Description of YM Research Results: Segmentation

Subject: Organizational Management
Pages: 15
Words: 4152
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Study level: College

Segmentation is a critical tool of classifying customers into their respective categories. It involves creation of an impervious strategy of dividing customer in accordance to their social classes among other groups. Probably, this would allow ministers to rent similar rooms within a hotel. Also, it allows travel agents to get accommodation of their social classes. According to Netessine and Shumsk (2002), segmentation is used when setting prices. They postulated that discrimination of prices can maximize hotel revenues. This research affirms the postulation by gathering information regarding price dissimilarities arising from segmentation. One manager from a four star hotel is eloquent on describing how segmentation influences prices in Riyadh hotel. The manager described that, “…the hotel has six types of rooms that vary in price from 600 Riyals to 1,400 Riyals. There are businessmen who prefer to get the most expensive room… On the other hand, there are some corporations that book the cheapest rooms for a long term” (participant #1). This technique of price segmentation has been identified by most hotel managers (Maxwell, 2008). The identification of such dissimilarities in the different portions of the market enables hoteliers to satisfy the needs of potential consumers in an effective manner (Reid & Bojonic, 2009). Customers are, therefore, able to book and rent rooms satisfying their needs and apprehending their nobility. How aristocratic is a minister who books a room similar to those of the travel agents? This depicts the necessity of segmentation to hotels that are potential for receiving VIP individuals.

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Hotels from Riyadh seem to segment customers into businessmen, geography, corporation, leisure, governmental institutions and airlines. However, Harrah Cherokee’s case stipulated that customer segmentation and designations as business or leisure are not necessary. Harrah argued that these results from spending patterns of the customers create a relationship to differentiate the groups that should be pursued and given focus in terms of the business resources (Metters et al., 2008). For example, corporations, government institutes, wholesaler and travel agents are willing to book some rooms for long period, such as one or two years. Others assume a specialized strategy involving the identification of percentage intake. For instance, a four-star hotel manager divided the intake into, “a) 40% for companies b) 20% for tourism agents c) 10% for businessmen, and d) 30% for e-booking (leisure travelers)” (participant #8). It is vital to acknowledge the rare geographic segmentation that assists to predict customers’ behaviors. Smolyaninova (2007) identified that customers originating from one geographic region may possess similarities in attitudes and preferences. However, few hotels considered geographic segmentation. In fact, there was only one five star hotel manager who identified its necessity in segmentation. The manager articulated that they segment customers basing on geography because Riyadh is a capital city (participant #5).

Most hotels from the Eastern Area have a distinct strategy of segmentation, except one five-star hotel involved in this research. Some hotels do not segment their customers. The hotel manager pointed out that, “We pay attention to all customers generally and companies particularly” (participant #11). Those that segment their customer base on ‘wake in’, websites, groups, sport and corporations. However, there are similarities that arise from the segmentation strategies between Riyadh and Eastern Area. The five star hotel segments customers according to the strategies recorded under Riyadh hotels in the previous paragraph.

Segmentation depicted on all hotels from Mecca implies the reliance of individuals and groups. The groups include travel agents and companies. Why are these modes of segmentation distinct in Mecca? All participants taking responsibilities within Mecca hotels emphasized on groups and individuals. They did not mention businesspersons, government institutions among others. This implies that there are control factors that influence the organization. Probably, since the main season involves the intervention of holidays, such as Ramadan, which are peculiar in the other cities.

