AOM5

CROSS EXAMING THE INFLUENCIAL AND DECISIVE FACTORS THAT REPEAL ADVERTISING SYSTEMS, PROCESSES AND MECHANISMS
OF HOTELS

By
Dr. Padma Srinivasan
Head-HR & Company Secretary
Sindhu Cargo Services Ltd.
Bangalore
E-mail : padma@sindhucargo.com

Key Words: Advertising systems, hotel Mechanisms and Hotel Advertising decisions

INTRODUCTION:
Advertising is a sales tool to bring buyers and sellers together for the exchange of goods and services. In any competition, a service provider needs an edge, a reason for the customer to select him. From prehistoric times, there has been some form of communication concerning the availability and sources of goods and services. Advertising is used not only for stimulating the interest in the product or service but as to insist on a continued use.

ADVERTISING SYSTEM AND PROCESS IN THE HOTELS:

Advertising as a part of promotion is a very important for business people, service providers and companies. Some companies and business people prefer to create advertising by themselves whereas some pass this job to the advertising agencies for a professional creation. At times the companies model their advertising plans following the campaigns of other companies. To benefit greatly, the mission, a firm along with the business plans specifies vision and goals of the advertising activity.

Advertising Mission: "To sell the product in the selected segment"
Advertising Vision: "A planned brand preference for own product."

The degree on intangibility varies from service to service. Since the fundamental idea of advertising is to create a brand preference based on the product/service offerings.

The ad plans are unique to each hotel based on its need. Mainly the Management decides the frequency of advertisements rolled out. The advertising process goes by the managerial decisions. In rural and semi urban hotels, they prefer 'Word of mouth publicity' to a great extent. They indulge in advertising during specific seasons or during specific days like that of anniversary of the owners etc. Now with the hotels becoming bigger, bank on the fresh funds to advertise.

ADVERTISING MECHANISM: The Star category hotels often sport advertising or prom campaigns just to retain their existing custom. They depend heavily on the corporate customers who bargain and bring down the rack rates significantly. Corporate targeted advertising helps in

* Assured business thro the year
* Cost saving due to reduced advertising requirements
* Experimentation of new innovations on the loyal custom to augment service
* Promote combo packs of free offers plus or discounts on the recent adds
* Promoting group establishments, services and products and properties.

The advertising mechanism deals with the following components and results and benefits of a campaign depend on the way the components are strategically mixed to offer attractive ads to capture the custom. They are mainly:

Category of hotels
Hotel budgets
Advertising budgets
Frequency of advertisements
Geographic coverage and
Ad focus

1. HOTEL BUDGETS: At least once per year, hotels shall prepare annual budgets, which are profit plans that address all revenue sources and expense items for the following calendar year. Moreover, the hotel annual operating budget represents standards against which management can evaluate actual results of operations. In the annual budget preparation process, a close coordination effort of all management personnel is vital.

The hotel's annual operation budget is commonly divided into monthly plans, which in turn are divided into weekly and even daily plans, for better control over actual results. While preparing the annual budget, the manager shall coordinate with the accounting department as to estimate only rooms' revenue and related direct expenses.

The hotel controller and the general manager, then, shall revise this budget. In order to forecast room revenue, the manager might consult historical financial information such as past room revenue, past number of rooms sold, past average daily rate, and past occupancy rates.

Due to the fact manager is responsible only for his/her department direct expenses (i.e. variable costs), the manager can, also, consult historical financial data depicting variable cost to room revenue ratios, in order to estimate department expenses. Sometimes, if external uncontrollable factors change significantly, in an unexpected way, then the actual operating budgeted figures shall be revised.

2.TYPE OF HOTELS: While the 5-star and 5-star deluxe and to some extent the 4-star hotels are the domain of renowned hotel companies, an unorganized market exists for hotels operating below these ratings. Hotel companies such as EIH and ITCH as well as international hotel chains are aggressively entering into the mid-budget hotel. Bangalore was the only city hotel market in India to register an increase in occupancy rate and a stable ADR between 1999/00 and 2000/01.

Exhibit:1 Category of hotels.
CATEGORY	No. Of hotels	% To total survey
Hotel & Restaurants	90	83%
Hotels-lodge	4	4%
Restaurants	7	7%
Resorts	5	4%
Dhabas	1	1%
Ayurvedic	1	1%
TOTAL	108	100%

With limited expected additional supply anticipated and buoyant demand from the corporate segment, occupancy and ADR are expected to be fairly stable in the next couple of years.

3. ADVERTISING BUDGETS: The advertising budgets decide the ad frequency, target reach, ad focus and the mission, vision, objectives and revenue targets. In the survey, it is found that 78% of the hotels being 84 hotels belonging to all categories, ages and segment spend within Rs 1-2 lakhs per annum on advertising within Karnataka region.

Exhibit:2 Ad budgets.
CATEGORY of hotel spend	Rs. 1-2 Lakhs	Rs.2-5 Lakhs	>Rs 5 Lakhs	Total
No. Of hotels	84	0	24	108
% To total survey	78%	0%	22%	100%

Higher budget ad allocations are effected by bigger, corporate, urban and 5-Star category and above. The ad spends are for the specific previous financial year and are spent by Groups and International Chains with many tie-ins and tie-ups for, special promotions, Guest loyalty programs etc.

