Tag Archives: pricing

My Latest Edited Book on Destination Marketing

An Excerpt from the Preface of “Strategic Perspectives in Destination Marketing” (forthcoming):

The marketing of a destination relies on planning, organization and the successful execution of strategies and tactics. Therefore, this authoritative book provides students and practitioners with relevant knowledge of tourism planning and destination marketing. The readers are equipped with a strong pedagogical base on the socio-economic, environmental and technological impacts on the attractiveness of tourist destinations. At the same time, this publication presents contemporary conceptual discussions as well as empirical studies on different aspects of the travel and tourism industries.

The readers of this book will acquire a good understanding of the tourism marketing environment, destination marketing and branding, pricing of tourism products, tourism distribution channels, etourism, as well as on sustainable and responsible tourism practices, and among other topics. They will appreciate that the tourism marketers, including destination management organizations (DMOs) are increasingly using innovative tools, including; digital media and ubiquitous technologies to engage with prospective visitors. Hence, this book also sheds light on the latest industry developments in travel, tourism, hospitality and events.

Chapter 1 introduces the readers to the tourism concept as it describes the travel facilitators and motivators. Afterwards, it explains several aspects of the tourism product, including; the visitors’ accessibility, accommodation, attractions, activities and amenities. It categorizes different travel markets; including; adventure tourism, business tourism (including meetings, incentives, conferences and events), culinary tourism, cultural (or heritage) tourism, eco-tourism (or sustainable tourism), educational tourism, health (or medical tourism), religious tourism, rural tourism, seaside tourism, sports tourism, urban (or city) tourism, wine tourism, among other niche areas.

Chapter 2 examines how foreign tourist intermediaries perceive Portugal as a tourist destination. It analyzes the promotional information that they use to attract visitors to this Southern European destination. This contribution recognizes that the tour operators have an important role in intermediating the relationship between the tourists and the tourism service providers. The authors suggest that tourism relies on the destination’s image that is often being portrayed by the foreign tourism intermediaries.

Chapter 3 explores the cruising consumers’ behaviors and their decision-making processes. The authors maintain that the destination, the social life on board as well as the cruise features are very important factors for consumer loyalty. In conclusion, they recommend that cruise lines should create synergies with local institutions in tourist destinations.

Chapter 4 investigates the Spanish inhabitants’ opinions on the tourism industry’s seasonality issues. The findings suggest that the local residents who live in the coastal destinations were in favor of having tourism activity throughout the year; as opposed to other host communities from urban and rural destinations (in Spain) who indicated that they would enjoy a break from tourist activity during the low / off peak seasons.

Chapter 5 provides a critical review about the pricing and revenue management strategies that are increasingly being adopted within the tourism and hospitality contexts. The authors introduce the readers to the concept of “rate fencing”. This proposition suggests that businesses ought to differentiate among various customer segments, as they should attract and develop relationships with the most profitable ones.

Chapter 6 appraises the use of qualitative reviews and quantitative ratings in interactive media. The authors also engage in a discussion on the content analysis of the online users’ generated content (UGC). They posit that it is in the interest of tourism and hospitality businesses to respond to positive and negative word of mouth publicity in reasonable time, as they may have to deal with fake and unverified reviews.

Chapter 7 clarifies how online travel businesses, including; AirTickets, AirBnB and TripAdvisor among others, are continuously investing in their communication technologies and infrastructures to improve their online users’ experience. The author contends that innovative technologies, such as recommender systems and control frameworks are supporting the travel businesses’ in their customer-centric approaches.

Chapter 8 discusses about the concept of the brand identity of destinations from the suppliers’ perspective. The author puts forward a case study on the city of Porto, in Portugal. She explicates how this tourist destination has used an authenticity-based approach to leverage itself as a distinct brand identity among other destinations.

Chapter 9 proposes an ambitious plan to attract visitors to Buxton, Derbyshire. Firstly, the authors focus on the marketing endeavors of a local renovated hotel. Secondly, they provide relevant examples of how other wellness and spa towns in Britain, including; Bath and Harrogate are organizing events and festivals to attract international tourists throughout the year.

Chapter 10 explains how a perceived (positive) image can provide a sustainable competitive advantage to tourism destinations. The authors argue that the historical events as well as other socio-political factors can possibly affect the visitors’ (pre-)conceptions of the Gallipoli peninsula in Turkey. However, they imply that the tourists’ positive experiences could translate to positive publicity for this destination.