The research results show that long term booking is the key factor determining discounts offered. The groups that were identified to receive these huge discounts as a result of the long term booking include travel agents, companies, corporations, government institutes, and wholesalers. It is crucial to note that longer length of stay leads to higher revenues attainment from product selling such as food. When a customer stays for a long period, there are expectations of continued income. Reducing their room ratings, therefore, acts as a strategy of ensuring continued income. Precisely, travel agents who book rooms for more than one year are potential customers for drinks, foods and other resources within the hotel for that time. Facilitating their length of stay by reducing room rates supports improvements on the revenue. This articulation regarding the period of stay is affirmed by a manager from a five star hotels in the Eastern Area. The manager stated that huge discounts are preserved for, “any group which books a great number of rooms for long term, such as Saudi Airlines” (participant #13). Other hotels offer discounts for long-term booking during the non-season periods. A four-star hotel manager from Eastern area pointed out that, “Corporations which book during non-seasonal times, as this assists to maximize the hotel income” (participant #10) receive huge discounts. It is, therefore, apparent that leisure travelers cannot receive these types of discounts. Their ultimate goals are recreation and entertainment which require movement and reallocation (Abdelghany & Abdelghany, 2009; Yeoman, McMahon-Beattie & Sutherland, 2001). Consequently, they cannot remain fixed to one hotel for enjoying high discounts.

Human Resources (HR)

HR is a basic factor for all business institutions that target to attain profits. The stipulation made by Yeoman (1996) that YM systems cannot function without HR is factual and certain. Humanity is the control factor that has an ability to evaluate issues critically in all situations. For this reason, we can state that HR is a fundamental factor for all institutions. In hotels, HR refers to the employees and employers who work to attain the goals. Their actions and satisfaction determine how services are rendered to the customers. One branch of HR includes the front office employees. The front office lays the picture of services offered in the hotel. Hotels, therefore, must ensure that there are appropriate and fit services in this department. Poor management in the front office leads to poor services and customer dissatisfaction. Therefore, it cannot be considered surprising when a 4-star hotel manager states that, “Front office staff are the heartbeat of the hotel” (participant #9). The hotels that were studied during this research show that most hotels consider front office workers in selection of prices and discounting. For instance, a manager of a 5-star hotel stated that, “… they are empowered to issue decisions related to prices, in addition to discounts. The most important of the hotel’s policies is to assign responsibility to its employees and let them be entitled to decide” (participant #3). Other hotels assign these employees the ability of bargaining prices in accordance to customer’s willingness and class. A statement from a 3-star hotel manager that, “…they can select one of three rates based on guest’s willingness,” (participant #14) approves this issue. Another manager applauds this articulation by stating that, “Front office staff have right to raise or decrease prices by 25% according to the type of a customer standing before him” (participant #11).

However, some hotels do not allow employees to participate in the price making processes. A manager of Riyadh hotels utters clearly that, “…front office employees have no responsibility to modify the price. Such decisions are liable to lead to reverse results, therefore, as an administration we have the responsibility to control prices,” (participant #2). Ideally, such cases are potential for establishing a harsh working condition that does not allow office managers to bargain and assume favors for the customers. This could lead to customer’s loss as a result of low customers’ bargaining power. When customers feel that they have the ability to argue the room prices down, they acknowledge it as a discount from the marked prices. Therefore, this could help to satisfy the customer and earn the hotel a future booking. General Managers should consider enabling some allowances for employees to select prices for the potential customers. It would be a tool to regulate prices in that customers who are willing to pay more can cover payments of those who manage to pay less. However, this research revealed that only five hotels did not involve employees in the room pricing. The other fifteen hotels, described in this research, show that they pay attention to the involvement of customers in decision making. Also, there arises one case where a manager cannot make decisions for the hotel. Although, other managers make decisions that they take responsibility for the outcomes, this manager is still struggling to attain this power. In a statement, the manager stated that, “Unfortunately, I don’t have the authority that empowers me to take some important decisions, and I should convince the general manager until I get the approval” (participant #18). The other managers were responsible for making decisions and facing the repercussions.

