Introduction
The Jumeirah group (hotel division) owns some of the most prestigious and luxurious hotels and resorts within Dubai and the U.A.E such as the Burj Al Arab, the Jumeirah Beach hotel, the World Trade Center Residence and the Madinat Jumeirah. Prices for rooms range from 1300, 1500 to 4000 dirham and above due to the various luxuries and amenities available to hotel guests. It must be noted though that as direct result of the 2008 global financial crisis and the current economic problems that the U.S., Europe and Asia are experiencing right now due to turbulent financial markets this has created an atmosphere of uncertainty which has actually negatively impacted the number of hotel goers that have come into the U.A.E.
In fact, domestic demand for hotel stays has been waning for the past several years which when combined with the gradual decline in Dubai’s booming construction industry has resulted in various hotel chains, such as the Jumeirah group, finding themselves in a situation where the various luxuries and amenities that they offer actually turns away potential guests due to their uncertainty over spending on luxuries during a time of economic turmoil.
On the other hand it must be noted that based on a SWOT analysis of the Jumeirah group it can be seen that the strength of the Jumeirah group within the Dubai region is the sheer scale of their projects and the degree of popularity they have with the local population. This creates a certain degree of “hype” in order to try the services and experience the luxury that people are talking about.
Furthermore when compared to the Ansoff analysis of the Jumeirah group’s degree of market penetration it can be seen that their projects such as the Burj Al Arab, the World Trade Center Residences and its various resorts have achieved a considerable degree of market penetration due to their popularity and uniqueness. Both of these factors represent considerable advantages for the Jumeirah in terms of hotel division being able to withstand the current financial crisis through the sheer popularity of its hotels and resorts.
On the other hand it must be noted that based on the SWOT analysis the weakness of the hotel chain is in its relatively high prices which when combined with the current turmoil in economic markets makes most guests shy away from even thinking of using the hotel’s services and is indicative of a major need to reevaluate its pricing scheme. Not only that one of the threats the hotel division has come in the form of the presence of several cheaper hotels within the city that are servicing guests that want an affordable means of visiting other countries due to the level of economic uncertainty that is currently affecting financial markets around the world.
It is based on this that this report will examine possible alternatives that the Jumeirah group can pursue in order to whether the current storm of the current financial turmoil that the world finds itself in.
Current Consumer Segments Being Targeted by the Jumeirah group
An examination of the market segmentation strategy that the Jumeirah group utilizes reveals that at the present there are two particular consumer groups that it has been targeting, namely: wealthy foreign tourists and wealthy local patrons. What must be understood is that the construction boom that occurred in Dubai over a decade was a direct result of plans to turn it into a financial and tourist center in order to secure its future when the supply of oil within the region begins to decline.
As such the Jumeirah group capitalized on this vision by implanting a strategy where it constructed hotels and resorts to cater to the predicted influx of wealthy tourists to the region as well as wealthy locals. While such a strategy has worked for the past several years the unprecedented nature of the current financial crisis creates the necessity of a new strategy in order to ensure that the hotel chains of the Jumeirah group continue to survive.
Recommended Marketing Mixes
Foreign tourists
In the case of foreign tourists what must be taken into consideration is the current financial recession that has currently created a distinct economic downturn in the global economy. Tourists are more reluctant to travel and spend money as compared to previous years and as a result fewer people have been booking rooms at the various hotels within the U.A.E. For this particular marketing mix the product in question are the luxury rooms that are available yet both their price and the fact that the current economic system is unstable makes consumers rather reluctant to utilize them. Based on this, the simplest solution would be to lower the price of various rooms in order to entice more consumers, both locally and internationally, to use them.
While it may be true that the hotel would not be able to earn as much compared to when it would charge full price for its various suites, the fact remains that it would still be comparatively better as compared to not having any guests at all. As such, in order to entice foreign tourists to come to the hotel, one method of doing so would be to advertise internationally using both commercial ads and travel agencies that the prices of the hotel rooms would be slashed for a certain period of time and as such people can avail of the discount.
Another factor to take into consideration is what particular place the Jumeirah group should focus on in order to gain more guests. One possible market are the cities of Beijing, Shang-hai and Guang-zou, the reason for the selection of these particular cities is due to the fact that as a direct result of global outsourcing initiatives China has now become one of the largest manufacturing centers in the world with numerous cities within China holding the distinction of being areas where various Fortune 500 companies have set up their off shored factories.
This trend in outsourcing has actually resulted in the creation of a new Chinese upper class, who due to their increased wealth, have now started to spend on a variety of luxurious items, homes and vacations. By advertising the various luxurious amenities available and by appealing to the Chinese sense of vanity it would be more than likely that the Jumeirah hotel group would be able to get more than just a few Chinese guests. As such, one method of promoting this would be to use various translated television commercials and Chinese celebrity endorsements in order to entice the newly rich Chinese segment of the population to patronize the hotels of the Jumeirah group in the U.A.E.
What must be understood is that this focus on international consumers is actually keeping in line with a PEST analysis of the Jumeirah which examined how local social factors affect the degree of product demand within Dubai. One well known fact within Dubai is that most of the workers within the city are not natives, rather, they come from various countries in order to work within Dubai.