Chapter 11 elucidates the notion of destination branding in the rural context. The author maintains that there are both opportunities and challenges for tourism policy makers to preserve the traditional farms and rural dwellings, in order to safeguard their distinct identity. He posits that the rural environment can add value to the tourist destinations and their branding.

Chapter 12 posits that today’s tour operators are highly driven by technology as prospective travelers are searching for online information about their destinations prior to their visits. The authors describe the digital marketing strategies and tactics that are used to promote Malawi, in Africa. They suggest that the inbound tour operators are increasingly using relevant content marketing through interactive technologies and social media to engage with prospective visitors.

Chapter 13 evaluates potential strategies that could be used to develop the tourism product in Adiyaman, Turkey. The authors identify the core responsibilities of the tourism stakeholders and put forward their key recommendations for the branding of this rural destination.

In sum, this authoritative publication is written in an engaging style that entices the curiosity of prospective readers. It explains all the theory in a simple and straightforward manner. This book reports on the global tourism marketing environments that comprise a wide array of economic, socio-cultural and environmental issues. It explains how technological advances have brought significant changes to the tourism industry and its marketing mix.

This book was written by academics for other scholars, researchers, advanced under-graduate and post-graduate students; as it provides a thorough literature review on different tourism topics, including; destination marketing and branding, sustainable and responsible tourism, tourism technologies, digital marketing, travel distribution and more. It is also relevant to the industry practitioners, including consultants, senior executives and managers who work for destination management organizations, tourism offices, hotels, inbound / outbound tour operators and travel agents, among others.

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The Travel Products’ Price Determinants

This is an excerpt from my latest tourism textbook, entitled; ‘Travel Marketing, Tourism Economics and the Airline Product’. This publication will be available through Springer and Amazon.com.


Price Determinants
The type of pricing strategy which marketing managers consider is determined by a number of factors, including: organisatonal and marketing objectives; types of pricing objectives; cost levels; other marketing mix variables; market demand; competition, and legal and regulatory issues, among other matters.

Organisational and Marketing Objectives

Company policy and image, target profit margins and staff count could influence the type of pricing policy which the marketing managers will apply. Company policy and image will play an important role when determining a pricing strategy. The price set must be consistent with the general corporate objectives and the strategic direction of the company. For example, a full-service airline may want to be associated with the top-end of the market by providing a high-quality service to the business travel segment. To price below the average rate for such a service may imply an inferior and poor-quality service.

Any airline which would like to target the business market should provide an extensive schedule and a high-quality service. Therefore, it will require considerable resources and capabilities to do so.

Pricing Objectives

The most fundamental pricing objective is that of survival pricing. When experiencing severe competition, businesses may be forced to offer lower prices than their rivals. This way they will generate revenue, and improve their chances of survival. A tourism service or sub-product will not generate revenue if it is not used over a given period of time (it will perish) . While the service or sub-products may be available for sale at some later point in time, the revenue that was originally lost, can never be regained. For example, a hotel had thirty empty rooms on a specific date. These empty rooms cannot be sold at a later date because the service has been completed, and perished. Similarly, an airline could depart with empty seats which cannot be sold at a later date.

Moreover, the demand for tourism products is usually seasonal. For example, many north Americans flee south to Hawaii and to the Caribbean, during the winter months; whilst Australasians travel to Europe during the summer months of June, July and August. Of course, seasonality may be due to other factors, other than climate, including; vacation and holiday periods. For example, families may habitually travel at the same time of the year, usually over Christmas, Easter or summer periods. This is the usual close-down time period for schools, industry and commerce, in many countries. Since tourism is highly seasonal, suppliers may reduce their prices during off-peak times. Hence, a low price strategy assists in creating demand particularly among price-sensitive customers. Conversely, operators may charge higher prices when there are peaks in demand, due to major attractions and special events.

Profit maximisation is another pricing objective. However, it may prove difficult to measure, as businesses could not be in a position to determine when they have reached maximum profit. As a result, profit maximisation may be evaluated according to a certain ‘level of satisfaction’. A change in profit relative to previous periods may be considered as satisfactory or unsatisfactory for the businesses. The setting of prices to obtain a fixed rate of return on a company’s investment is a profit-related objective. Many businesses could be aiming to achieve a specific profit.

Another possible pricing objective is that of increasing market share. Many companies may design pricing policies which will enable them to improve their market share. However, at times, they may be satisfied with their current status in the market. In this case, their objective would be to retain their status quo. Companies with such an objective may not use pricing as a competitive tool. They will probably maintain a steady market share by nurturing their brand equity.