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Controlling HR and proving the necessities for proper working conditions is vital in goal attainment. For instance, front office employees could attain different language preferences to enhance diverse communication when speaking to customers. When the front office department is armed with eloquent speakers, there are high expectations of profits due to convincing power that comes with a language understanding. Sadi and Henderson (2005) indicated that domestic tourists made more than 57 million trips through 2002. This identified that those employees who are from East Asia countries should acquire the local language that assist them in interacting with the local guests (Hayes & Ninemeier, 2007). This interaction establishes roots for future accommodation and income. Additionally, most hotel managements offer courses that enlighten worker and equip them with sufficient knowledge of working. These courses could be enacted when employees are being recruited and later during the working process. For instance, a Riyadh 5 star hotel manager said that, “Regarding hotel staff development, a course for three months is provided to newly appointed employees in their fields. For example, an employee who is assigned for income team organization shall have courses related to yield management and work-team directives. Usually, such courses are internally organized and addition courses will be provided for all staff every six months” (participant #2). These strategies will satisfy the employees and motivate them towards providing quality services. It is vital to note that satisfaction of employees is the root of customers’ satisfaction. In fact, the hotel manager could identify the necessity of employees’ satisfaction in determining the satisfaction customers. The manager quoted that, “if our employees are happy, customers will be more than happy” (participant #2). Surely, we cannot expect an angry customer to make the customers happy. Instead, it would be more likely that the customers will be unsatisfied and unhappy than satisfied and happy. Participants imply that the front office takes a significant role during price setting. Almost all individuals mentioned the front office as a price determinant. This department, therefore, requires extensive and specialized training for clerks who negotiate prices and handle inquires (Donaghy et al., 1995).

Managers cannot escape satisfying customers by ensuring that the employees who serve them are satisfied. Satisfaction must arise from within the hotel management to the customer. Otherwise, the quotation made by a 4-star hotel manager that, “without a satisfied staff you will never get satisfied guests” (participant #18) is rooted and solid. We can appreciate the fact that YM and field reservation employees influence the prices of rooms. Their satisfaction is, therefore, a tool for success and strategic delivery of satisfying services. To enhance satisfaction, the hotels provide services to the workers. For instance, in a bid to satisfy employees, a three star hotel provides services to the employees. The participating manager stated that, “… we offer material and moral rewards. Material incentives, such as medical insurance, and moral incentives such as issuance of gratitude certificates for employees” (participant #12). This motivates workers into working tirelessly to achieve these rewards and upgrade their working class. Other hotels are able to divide workers payment in accordance to their working efforts. The manager described clearly that, “We are the only hotel which provides monthly earnings to its staff. These earnings are usually distributed to all employees but the proportion of dividends varies from employee to employee, based on efforts in their work. There are financial incentives distributed to the heads of departments and their employees, such as sales management and front office desk, which achieve a certain percentage of sales as well” (participant #19). We cannot neglect the issue regarding enlightenment of employees with the arising information to equip them with the necessary skills. Sometimes, lack of knowledge can limit the effectiveness of services offered by employees. Consequently, managements of most hotels provide courses to update their workers. Employees who are skilled can provide quality services and attract customers into the hotel another time. Contrary, when the management fails to consider educating its staff on upcoming issues, there is a high probably of rendering unqualified services that may not please the customer.

Customer Management

A hotel with quality service has the essence of retaining its customers and expanding its territories due to these retentions. The key factor that facilitates retention of customers is associated to customer satisfaction. When a customer is dissatisfied s/he retains and populates the attitude that s/he has towards a hotel. This attitude could develop through a nation and arrest the operations of a hotel due to attitude of several customers. It is, therefore, crucial to manage the hotel and ensure that customers are satisfied with the services they are rendered. Professional applications in yield management systems should involve guests’ satisfaction that will bring successful financial outcomes (Gurbuz, 2011). A 5-star hotel manager described how the hotel ensures satisfaction. The manager pointed that, “We satisfy customers through distinguished services. Most customers repeat their visits to the hotel due to services offered to them. Evidence for this is the questionnaires provided for clients or direct questions posed to them by front office employees. As previously stated, a variety of rooms offered for rent attract customers to come to the hotel. Furthermore, the importance of loyalty programs offered for permanent customers is clear. The program includes different policies; first a card is provided for the sustainable customer who receives notable benefits compared with frequent clients. One of those benefits is to attain a room at any time, discount, and be up-graded from a mere room to a suite …etc” (participant #2). YM strategizes to improve the satisfaction of customer basing on the statement that, “Greater customer satisfaction leads to greater organization of revenue” (participant #10). This implies that if hotels paid attention to customers’ satisfaction there would be promising number of customer in the future. To attain this satisfaction, the hotel employees must learn to sacrifice their arguments into the assumption that, “a customer is always right” (participant #12). Otherwise, if the hotel employees argue to dissatisfy the customer, s/he may get upset and initiate a bad attitude towards the hotel.

