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Tourism Marketing

CHAPTER

Learning Objectives

First ½ of chapter – Marketing basics

Appreciate the impact on tourism marketing.

Become familiar with the marketing mix and be able to formulate the best mix for a particular travel product.

Appreciate the importance of the relationship between the marketing concept and product planning and development.

Understand the vital relationship between pricing and marketing.

Be able to do market segmentation to plan a marketing program for the business you are most interested in.

Second ½ of chapter – Marketing Applications

Quick view of the role of San Francisco Travel Association

Demonstrate the linkage between tourism policy and tourism marketing.

Look at the channels of distribution

What is Marketing?

Before we define marketing…

Why is Marketing needed in the Tourism industry?

What are examples of “good” marketing – in general?

In the tourism business?

http://www.youtube.com/watch?v=mhtnMzCzrXk&feature=share&list= PL086D543C5C21EC45

What do you believe are the critical features of marketing?

Isn’t marketing just advertising and selling goods/services to consumers? Why or why not?

How has the destination-guest relationship changed over the years?

South Africa Tourism

What is Marketing?

Beyond sales and advertising.?.

Beyond the physical aspects of a business.?.

Marketing encompasses all aspects of an organization. It determines:

The nature of consumer demand

Develops, promotes and delivers the products and services that will satisfy that demand

Involves the entire buying process from the initial customer need before purchase to supporting the product/service after purchase

What is Marketing?

Marketing’s Role in Creating Value

What marketing does for consumers:

Marketing brings customers into the tourism organization

Marketing keeps customers coming back

What marketing does for destination & companies:

Returning customers provide value to the organization by giving the organization revenue, positive word of mouth, and constructive criticism when things go wrong

Zeithamal (1988) perceived value can be regarded as a “consumer’s overall assessment of the utility of a product (or service) based on perceptions of what is received and what is given” (p. 14).

Her definition of perceived value referred to value as the ratio or trade-off between quality and price or to a value-for-money conceptualization.

What is Marketing?

Marketing defined:

“Identifying evolving consumer preferences; then capitalizing on them through the creation, promotion, and delivery of products and services that satisfy the corresponding demand.

This is done by solving the right customers’ problems and giving them what they want or need at the time and place of their choosing and at the price they are willing to pay.” (Shoemaker and Shaw, 2008, pg. 8)

What is Marketing

The American Marketing Association defines Marketing as:

“an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”

What is Marketing?

Can you think of any examples of firms who exemplify this definition?

McDonalds?

Target? IKEA?

Howard Johnsons?

By 1954, there were 400 Howard Johnson's restaurants in 32 states.

By 1961, there were 88 franchised Howard Johnson's motor lodges in 32 states.

That same year, there were 605 restaurants, 265 of them company owned and 340 franchised.

1974 HoJo's restaurants and motor lodges, which maintained 85% of revenues from travelers, lost profit when Americans couldn't afford to drive long trips or take frequent vacations.

The company model of serving pre-made food with high quality ingredients in traditional dining rooms was costly when compared to the innovations introduced by outlets like McDonald's, which designed its products and restaurants to appeal to families with younger children.

Johnson attempted to streamline company operations and cut costs, such as serving cheaper food and having fewer employees. It proved disastrous as guests were finding this new era of Howard Johnson's restaurants and motor lodges irrelevant to the services they had come to know for years.

Marketing and the Firm

The customer (not the business) determines what a business is

Focus on the customer

Profit stems from customers

Twofold Purpose of a Business

What is the purpose of business?

Purpose of a Business*:

The only valid definition of business purpose is to

1) create and 2) keep a customer (A customer orientation)

Profitability is not the purpose of but a limiting factor on business enterprise and business activity. Profit is not the explanation, cause, or rationale of business behavior and business decisions but the test of their validity (emphasis added)*

Purpose of a business is to create value for and from customers

Customer value is a judgment made by consumers that examines the relationship between the expected or completed consumption of specific goods and services and what they pay for these goods and services

perceived

* Drucker, P.F. (1954). The practice of management (p. 37). New York: Harper & Row.