While this does potentially present itself as an opportunity for local hotel industries the fact remains that due to its high prices and exclusivity the hotels of the Jumeirah group are often thought of as too expensive for even one night’s stay resulting in more people going to cheaper and lesser known hotels. It is based on this their expansion into greater numbers of foreign clientele is not only a good move but is keeping in line with proper strategies in surviving through a recession.
Wealthy local patrons
In the case of wealthy local patrons, one possible marketing mix would be to create special offers for hotels that would otherwise be outside the price range of the lower tier of the elite within U.A.E. society. For example, hotels such as the Burj Al Arab cost roughly 3,000 to 5,000 dirham a day, while such an amount is not necessarily that high the fact remains that with the current financial crisis more people within the area are getting more reluctant to spend money due to economic uncertainties.
As such, one way of encouraging more guests to try the facilities is to lower the price range to 2,000 dirham or less per night and promote going to the hotel in various areas such as Qatar, Oman and other Middle Eastern countries in order to capitalize on some of them being curious as to what its like in the Burj Al Arab. Possible methods of promotion could include television advertisements specifically targeting the areas stated as well as utilizing various TV promos and limited offerings through various travel agencies as well.
Difference between Marketing to Organizations or Marketing to Consumers
What must be understood is that hotels do not always market directly to consumers rather they sometimes use intermediaries such as travel agents, tourist package websites and various organizations that bundle specific tour packages for tourists. The main difference between the two is that when hotels market direct to consumers they absorb most of the cost of marketing with fees related to commercials, celebrity sponsorship agreements, musical events and various extravaganzas in order to entice people to stay at the hotel. This actually creates a significant degree of cost for the hotel with no distinct certainty that they will be able to break even as a direct result of such actions. Not only that the marketing capabilities of hotels are limited to certain areas and cannot encompass all global locations.
For example, while the Jumeirah hotel group advertises its amenities to locations such as the U.S., Britain, France and Germany it lacks market penetration in places such as Japan, Australia, Canada, Russia and South America. This is not due to a lack of trying but rather a lack of resources to be able to effectively market their hotels to all areas around the world.
In cases though where a hotel chain such as the Jumeirah group markets its products and services to organizations such as tourism agencies, tour groups and other tourist organizations it is able to ensure that consumers from all around the world are given the option of going to hotels owned by Jumeirah in the U.A.E. instead of hotels owned by other hotel chains. While it may be true that travel agencies and tourism organizations do not directly advertise their services via commercials or ads the fact remains that most people go to such organizations in order to effectively plan their trips and vacations.
By marketing directly to such organizations and giving them a commission based on bookings the Jumeirah hotel group is in effect able to expand its market reach without having to utilize expensive marketing campaigns. This particular strategy is important to take note of due to the fact that with dwindling numbers of guests going to their various hotels it is necessary to find alternative cost effective solutions to reach a wider customer base and as such marketing to organizations provides the necessary means of doing so.
Difference between International and Domestic Marketing
In order to understand the difference and importance of international and domestic marketing, it is important to first take note of the theory of consumer behavior to understand what drives consumption of a particular product or service. The theory of consumer behavior revolves around the concept of the perceived value or satisfaction that a consumer derives from the consumption/use of a particular commodity. In terms of actually understanding the demand side of market consumption/utilization the theory of consumer behavior uses two distinct methods of measurement, namely Total Utility (TU) and Marginal Utility (MU).
Total utility is defined by various experts in the field on consumer behavior as being the equivalent to the total level of satisfaction that a consumer can get from the use/consumption of a particular good or service. In the field of analyzing, consumer behavior marginal utility is basically described as an add-on, namely it is the additional form of satisfaction that a consumer /hotel guest can get from the use/consumption of an added portion of a particular good or service. It must be noted though that while total utility increases with the overall level of quality, at some point due to the continuous consumption of a particular product or use of a type of service the overall yield will result in smaller and smaller levels of additional utility towards the consumption.
To illustrate this point, one can imagine a person buying a scoop of dark chocolate ice cream at an ice cream store because of the hot weather. While initially the total utility and marginal utility are equal if the person were to go back and kept on buying the same product in order to stay cold, the total utility would increase due to the consumption, however, the marginal utility would decrease over time as a result of the continuous consumption of the same product. This is based on notion that continuous consumption of the same product would eventually cause a person to get tired of consuming it thus the added value continues to decrease over the course of consumption.
In the case of domestic marketing, the fact remains that most marketing campaigns take into consideration the theory of consumer behavior of diminishing returns as a result of continuous use of a particular service, there are only so many times a person can stay at the same hotel and resort before they get tired of it. As such, in the case of domestic marketing what is done is usually limited marketing campaigns targeting particular seasons or days such as holidays, special events etc. However, these campaigns do not run throughout the year since it is inevitable that even if the hotel chain were to significantly increase the level of advertising it does domestically it still does not automatically mean that the consumers who already go to the hotel will frequent the establishment even more.
Another factor to consider is the fact that due to the high prices of the hotels of the Jumeirah group the number of local consumers is further limited to a selected group. Thus, in this particular case international marketing becomes a necessity. In the case of international marketing, while hotel chains do not have to worry so much about customers getting tired of visiting their hotels the fact remains that international marketing efforts actually have certain problems as well. There are considerably increased costs, the fact that it is harder to properly target the right consumer segments and the fact remains that marketing to different cultures also brings a certain degree of problems in relation to proper cultural compatibility with the services the hotel offers.