The participants identified four categories of customers which classify the level of satisfaction rendered. These are loyal, continuous, discontinuous and new customers. According to a 5-star hotel manager from Mecca, the customers are treated differently in accordance to their category. The manager stated that, “We have divided customers in four categories. a) Loyal customers: they have a special card which offers a discount, confirmed booking and sending messages of congratulations in all events. b) Continuous customers: they receive emails including discounts during unseasonal times and congratulations in all events. c) Discontinuous customers: they receive messages of congratulations in all events. d) New customers: there is nothing” (participant #15).

The research was able to identify strategies that help the management to determine when customers are satisfied. One of the strategies involves the use of questionnaires that allow customers to rate hotel’s services. In reference to this, the manager stated that, “There are questionnaires in each room; every questionnaire includes the services provided, conduct of the front office, quality of furniture, prices, and overall satisfaction. We always focus on the price whether it is appropriate or inappropriate for guests” (participant #1). The results of these questionnaires provide adequate information that rates the workers. The questionnaires assist to identify the problems that exist within the working staff. For instance, if several customers complain about a certain staff members, the management must address the issue since it depicts the presence of problems when giving services. This could, also, be performed through providing suggestion boxes.

Price conflicts are common in many hotels. The conflicts arise when a hotel applies discriminatory prices in relation to the customer’s ability to pay, inventory control that retains spare for the customer with more money, and overbooking to cater for cancellations (Wirtz, Theng, & Patterson, 2001). The managers have strategies of controlling these factors and ensuring that they do not dissatisfy the customer. For instance, one manager stated that, “We try our best to apply different means to satisfy our clients, as long as the hotel has about 500 rooms. Generally, we implement various methods which enable us boost income and attain customers’ satisfaction. Mostly, those procedures include display of different rooms with competitive prices but with non-refundable or changeable prices, besides, rooms with high prices which can be cancelled within 24 hours from the date of the booking. Also, offer special prices for students as there is a noteworthy cooperation between the hotel and Ministry of High Education. Lastly, we are keen that the hotel’s prices be the same in all channels” (participant #3). Discriminatory prices allow preservation of some room for those people who can afford. Conflict related to the prices could easily be handled by using fenced pricing. This is the most effective ways of dealing with customer conflicts , such as advance payment, advance purchase, cancellation and refund penalties (Mauri, 2007; Wirtz et al., 2001). However, other customers do not even negotiate the prices. They pay the listed prices for a room and are allocated without conflicts. In regard to this allegation, the manager stated that, “As we target a certain category of customers, which are the businessmen, they usually have potential to pay. Also, they do not negotiate to reduce the price. Besides, most customers nowadays are aware of YM policy, which is obviously seen with airline agents as they offer different prices for the same flight, and those who early book will receive lower prices” (participant #5). However, there must be some coherence to explain the differences in prices. The management cannot just raise the prices for one customer and lower for the other without an explanation. A 2-star hotel manager managed to explain this issue explicitly. The manager said that, “… most customers compare room price and quality of services. If such a price is reasonable in comparison with service quality, a customer will not object to offered prices. Additionally, we usually explain to customers that a room price is fixed but there are special offers and discounts for those who book earlier in cases of non-refundable fees, booking via our website, or in times when the occupancy rate is least and we need to cover variable costs” (participant #7). The issue of price discrimination demands for complete staff intervention since it can dissatisfy customers. Furthermore, the staff member who handle this issue must be ready for any embarrassment that could be due. A five-star hotel manager explained this by narrating that, “… the discriminations of prices put the reception staff in embarrassing situations. For example, a front office employee encountered an embarrassing position where two customers booked the same type of room but the first one booked it at SAR 700, whereas the second one booked it at SAR 850. The last one asked why they paid the higher fees. The employee replied convincingly where he said this guest booked on 31/10/2012 and you booked on 15/11/2012. He explained to him that the hotel provides discounts for earlier bookings of non-refundable fees” (participant #13). This depicts that there is need to enlighten customer about the functioning of the hotel so that they can compete in booking events. For instance, if the later customer had identified that there were discounts for early booking, probably s/he would have booked earlier to enjoy the discount. This could be done through issuing published documents or posting in the booking websites. In fact, some managers identified these two strategies of informing the customers. One manager stated that, “…we have a clear policy concerning price variation. Firstly, prices published by front office, reservations and all websites are always the same…” (participant #18).