Twofold Purpose of a Business

It is the customer who determines what a business is…

For it is the customer, and he/she alone, who is willing to pay for a good or for a service

What the business thinks it produces is not of first importance -- especially not to the future of the business and to its success

What the customer thinks he/she is buying, what he/she considers ‘value’, is decisive --it determines what a business is, what it produces and whether it will prosper*

* Drucker, P.F. (1954). The practice of management (p. 37). New York: Harper & Row.

The Concept of marketing

Isn’t marketing just advertising and selling stuff to consumers? Why or why not?

The art of creating customer value and helping customers be better off by fulfilling their expectations and solving their problems.

This is not a 2nd definition of marketing but rather a “way of thinking” or a “culture” that guides the firm’s overall activities

Practicing the concept of marketing means making the business do what suits the customer’s interests.

Let’s look at the next example…

Original Marketing Mix: The Four Ps

Price, product, promotion and placement (distribution)

Professor Neil Borden of Harvard – June, 1964

Developed for the marketing of goods

hospitality and tourism Marketing Mix: The Seven Ps

Marketing Mix (Hospitality and Tourism) – the mix of marketing activities that are directed toward an identified target.

Tourism Marketing Mix-the “7” P’s
Product/service mix	Distribution mix
Presentation mix	People mix
Pricing mix	Process mix
Communications mix

All marketing activities will/should take place only after we study the external environment and learned about the needs and wants of our customers.

Tourism Marketing Mix: The Seven Ps

Product/service mix: the combination of products aimed at the needs of the target market (Ex: luxury vs. select service segment product focus)

Pricing mix: the combination of prices that customers pay for products or services. (Ex: hotels are comprised of multiple prices-room type, arrival date, group, etc.)

Distribution (placement) mix: all channels between the firm and target market that increase the probability of getting the customer to the product. (Ex: Marriott’s multiple locations, segments and targets – the consumer travels to the product)

Communications (promotions) mix: all communications between the firm and target market that increase the tangibility of the product or service. (Ex: estab. Expectations, builds relationships, or persuades consumers to purchase)

Tourism Marketing Mix: The Seven Ps

Presentation mix: all elements used by the firm to increase the tangibility of the product/service mix. (Ex: Westin’s Heavenly bed)

People mix: people that work for an organization and how they affect service delivery (Ex: people, hiring, training, consistency, & service goals)

Process mix: activities designed to deliver the desired services to the guest. This is the final combination of Ps chosen by owners/management to implement.

The additional 3 P’s

(Shoemaker and Shaw, 2008)

Tourism Product/Service Mix

The product/service mix is a combination of products/services offered to satisfy the needs/wants. It is what customers see, get, and experience during their hotel/restaurant encounters.

Designing the tourism/hospitality product

Begins with what the customer wants

People don’t buy quarter-inch drills…

…they buy quarter-inch holes.

What do customers want?

Just a bed? Just a meal?

Tourism Product/Service Mix

Bundle purchase concept

Consumers buy a Tourism product as a whole, not the individual elements

Ex) a hotel guest room includes: ?

A bed, bathroom, security, check-in procedure, housekeeping, etc.

TriBecca Grand Bundling Example

3 types of bundle purchases

Formal product

Core product

Augmented product

Tourism Product/Service Mix

Formal product

What the customer thinks they are buying

Ex) drill, location, good meal, meeting room, or quality

What if we ONLY focused on these attributes?

Are consumers accurate in their description of their needs?

Core product

What the customer is really buying?

Is the carpenter buying a drill? (i.e. ¼” drill hole)

What is a tourist/visitor buying?

What is a family buying?

The core product is how the entire destination team deals with the tourist problems and working in concert finds solutions for a successful visit.

Tourism Product/Service Mix

Augmented product

The total of all benefits received or experienced by the customer

Should solve even the problems the customer did not recognize (i.e., inclement weather)

Anticipating the unanticipated

The culmination of…coming together.

service delivery, – the way things are done

the service product, – assurance that they will be done

the physical product, – cleanliness, comfort of the bed, size of the towels, etc

the service environment – cleanliness, décor, etc.

Formal product?

Core product?

Augmented product?

