception, this case study establishes that tourism is

one of the most dynamic industries that change with time. Nowadays tourism is

associated with service industry that embraces business principles like competitiveness,

sustainability and many others that will hopefully come up in the proposed generic
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strategy. At the same token, several scholars regard accommodation as a basic, functional

business within the tourism industry. Most tourists experience the extreme luxury and

opulence of tourism when accommodation is of a high standard. Hotels constitute

proportion as a sub-sector of tourism accommodation business (Bhatia, 2006). Most of

the existing studies only focused on hotels, ignoring the fact that there is a diverse array

and numerous classifications of accommodation facilities related to the tourism industry

like tourist inns.

In general, hotels offer two major types of services: (a) accommodation and (b)

dining services. Based on the quality and extent of services provided, location, bedroom,

front office/reception, food and beverage, general facilities (service and staff), and special

facilities (i.e., business center, limousine services and airport transfers), hotels are further

classified as Deluxe, First Class, Standard, and Economy.

Hotel guests can expect a room with private bath, telephone, radio, and television,

in addition to such customer services such as laundry, valet, cleaning and pressing. Aside

from the services mentioned, hotels have other facilities: function rooms, ballrooms,

health spas, coffee shops, dining rooms, cocktail lounges or night clubs, gift shops or

newsstand-tobacco counters, and business centers for social occasions, health buffs, and

business conferences.

Customers of the industry include the domestic household, foreign visitors and

institutional buyers. It can be noted that the domestic household’s selection of hotels and

other lodging facilities are affected mainly by three factors: 1) Social Networking; 2)

Type and extent of free services (i.e., free local calls, continental breakfast, etc.); and 3)

Competitive Pricing (Edralin and Castillo, 2001).

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The Hotel Management network provides access and opportunity within all facets

of the hotel and lodging industry across the globe. It encompasses a series of publications

and live events that serve the hospitality industry starting with the flagship publication

Hotel Management, delivering hotel news, analysis and operational strategies; magazine,

celebrating the design excellence of hotels, resorts, lodges and destination spas.

In addition to these print and online products, Hotel Management's network

sponsors prominent events including the International Hotel Investment Forum (IHIF)

held in Berlin, which is the leading meeting place for the European hotel investment

community; the Russia & CIS Hotel Investment Conference, which provides an

invaluable opportunity to explore the region’s enormous potential and uncover new

business opportunities; NATHIC which cover the US hospitality investment market; the

HOTEC series of three-day forums held across the globe which consist of pre-scheduled

appointments with numerous networking opportunities to do business and exchange ideas

with the leaders who influence the future of the global hospitality industry and IHIF Asia

Pacific, a hotel investment conference in the Asia Pacific region.

Social networking is the practice of expanding the number of one's business

and/or social contacts by making connections through individuals. While social

networking has gone on almost as long as societies themselves have existed, the

unparalleled potential of the internet to promote such connections is only now being fully

recognized and exploited, through web-based groups established for that purpose.

Based on six degrees of separation concept (the idea that any two people on the

planet could make contact through a chain of no more than five intermediaries), social

networking establishes interconnected internet communities (sometimes known as

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personal networks) that help people make contacts that would be good for them to know,

but that they would be unlikely to have met otherwise. In theory, any individual can make

contact through anyone they have a connection to; to any of the people that person has a

connection to, and so on.

Business, especially small firms today are no more reliant on traditional

marketing methods such as word-of-mouth or printed advertisements. It has become very

essential for the businesses to conduct comprehensive internet marketing to succeed in

this competitive world. Now-a-days, the importance of this marketing has increased as it

is an easy medium to reach the target audience quickly and cost effectively.

One of the easiest, fastest and cheapest ways for businesses to reach consumers

today is via the Internet. Digital marketing, also known as Internet or online marketing, is

quickly replacing print, television and radio advertisement as the marketing approach of

choice for businesses of all sizes. Recent research revealed that 1 in 4 of every business-

advertising dollar is dedicated to Internet marketing.

“Online marketing is ensuring potential customers find your business — your

brand and messaging — everywhere online,” said Trevor Sumner, co-founder of the local

marketing firm LocalVox. “With today’s connected consumer, your business must be

found everywhere consumers are looking.”

The use of internet-based social media programs makes connections with friends,

family, classmates, customers and clients easily. Social networking can be done for social

purposes, business purposes or both. These programs show the associations between

individuals and facilitate the acquisition of new contacts. Social networking programs
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group individuals by interests, hometowns, employers, schools and other commonalities.

It is also a significant target area for marketers seeking to engage users.

The rapid development of the internet has revolutionized the travel industry from

top to bottom, but on balance it has helped the large hotel groups more than independent

establishments. With their great financial power, large hotel groups with established

brand names have been able to use the internet to maximum advantage in their

international expansion; American tourists can now see, with the click of a mouse, that

there are chains like Holiday Inn or Marriott ready to provide a familiar environment for

them worldwide, and European tourists can see, from their desktop or laptop, that

familiar names like Ibis and Novo hotel, parts of the Accor group, can welcome them in

many parts of the continent and beyond.

Small independent hotels could never compete with hotel chains in terms of

advertising and brand awareness; in this respect, the internet - which some initially hoped

would help to level the playing field - has generally put them at a disadvantage, as large

numbers of tourists and holidaymakers go for the familiar names, on the assumption that

the service provided will match their expectations.