Cost Levels

The marketing managers should be careful to analyse all costs so that they will be included in the total cost. Therefore, the pricing of products should be based on the company’s direct and indirect costs (and may consider overhead expenses) if they are projecting a certain profitability margin.

Other Marketing Mix Variables

The marketing mix elements, including; promotions (the integrated marketing communication mix) and place (distribution channels), could determine the target customers’ perceptions of the firms’ products (or services), in a given competitive context.

The extent to which a product is promoted can have a huge effect on consumer demand. The products’ price will usually determine their target market. Low-priced products may attract price-sensitive markets. Such products will be promoted through different marketing communications channels other than high-priced, better quality, premium services. The more expensive the products; the higher the customers’ expectations. Considerable thought and action must go into product development so as to provide the customer with a valuable service which reflects the product’s price. One of the most significant promotional tools is word-of-mouth publicity. For instance, online reviews and ratings are increasingly playing a major role in tourism marketing.

When making a pricing decision, the businesses should consider their distribution costs. The companies’ intermediaries, including; tour operators, online travel agents, and the like, will expect financial compensation for selling travel products. Alternatively, they will expect discounts and special incentives to push the businesses’ products to consumers. For example, they may book large seat orders and place substantial mark-ups on seats which they have bought from the airline (these products may be demanded for inclusive tours). These factors must always be taken into consideration by the airline marketing managers, as they have to add mark-ups to the cost price of seats, when selling them to intermediaries.

Market Demand

There is a highly segmented market for tourism products. Each of the market segments vary in terms of elasticity, and service requirements. These variables will influence the way in which prices a set.

The business travel segment is generally more inelastic in demand. Fluctuations in prices will not affect demand to any great extent. However, the business travel segment expects a high-quality service. Generally, business travellers are prepared to pay a higher price for such services. The higher fares will not only cover the costs of the superior service, but will also convey an image of a premium, prestige product.

The passengers from the leisure travel segment are usually price-sensitive. Their expectations are somewhat lower than those of the business travellers. Demand is extremely elastic in this segment; and an increase in price may result in lower demand.

The socio-political factors may affect market demand. If a destination is politically or socially unstable, tourists may not want to go there. Most people like to feel safe and comfortable. For instance, many destinations have experienced dramatic reductions in the number of tourist arrivals, following the terrorist activities in certain countries.

Economic factors, including the individuals’ income and well-being, will affect their propensity to travel. However, this may not necessarily translate to an increased demand for all tourism products. For instance, if leisure travellers receive an increase in income, they may decide to travel to long-haul destinations rather than short-haul itineraries. Alternatively, these clients may increase the quality and standard rather than to increase their frequency of travel. Such customers may decide to upgrade their hotel accommodation, or to travel in higher classes. Income may affect demand according to the purpose of travel. For business travellers it may not make much difference, whilst for leisure travellers it can make quite a substantial difference. Their demand may also be influenced by the availability of substitute products. If there are no substitutes for the product, then consumers will be forced to buy regardless of price.

In addition, customers may develop perceptions about tourism products. Whether they are accurate or not, they could influence their purchase behaviours. Therefore the travellers’ perceptions, the online ratings and reviews should be carefully considered, as tourism products must always be purchased in advance.

Competition

The businesses should be aware of their competitors’ prices. They may decide to respond to their rivals’ pricing strategies, or to be proactive by taking the pricing initiative, themselves.

Responding to the Competitors’ Pricing Initiatives

There is no rigid method of responding to a price initiative taken by competitors. Every situation is unique. However, businesses are capable of making confident decisions if they examine the situation from different viewpoints:

At times, competitors may decide to lower their prices: It is not wise for other businesses to follow suit, unless they establish why their competitors are pursuing such a pricing strategy. It may be the case that the competitors have made a bad decision. It must be determined whether the competitors’ pricing initiative was a long term or a short term one. For instance, an airline’s poor fleet planning may result in the company changing its prices on a long-term basis. In such situations, rivals will have to respond or risk losing their market share. Price reductions will eventually lead to lower yields for the airline. As a result, this will have a negative impact on the airline and its long-term sustainability prospects. If the pricing initiative appears to be a short-term action, it is advisable to ignore it, and to avoid de-stabilising the market.

The price reductions on certain products may be questioned by the airline’s customers. As discussed above, the airlines may usually charge higher prices for their business and first class as these services are considered as prestige products. The airlines can differentiate themselves from competitors when they provide superior services; that are perceived as an index of quality and corporate image.

On the other hand, the airlines’ should continuously monitor those competitors who are resorting to price-cutting policies. Certain leisure markets may be more price-sensitive than others, as they may exhibit higher price-elasticity levels. The lower prices could result in an increase in demand for the economy class of service.