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Tourism Matters

IMPORTANT NOTE: The images included in this presentation were provided by the San Francisco Travel, Moscone Center and various businesses and photographers. They were provided with the understanding that these images will be used in this PowerPoint ONLY and they will NOT be published or posted on the Internet. Please honor this agreement.

Thank you for the opportunity to meet with you today. I’m ____. I want to talk with you about San Francisco’s largest industry and what it means to you, your employees, your neighborhood and your city.

Group self-introductions

Tourism: The City’s Largest Industry

15.4 million visitors annually

$7.8 billion in visitor spending

66,837 San Francisco jobs

Annual payroll of $2.2 billion

$9,283 spent per San Franciscan

15.4 million - That’s enough to fill AT&T Park for 366 Giants games. Or 4.5 complete baseball seasons of 81 games per season!

On an average day, 125,407 visitors. It’s as if everyone from both Beverly Hills and Santa Monica were visiting San Francisco every day – plus a few more.

Visitor spending accounts for $21.51 million every day

$2,2 billion payroll - excludes gratuities

If tourism were to disappear, every single person living in the city would have to spend an additional $9,283 every year to maintain the level of services that tourism spending supports

Figures are for 2009

Tourism Employs Our Neighbors

Tourism’s employees live in every part of the city, as you see on this map.

Hotels 17,661

Restaurants 15,149

Retail 4,567

Entertainment & Sightseeing 9,155

Local Transportation 7,920

Exhibition Services 6,384

SFO Jobs/Visitors 6,000

Tourism Supports 66,837Jobs

Tourism employs people of all education and skill levels.

These are jobs on every level, from entry to executive.

People who have just arrived in this country or who have decided to embark on an entirely new career.

Tourism provides opportunities for nearly everyone

Visitor Volume, 2011 (Million Visitors)

TOTAL =

15.4 MIILION

Take a look at where our visitors come from. Cleary the majority do NOT stay in San Francisco’s hotels BUT…

Visitor Spending, 2011 (Billion $)

TOTAL =

$7.8 Billion

Hotel guests spend FAR more than any other type of visitors.

That’s why most of our marketing begins where day trips end.

Lodging: 22%

Dining: 17.8%

Shopping: 16%

Transportation Related: 25.7%

Sightseeing & Entertainment 10.2%

Exhibitor Services: 8.4%

How Visitors Spend $7.8 Billion

Think about all the things visitors pay for: lodging, dining, shopping, entertainment, sightseeing, transportation, attractions…

Visitors Generate Fees & Taxes

$500 million in taxes and fees in 2011

We’re all familiar with the taxes we pay when we travel – Hotel tax, sales tax, taxes on rental cars, dining, etc.

But the revenue goes even deeper – hotels pay hotel tax, AND property tax, utility tax, business tax, sales tax, etc.

There are Airport, Port and Redevelopment fees generated by tourism.

Convention Facilities

Recreational Facilities

Arts & Cultural Organizations

Arts & Cultural Facilities

Low Income Housing

City’s General Fund Budget – Largest single use

Hotel Tax Benefits Span the City

The largest single use of the hotel tax is to the general fund.

Police and Fire Services

Schools

Public Health

Social Services

Recreation & Parks

Hotel Tax to General Fund to…

About 54% of the Hotel Tax collections going to the General Fund (which is used for police, fire, social services, etc.)

Top quality restaurants

World class museums & performing arts

Contemporary arts groups & galleries

Quality & variety of shopping available

High level of service & hospitality

Festivals & special events year round

Diversity of global visitors

Tourism Improves Our Quality of Life

San Francisco’s relatively small population couldn’t support the range and breadth of businesses and cultural organizations if it weren’t for the influx of people, revenue and taxes from visitors.

The City’s official destination marketing organization, working to enhance the local economy by marketing San Francisco and the Bay Area as the premier destination for conventions, meetings, events and leisure travel.

San Francisco Travel Association

Despite what you may think, no city sells itself.

With increased worldwide competition for leisure travelers and for meeting and conventions, it’s necessary to keep working hard to stand out from other destinations. So how does tourism “happen?”