As mentioned earlier, satisfactions of customers and their retention is facilitated by appreciating the customers’ choices. The famous tool employed is the guest comment card (Trusov, Bucklin & Pauwells, 2009). This card allows customers to express their gratitude and to state their suggestion. Guests comment cards are vital in determining the guest satisfaction in hotels and implementing the necessary changes to the management (Ladhari, Morales, & Lakhal, 2005). These modifications assist the hotel to form a solid foundation for future customers. After performing a research, Guzzo (2010) identified that 20% of the customers had booked rooms with the hotel previously. Guzzo attributed these results to services of high quality that satisfied the customers.

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Third Party Websites

A 2-star hotel manager regards to third party websites as the center of hotels’ occupancy. The manager quoted that, “Third-party websites are the main engine for the room” (participant #7). The manager proceeds to describe this allegation by narrating that, “… this year those websites accomplished revenue of 1,150,000 SR and received an approximate commission of 172,500 SR. In my view, such part compared to income is very suitable. Also, if such an amount have been paid to one of marketing companies it could not attract customers matching those who came via such websites” (participant #7). Some authors indicated that third-party websites are relied on when selling hotel’s rooms (Toh, DeKay, & Raven, 2011). The research has depicted the necessity and importance of third party websites because they help in increasing the chances of demand. For instance, a manager identifies the advantages of third party websites by stating that, “No doubt, the advantages of third-party websites exceed their disadvantages. Such advantages are: a) Payment of a room’s commission is about 15% from sales which is considered a minor portion compared with advertisements via other media channels. b) Those websites have appreciably increased the percentage of occupancy. c) We can make our decisions associated with prices…” (participant #4). However, the manager, also, identified some disadvantages by stating that, “… Conversely, these sites have several disadvantages: a) increased competition, as some hotels have their price reductions imposed on them to match other hotels which offer equivalent services. b) Some websites stipulate that room prices displayed in front office should be more than those on a website” (participant #4). Even though the online channels create such disadvantages and have an effect on the YM application, they offer plenty of opportunities for the revenue managers (Choi & Kimes 2002). This is because they improve the demand of hotels by increasing the opportunities of encounters with a hotel. These websites receive commission of about 15% from sales to the Booking website and 15% for Agoda in most hotels. Regarding the development of the hotel websites, some hotels have situated some policies while others have not. According to a 5-star hotel manager, “… we have a website to show room prices. We, also, made some developments on this site and tried to change customers’ view towards the hotel’s websites which usually make inconvenient for them when dealing with bookings. As a result, some customers decided to book through other websites that could secure such process for them. Therefore, we made an agreement with a company to develop the website and use the best tools to enable a customer to perform booking and its confirmation. We also get in touch with a customer immediately after such booking is concluded for reconfirmation and express gratitude for our website use” (participant #4). Few hotels have not managed to raise any website to broadcast their activities. In fact, one five-star hotel manager justifies this by stating that, “Customers seldom look for the hotel’s websites, as most travelers are businessmen who navigate through websites which provide a wide series of hotels with varied prices. In my opinion, the hotel’s website is not very important” (participant #2). Some of the hotels that do not have these websites were said to be new. For instance, a hotel that was said to be new did not have a website at the time. Probably, the hotel management will consider implementing one website in the future. The manager involved stated that, “Unfortunately, there is no website for the hotel at this time” (participant 1). This depicts some desires of having the website.