There will always be places where small independent hotels will survive, because

they are the only ones who can survive in certain places, particularly in rural areas. In

places where the big chains have seen lucrative openings, the future for small

independent hotels may be a little bit hard. Independent hotels - at least those that make

the mark - have some things that the big brand chains cannot have; notably the human

touch, individuality, character and a local base.

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Internet marketing is important because it aligns with the way consumers make

purchasing decisions. Studies by analysts such as Gartner (2007) indicate that increasing

numbers of consumers use social media and research on mobile Internet to carry out

preliminary product and price research before making final decisions. Internet marketing

enables you to build relations with customers and prospects through regular, low-cost

personalized communication, reflecting the move away from mass marketing.

Chron Asia (2008) iterated that Internet marketing enables tourist inns to be open

for business around the clock without worrying about business opening hours or overtime

payments for staff. Offering products and services on the Internet is also convenient for

customers. The said marketing magazine also cited that by marketing on the Internet,

barriers of distance can be overcome. It also enables owners to personalize offers to

customers by building a profile of their history and preferences.

Linton (2011) added that when a customer has accessed an online platform of any

business, it can begin a relationship where the business could send a follow-up email to

confirm the transaction and thank the customer. Emailing customers regularly with

special, personalized offers helps to maintain the relationship. Owners can also invite

customers to submit product and services reviews on the website, helping to build a sense

of community.

The Philippines has a long history of promotional activities for small-scale

enterprises. These efforts have enjoyed and continue to have the support of government

and are carried out by a network of close to 50 governmental and private agencies. Some

key ones among these offer assistance in marketing as an area of focus or as part of

broad-based and balanced support programmes. The crucial importance of markets and
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marketing is reflected in the attention given to these aspects by the agencies (Salazar,

2002). A majority (78%) of the small and medium enterprises employed direct marketing

and 22% were engaged in non-direct marketing arrangements such as sub-contracting,

joint venture, purchase agreement and integrated operations.

In Palawan, direct marketing was fully utilized. Cash on Delivery (COD) is the

most common (90.4%) term of sale, with credit (24.1%) cash advance (11.8%) and

installment (7.1%). The high COD rate reflects the need of Small Scale Enterprises (SSE)

for arrangements that will provide them with cash for continued operation. There are

instances when middlemen provide the SSEs with their input requirements but arrange to

be paid with the production at an agreed price. This usually results in a lower profit

margin for the entrepreneur. The issue that arises is whether government either directly or

through the banking system can provide financing for working capital which would allow

these firms to provide credit and increase sales (UP Institute for Small-Scale Industries,

2002).

In the article “Markets and Market Development for Small-Scale Enterprises” by

Salazar (2002), personal selling was the most widely used promotional tool prior to

making a sale. Typified by an oral presentation of a product to a prospective buyer, it is

the cheapest and the simplest approach. Another means by which a product gets known to

a customer is through “word of mouth” testimonial. This however does not constitute a

deliberate effort on the part of the entrepreneur to promote his product because it is

purely voluntary on the part of the customer. The other approaches used were samples,

store displays, billboards/store signs, telephone canvass and direct mail. Other

promotional tools utilised by more progressive firms were advertisement placements in

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magazines, journals/newspapers, radio and television spots as well as participation in

fairs. In Palawan, personal selling was top at 45.9 % followed by word-of-mouth by

45.4%. Considering the limited resources and expertise, small firms in their advertising

and promotion come up with material which may not meet market demand.

On a more personal note, the following are some of the strategies applied by small

scale hotels (Inns’) at Puerto Princesa in Palawan:

Placing a booth at Puerto Princesa International Airport in order to promote their

services offered and caters the need of the guests (local and foreign) who are usually

looking for a more affordable place to stay while in the place.

Tying-up with Travel & Tour agencies and provide vehicles to be used in the

transfer of guests from one place to another as they visit all the tourist spots in the place.

Provide additional services like laundry, massage, and other similar services in

order to fully accommodate the need of the guests while on stay.

Consider lowering some charges during “Lean Season” and a bit increase in the

amount of some services offered during “Peak Season” in order to offset the possible loss

incurred during bend season.

For those who wanted to increase the number of their guests, they connect to

social network such as: Facebook page, Twitter, Ayos ditto, Sulit or Olx and Instagram.

While some are promoting their services offered through radio advertisements.

Brief Company Profile of Selected Tourist Inns in Puerto Princesa City

Tangay Pension and DZR Guest House marketing strategy focused on walk-ins &

referrals of some previous customers and they don’t have their own websites to advertise
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their Inns’. Having a personal websites is a right thing to do to compete with other

businesses offering the same services. There was a time wherein Tangay Pension and

DZR experienced to have zero number of guests which makes them worried most. They

don’t even have flyers to distribute to some of the potential guests that are inquiring

personally to them.

They only have seven (7) employees working at Tangay pension and only 5

employees in DZR guest house but sometimes they also experience to have fully booked

in all of their rooms especially during peak season. With a minimal number of employees

it also sacrifices the quality of service being rendered and or provided to the guests. In

return, it will affect the image of the business that will eventually decrease the

profitability.