That’s the role of the San Francisco Convention & Visitors Bureau

The City’s only organization dedicated to promoting tourism and conventions

By contract with the City, we are the “official” destination marketing organization for San Francisco

Staff of 70

Board of Directors, Advisory Councils and volunteers

Supported by @1,600 member businesses

80% of members are small businesses

Two thirds are located within San Francisco

Who Are We?

Our Vision:

To ensure that San Francisco is the most compelling destination in the world.

Assessment collected in addition to 14% Hotel Tax

Zone 1 hotels: 1.5% of room rate

Zone 2 hotels: 1% of room rate

Began January 1, 2009

Approved by Hotels and Board of Supervisors

Tourism Improvement District (TID)

How are we funded?

Since 2009, we have been funded primarily by a new Tourism Improvement District (separate from the Hotel Tax Fund.)

Our revenue also comes from member programs and private revenue

Began January 1, 2009

Approved by both Hotels and Board of Supervisors

Assessment collected in addition to 14% Hotel Tax

Zone 1 hotels: 1.5% of room rate

1% to sales, promotion, marketing programs

.5% to Moscone Center renovation & expansion exploration

Zone 2 hotels: 1% of room rate

.75% to sales, promotion, marketing programs

.25% to Moscone Center renovation & expansion exploration

Is 15.5% too much (Hotel tax plus TID)?

We asked our customers and they said it’s “up there” but no unreasonable

Vancouver: 17%

San Antonio: 16.75%

Chicago: 15.39%

Kansas City: 15.23%

Anaheim: 15%

Boston: 14.70%

Los Angeles: 14%

New York City: 13.38%

San Diego: 10.50%

Over 2 million room nights booked in 2012 for the next 15 years

$1.14 billion total estimated economic impact

Conventions

Even in a recession, San Francisco maintains a reputation for attracting record-breaking attendance.

There are challenges:

Association meetings still reliable but trade shows and corporate meetings are volatile

Other CVB’s are “buying” conventions with steep rental discounts and other incentives

Negative perception of convention and business travel as “extravagant” The AIG Effect

Hotel labor issues and high service costs are concerns to our customers

Recent drop in rates has allowed us to “cast a wider net.”

Moscone Center is finally getting renovation to maintain

Plans for expansion to increase market share.

An Ever Evolving Destination

Arts & Culture/Art SF

Food & Wine/Taste SF

Diverse Neighborhoods

Sustainable Travel/Green SF

Gay/Lesbian Travel

San Francisco Travel Consumer Marketing Themes

These are programs targeting individual leisure travelers

All under the brand umbrella of “Only in San Francisco”

As with Conventions, we seek to attract visitors who will stay the longest and spend the most

Hence, we target high-income, highly educated adults, ages 35+ primarily, within California

We pursue additional markets when affordable

Major Partnerships

the San Francisco Travel develops key partnerships with corporate, community and media partners to enhance and expand exposure for San Francisco.)

Assisting 2100+ journalists per year

500+ journalists visiting for research

Issuing 7+ press releases per month

550 million+ media impressions

San Francisco Travel Media Relations

In 2008/09 the San Francisco Travel Public Relations Team assisted a total of 2170 journalists.

501 of them actually visited San Francisco to research their articles.

We issued 86 press releases.

And we received 550 million media impressions

All with a staff of two people

Tourism: International Offices Worldwide

SAN FRANCISCO

Europe

United Kingdom

Germany

France

Italy/Spain

Scandinavia

Asia

China: Shanghai

China: Beijing

India

Japan

Korea

Latin America

Brazil

Argentina

Australia/Oceania

Australia

San Francisco Travel

INTERNATIONAL REPRESENTATION

Over 25% of all overnight hotel visitors are from outside the US.

Total number of international visitors to our city is much higher when other segments are counted such as those staying outside the city or with friends and relatives.

The tourism division works to influence the people who influence travel to the US through their tour products as well as incentive groups and international convention delegations including tour operators, travel agents, and airlines.

Tourism also works with domestic trade who put together packages for individuals and groups.

Leads to San Francisco Travel members for bookings from tour operators and travel agents

Informs trade of “What’s New”

Represents San Francisco at travel industry trade shows

Produces signature events in key markets

Hosts over 1,000 people annually during familiarization programs

Leverages efforts with California Travel & Tourism Commission

Maintains representation in 13 overseas markets

San Francisco Travel represented in 11 countries around the world.

