4. Given Mr. James' charge to the senior vice presidents, how would you portray and assess sales and marketing initiatives, expenditures, and outcomes for fiscal 2004 and fiscal 2005?
In the fiscal 2004, the objective of Astor Lodge & Suites was to raise the hotel occupancy. In order to achieve this target, the management engaged in two marketing initiatives. First, they put more attention on pleasure/vacation travelers because of the increasing sluggish business travelers. Through the new emphasis, they intended to attract more pleasure/vacation travelers to increase occupancy. In the marketing campaign, they proposed the tagline “The place to stay on the way” with ads demonstrating the enjoyment that family or couple have when they stayed in the hotel. Second, they included internet communications into the marketing initiatives because more and more people were using internet to make travel plan and to reserve hotel rooms. The increasing presence of the Internet is becoming a critical factor in traveler’s decision-making processes (Bonn, Furr and Susskind, 1998). Astor Lodge & Suites wanted to broaden the channel to get potential customers.
In order to carry out these two new marketing initiatives, Astor Lodge & Suites increased the sales budget to $4.4 million. In the budget, the expense of sales representatives was accounted for the major part (82.4%). These representatives worked with online and offline travel agencies and organizations to build pleasure business. In addition, the media advertising budget was also rising to $11.3 million. 28% of this expenditure was targeted on pleasure travels while 72% on business travelers.
The outcome was good and the objective of 2004 was attained. Benefiting from the sales representatives and wide published taglines, the hotel enjoyed an increased overall occupancy and the number of pleasure travelers was evidenced in a rise. The rate of first guest also showed an increase from 25.5% in 2002 to 27% in 2004. What is more, when people were asked the likelihood to stay in Astor Lodge & Suites if they return visit this place, 84.5% of the respondents said they were extremely or very likely to choose Astor Lodge & Suites again. It signified that these marketing initiatives did work and consumers were pretty satisfied with the hotel.
In the fiscal 2005, Astor Lodge & Suites proposed three objectives. The first was to raise occupancy. The second was to catch more attention from first-time guests. The third was to increase the length of stay. In order to accomplish the three objectives, the management made up with three marketing initiatives accordingly. First, they continued to focus on pleasure travelers as previous year to increase occupancy. Second, they used “frontier strategy” and broadened the ad media placement scope with including midwestern states to attract new guests. Doing such thing would help raise brand awareness and acceptance. Third, in order to increase the length of stay, they carried out a summer promotion. The promotion allowed people to enjoy a 50% and 25% discount on a third night stay in suits and non-suits rooms respectively.
The budget of fiscal 2005 was higher than that of 2004. On the one hand, media advertising was $12.5 million. The 10% increase in media expenditures was accounted for the “frontier strategy”. Additionally, compared to the media budget allocation in 2004 (28%), the proportion of media budget was assigned more to pleasure travelers in 2005 (35%). On the other hand, sales budget increased to $ 4.7 million and the increase was in response to the two new sales representatives added. The new representatives were responsible to develop working relationships with Midwestern companies.
The outcome of fiscal 2005 was excellent. The occupancy rates would be 7.9% higher than fiscal 2004. The number of new guests and average stay length also had a somewhat increase. However, one problem existed that the average daily rate decreased a little. But the higher occupancy helped the rise in revenue per room.
5. What should Kelly Elizabeth propose in her Fiscal 2006 Marketing Plan and Budget?
First, the emphasis is supposed to be placed on pleasure/vacation travelers in fiscal 2006, but business travelers could not be ignored as well. In 2004 and 2005, Astor Lodge & Suites invested a lot to attract pleasure/vacation travelers, including adding more sales representatives and publishing wide advertising. As a result, the hotel showed a good development with increased occupancy, new guests, and average stay length. Besides, considering the external environment, hotel industry is still in sluggish, particularly for the business travelers. So the pleasure/vacation travelers market is still regarded as more promising to be explored. To sum up, based on the good outcome and sluggish external environment, Astor Lodge & Suites should continue to emphasize on pleasure/vacation travelers. However, the hotel could not put too much attention on the new emphasis and ignore business travels. The mission of the hotel is to service business people. As for the increasing complaints from current business clients, the hotel is suggested to increase budget to carry out marketing research which is aimed to investigate what happened and why they had such complaints. According to the research result, solution and improvements are needed to make up with. Market research is often applied to understand target customers and to make marketing matters (Solomon, 2012).
Second, According to the Chief Financial Officer, a dollar or so increase in our room rate may equals to a five to 10% increase in occupancy rates with regards to profitability at no out of-pocket cost. However, pleasure/vacation travelers are more prices sensitive. If the room rate increases, the customers may choose another hotel, which may influence the hotel occupancy. For this, Astor Lodge & Suites could investigate the price tolerance of pleasure/vacation travelers and based on that to adjust the room rate. It is suggested that the room rate adjustment could be implemented in the hot season, because it would make the price rising more acceptable.
Third, as for the “frontier strategy”, whether it should be carried forward depends on judging the cost and profit. If the profit exceeds cost, it could be carried forward. But if not, the “frontier strategy” is supposed to be taken into reconsideration. As for the “week-end special” promotion, it is needed to make sure what the target group is, what the discount is, how long the promotion period is, and what the budget is and so on. The decision made should consider all these factors and balance the cost and profit.
Reference:
Bonn, M. A., Furr, L. H. and SusskindA. M., (1998), “Using the Internet as a Pleasure Travel Planning Tool: an Examination of the Sociodemographic and Behavioral Characteristics Among Internet Users and Nonusers”, Journal of Hospitality & Tourism Research, pp. 303-317.
Kerin, R.A., and Peterson, R.A. (2013). Strategic Marketing Problems Cases and Comments, International Edition, 2013, Pearson.
Solomon, M. R., (2012), Consumer Behavior: Buying, Having, and Being (10th ed.), NJ: Prentice Hall.