Hospitality Better to be prepared
Food and Beverage

Volatile UK economy continues to hit SME hotel fortunes

PricewaterhouseCoopers (PwC’s) latest hotel forecast anticipates moderate growth in demand for UK hotels, driven largely by London. PwC’s forecast suggests London could see an occupancy gain of 2.3% and rate growth of 3.5% in 2010.

The Provinces could see 1.6% revenue per average room (RevPAR) growth in 2010 with a more solid recovery of 3.1% in 2011. For the provinces the reliance on dwindling domestic business, may mean the journey to near normal trading conditions is likely to be more difficult. Many believe it could be 2012 or beyond before hotels see a return to long term trading growth.

SME hotel owners despite uncertainty can add 8 – 10% turn over.

How? Walker et al. (1992) found evidence that firms with formal marketing plans outperformed those without. Now more than ever time constraints shouldn’t steer you towards pragmatic and intuitive marketing.

So why do, SME’s lean towards pragmatic and intuitive approach towards marketing? 

The answer, SME’s operate under serve financial and human resource constraints. Most SME’s owner managers are forced to undertake a wide range of business activities. A further contributing factor marketing tends to be run by the owner/manager inevitably their management style and personality determines marketing activity. Invariably SME’s tend to lack marketing expertise they need so owner managers focus upon controlled growth rather than sales maximisation.

SME’s do have the advantage of having closer contact with customers. Generally SME’s are more flexible, responsive to change and more innovative than most, larger firms. They rely significantly on word-of-mouth for promotion (Stokes, 2000; Stokes and Lomax, 2002) and utilise personal social and business networks for information gathering, idea testing and advice and draw on experiential knowledge to intuitively develop their competencies.

This approach to marketing has been termed “entrepreneurial marketing” a balance between reactive/tinkering/and proactive marketing. This style of marketing is crucially dependent on targeting a specific customer group as a starting point. Relationships with customers and word-of-mouth are the key aspect of promotion, within the marketing mix, and marketing intelligence relies strongly on business and trade networks.

An independent hotel success is very dependent on the owner/managers expertise and aspiration. As services, hotels exhibit a number of characteristics, such as intangibility, inseparability, variability, perishability, and the lack of transference of ownership, which impact on both their practices and SME optimal marketing mix.

Over factors that affect marketing

  • seasonality.
  • the interdependence of tourism products.
  • high-fixed costs of operations; and, the availability of the product being fixed in time and place.
  • Marketing is often used to manage the fluctuations in demand associated with seasonality.
  • Variability of hotels affects the industry as consumers make purchase decisions based on a combination of products and services, such as accommodation, visitor attractions and facilities like shops and restaurants.
  • Marketing affiliate initiatives delivered via agencies such as
    • enjoy England, Scotland, Wales (formally known as the Tourist Board) may not compliment the hotels marketing strategy.
    • Ideally promotions should lead to extra hotel sales thus mitigating high fixed costs and low –variable costs to produce profit at little or no extra cost.

Over the years there have been a number of research projects to address the particular marketing challenges SME hotel owners face. Themes such a relationship marketing i.e. satisfying customer demand the principal objective being customer retention and or referral.

Easier for larger branded hotels to implement given they are likely to have customer relationship management software linked to loyalty schemes plus their customers have a tendency to return. Small hotel customers typically do not visit the same location for business and leisure and are therefore unlikely to use the same hotel for both functions, and further, leisure customers often like to visit different locations in pursuit of variety.

SME Hotels have a need to attend to both customer acquisition as well as customer retention this can be achieved through a combination of a transaction and a relationship approach to marketing. Stokes and Lomax (2002) emphasised the importance of the management of word-of-mouth recommendations for customer acquisition.

In summary, traditional marketing strategies deployed by large hotel chains do not fit SME owner managers’ pragmatic and intuitive approach. SME style of marketing places greater significance upon word and mouth networks. Nevertheless a formal marketing plan plus software solutions which you probably own but your unsure how to configure and use could add 8 – 10% to your turnover. Your marketing mantra must be, ‘ your points of difference’ and target specific customer segments who value your product service offering.

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Success REQUIRES strategy
Christopher Bird Author