Our international representatives work to keep San Francisco top of mind with the trade and media within their countries and alert us to sales and marketing opportunities

Emerging:

China

Korea

India

Brazil

Italy

Strongest:

United Kingdom

Germany

Japan

France

Australia

San Francisco’s Major Overseas Markets

The CVB is focused on the future as well which is why we have representation in China and India- the first US cities to do so.

Hallidie Plaza, near the cable car turnaround

450,000+ visitors per year

Provides information, maps, brochures, suggestions, tips

Staffed by employees and volunteers

More than a dozen languages spoken

Visitor Information Center

Located at Hallidie Plaza, near the cable car turnaround

This is the front lines of tourism.

The staff at the VIC works to open visitors eyes to ALL the city has to offer, especially in the neighborhoods

Channels of Distribution

Selection of Channels of Distribution

Channels of distribution are selected by

Analyzing the product

Determining the nature and extent of the market

Analyzing the channels by sales

Determining the cooperation you can expect from the channel

Determining the assistance you will have to give to the channel

Determining the number of outlets to be used

Channel	Example
Representation firms	Leading hotels of the World – www.lhw.com
Reservation services	Pegasus, TravelClick-iHotelier, REZsolutions
Online travel agent	AMEX, Travelocity, Expedia, Orbitz
Incentive travel organizations	Maritz, Carlson Wagonlit
Consortia	JTB, GIANTS, AMEX
Corporate travel department	Any large firm (Keiser, IBM, Home Depot)
Tour wholesalers	GoGo Vacations, Certified Tours,
Global distribution systems (GDS)	Sabre, Galileo, Worldspan, Amadeus

Summary of Distribution Channel Types Methods to Get the Customer to the Product

Channel	Example
Central reservation systems (CRS)
Travel management companies	AMEX, Carlson Wagonlit
Convention meeting planner organizations	CVB’s
Discount brokers/consolidators/ wholesalers	TUI
Destination management organizations (DMO’s or DMC’s)	www.pra.com www.hello-florida.com
Online intermediaries for business or groups	Expedia Corporate, Travelocity Business, Orbitz for Business, Groople
Online intermediaries for transient, business and packages	Expedia Corporate, Travelocity Business, Orbitz for Business, Groople

Summary of Distribution Channel Types Methods to Get the Customer to the Product

Getting the Customer to the Product

Reservation services

Representation firms

Consortia

Incentive travel organizations

Corporate travel management

Global distribution systems (GDS)

Traditional off-line travel agents

Central reservation systems (CRS)

Internet channels

Websites

Getting the Customer to the Product

Booking Engine, Ex)

Getting the Product to the Customer

Customer

Travel Agent

GDS

(Sabre, Worldspan,

Apollo, Amedius)

Pegasus

(Switch or Pass

Through)

Booking Engine

(iHotelier, Utell,

Lexington, Preferred or

Leading Hotels)

Hotel

(Load complex rates

and packages)

Third Party Websites

Orbitz, Hotwire, Priceline,

Expedia, travelocity

Hotel’s Website

GDS Flow Chart

Promotion

In order to sell the product it is necessary to:

Attract attention

Create interest

Create a desire

Get action

Typical Bases for Market Segmentation

Geographic

Demographic

Socio-economic

Psychographic

Behavior patterns

Consumption patterns

Consumer predispositions

Typical bases for market segmentation. Source: W. Zikmund and M. D’Amico, Marketing, 3rd ed., copyright ©1984, New York: John Wiley & Sons, Inc.; adapted by permission of Prentice-Hall, Englewood Cliffs, N.J., from Philip Kotler, Principles of Marketing, copyright ©1980, p. 297.

Typical Bases for Market Segmentation

Differentiation

Distinguishing your product or service from the competition in ways that are both identifiable and meaningful for the customer

The customer should perceive a greater value

If none is perceived, then for all intents and purposes – one does not exist.

Ex) Beef from Texas or Oklahoma

So that Customers will choose your product or service over that of the competition

Differentiation – destination Brands