Taking the Price Initiative

Generally, businesses may avoid lowering their fares, as this will affect their bottom lines. Price wars have destroyed the profitability of many businesses. However, there may be a tendency toward price competition: when firms have low variable costs; when there is little differentiation among the competitors’ products; when industry growth rate is low, and; when the economies of scale are important. The businesses need to consider their cost levels before taking the initiative to lower their prices. The lean businesses who may have less costs, will usually be in a much stronger position to lower their prices than other competitors with high costs. However, more established high-cost businesses may have stable financial backing, which will enable them to meet, if not undercut, the new companies’ prices. They could eventually push their competitors out of the market.

An increase in price may be required if the business is facing controllable or uncontrollable costs. For example, if the airlines’ uncontrollable costs, include; increased airport landing fees and air traffic control charges; they may either decide to absorb these costs or alternatively, they may increase their fares as a means of covering these added costs. Of course, rival airlines will also face the same pressure. In such cases, the airlines could inform their customers about their uncontrollable costs, which have forced them to increase their fares. Ongoing corporate communications and public relations will help them to maintain their customers’ goodwill. On the other hand, the airlines’ controllable costs, including the employees’ salaries and wages, are under their direct responsibility. Such costs may not justify taking pricing initiatives to improve the organisation’s financial performance. They may even aggravate the airline’s profitability, in the long-term.

Legal and Regulatory Issues

Legal and regulatory issues may have an impact on a company’s pricing structure. Although, the airline industry has experienced deregulation and liberalisation in the past decades, there is still some government intervention, in certain areas. In international markets, air service agreements between governments necessitate that national airlines should meet and agree on the fares and rates to be charged to passengers. The agreed fare is brought back to both the airline’s governments who have the right to veto the fare. Should this happen, the airline concerned must seek to re-open negotiation.

Deregulation and liberalisation have affected the airlines’ pricing policies in many contexts. For example, liberalisation has changed the fares regime in the United States of America, in the European Union and in many other places. Today, several airlines have introduced lower fares which have contributed to increased travel. Moreover, the rise of the low-cost carriers has often resulted in lower air fares within pre-agreed zones. Evidently, pricing is increasingly being used as a competitive tool, in many contexts.

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Travel Search Engines and Price Comparison Websites

search

Many search engines are increasingly offering advantageous deals on travel products. Very often, they may have user-friendly websites that help individual consumers search for the best prices. For example, a flight search may include one-way, return or multiple destinations. The travellers may specify whether they would like to travel in a particular class of service (for example, economy, business or first class). Travellers may also opt for direct services (which are usually more expensive), and their search can be narrowed down according to their preferred departure and arrival times (if any).

In addition, many search engines identify their “best flight” option. Their algorithm will usually base their decision on layover time, the length of flight, and departure/arrivals times. They may also let you know if there are cheaper flights available, particularly if there are nearby airports.

Price Alerts: The search engines will enable their users to set a price alert on tourism products. For example, after the users have given details on the travel dates and their email address, they will receive regular emails which will communicate whether the price for the flight (that was searched through the search engines’ system) has gone up or down in price.

Travel alerts are convenient for those passengers who are planning their itineraries in advance. Online prospects will be updated on the best time to purchase their flight (in this case).

Flight Deal Websites: Online prospects can find good flight deals by following niche websites that are dedicated to posting such deals. Most of these websites may not necessarily be affiliated with any airline. Very often, consumers may check these websites on a regular basis. Alternatively, they may follow travel and tourism groups through social media.

Flexibility: An inexpensive flight may not always be the right flight for passengers. The prospective customers may demand flexible dates. For instance, they may want to avoid unnecessary overnight stays in random cities (a hotel accommodation may well increase the cost of the travellers’ journey). Moreover, there are other important considerations. For example, customers may not be willing to travel to distant airports. They may not like to travel at night, et cetera.

The best flight deals may not last long as search engines may frequently change their flight prices.

Bonus Tip: Many low-cost carriers may not feature all costs in their prices. These “hidden” costs may comprise carry-on baggage fees, checked-baggage charges and seat fees. Customers should check these fees and charges before purchasing a flight with any airline. Such “hidden” costs and expenses are usually disclosed on the airlines’ respective websites. In many cases these supplementary fees can be paid in advance. If customers would not pay in anticipation of their flight, they may easily incur additional charges.

Therefore, the overall best deal should be determined according to flight times, hidden costs, and personal airline preferences.

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