4. FREQUENCY OF ADVERTISEMENTS OFFERED BY A HOTEL:

The hotels are reaping the benefits of the brand establishment, loyal customer base and finally the profit maximization based on the frequency of their ad inserts. In our survey, it has been observed that Daily, Weekly, Fortnightly, Monthly, Quarterly, Half Yearly, Yearly, during Festive Times and Special Occasions, most of them amounting to a total of the 91% of the ad works effectively. Adhoc advertisements are up to 5% where the advertisements are released whenever the management feels the intensity of the advertisement purpose.

The manufacturers weigh the options of the advertisement timing. These Adhoc releases usually coincide with the local significant happenings and to highlight the food fests to solicit local crowds. Festive releases on Diwali day, New Year eve account for 2% of the ad spends. Occasions like that of hotel anniversaries, Founder's day and completion of 10-years, 25-years call for a celebration and ad releases. Totally 562 opinions are collected to indicate the desirability of the ad timing and frequency of releases.

Exhibit:3 Advertising frequency
CATEGORY	No. Of hotels	% To total survey
DAILY	74	13%
WEEKLY	74	13%
FORTNIGHTLY	74	13%
MONTHLY	74	13%
QUARTERLY	74	13%
HALY YEARLY	74	13%
YEARLY	74	13%
ADHOC	24	5%
FESTIVE TIMES	10	2%
OCCASIONS	10	2%
Total	562	100%

5. GEOGRAPHIC COVERAGE OF THE ADVERTISEMENT:

The advertisements used will lure all the customers based on their viewing, the area covered and propagated by the ad covered by the media. The regional focus of the advertisements released in Karnataka is 67%. Next focus of importance, especially to 4-Star and above is for the attention of customers' thro out the world.

In the context of globalized business environment, it is necessary to have a macro outlook. Additionally, global businesses bring in foreign exchange, which is a welcome source of income to all the Star hotels that operate on huge capital outlays. How ever, 6% of the surveyed hotels advertise for the entire periphery of India. Localized ads thro out Karnataka amount to 11%, being mainly adopted by the smaller and rural side hotels.

Exhibit:4 Ad Coverage
CATEGORY	REGIONAL	STATE	INDIAN	GLOBAL	Total
No. Of hotels	72	12	7	17	108
% To total survey	67%	11%	6%	16%	100%

6. AD FOCUS : Most hotels (94%) advertise to solicit the continued support of repeaters and new business to add margins. Only 6% of the sample, especially the matured hotels advertise for image build-up. For establishing their continued presence in their niche 26% of the surveyed hotels advertise.68% of the hotels advertise for new business alone.

Exhibit:5 Ad Focus of the hotel advertisements
CATEGORY	No. Of hotels	% To total Survey
NEW CUSTOMER	74	68%
CUSTOMER RETENTION	0	0%
IMAGE BUILDUP	6	6%
TO FACE COMPETITION	0	0%
CONTINUED PRESENCE	28	26%
Total	108	100%

ADVERTISING PLANNING AND STRATEGY: The successes of the marketing efforts of a hotel hugely depend on the management of the ad campaigns. The hotels have to deliberate carefully on the plans using a cost- benefit analysis. When global success is aspired the plan has to be fool proof but as modified based on the country differences. The five major tourism decisions to achieve the realistic RevPAR/GOPPAR are:

1) What are the advertising objectives? -MISSION
2) How much can be spent? -MONEY
3) What message should be sent? -MESSAGE
4) What media should be used? -MEDIA
5) How should the result be evaluated? -MEARUREMENT

The advertising objectives must flow from prior decision on the tourist market, market positioning, and marketing mix. The market positioning and marketing mix strategies define the job that advertising must do in the total marketing programme. Many specific objectives could be assigned regarding Communication objectives and Sales objectives. The Generic Advertising Planning consists of the following: -

1) Analysis of the market and proper segmentation.
2) Set out marketing and advertising objectives.
3) Work on the power brands to be created.
4) Finalize marketing and advertising budgets.
5) Add on value additions possible economically
6) Create art, copy and total visual.
7) Finalize the media and
8) Coordinate with other marketing mix factors like sales promotion etc.

CONCLUSIONS: Hotel Strategies may be generic or specialized based on the market or product/ service lines indulged. A meaningful measurement of the effectiveness of advertising will be possible only by disaggregating the total area to be covered and relating it to various stages of processing and preparation of advertising and to the hierarchy of its possible effects. So all the advertising efforts should be aligned and matched with the objectives, competitive advantages and long term prosperity of the hotels.

*REFERENCE AND SOURCE: DIRECT SURVEY BY THE AUTHOR
**PROCESSED BY: DATA ANALYSIS PACKAGE.

Dr. Padma Srinivasan
Head-HR & Company Secretary
Sindhu Cargo Services Ltd.
Bangalore
E-mail : padma@sindhucargo.com

Source : E-mail November 23, 2004

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