Implications for Marketing in Today’s Competitive Travel and Tourism Sector

An investigation into the implications for marketing in today’s competitive travel and tourism sector

Table of content:

Task 1:Concepts,principles and the role of marketing in the travel and tourism sector

a)    Introduction……………………………………………………………..pg.2

b)    Core concepts of marketing for travel and tourism……………………………pg.2

c)     The impact of the marketing environment on Emirates……………………….pg.4

d)    Factors affecting consumer motivation and demand………………………….pg.8

e)     Principles of market segmentation and uses in marketing planning…………pg.8

f)      Importance of strategic marketing planning for Emirates……………………pg.9

g)    Relevance of marketing research and information……………………………pg.9

h)    Influence of marketing on society,ethical issues Emirates should be aware of.pg.10

i)      Conclusion………………………………………………………………………pg.10

a)  Introduction-Emirates Airline

Emirates Airlines it’s an international aviation organisation that started their operations in 1985 and they are the flagship carrier for the UAE. Emirates Group has its headquarters in Dubai and it is fully owned by the Government of Dubai. It has many subsidiaries such as Emirates Airlines, Emirates Skycargo, Changi Intl airport services, Dnata, Emirates flight catering and many others into their line of business. Emirates is the largest airline in terms of passengers, revenues and fleet size in the Middle Eastern area, and during the years they been able to develop a brand name based on its distinctive and reliable services. One of their main competitors today is Air France Airlines along with Lufthansa and British Airways. (Hitesh Bhasin, 2017)

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Emirates continued their expansion into the UK by launching at the end of September 2018 a new route to Edinburgh, making the Scottish capital the eighth destination as the city grows in popularity. The airline now runs 19 daily flights to the UK, adding Edinburgh, the second most visited city after London. Hubert Frach, vice president for the airline’s western markets, said : “The UK is really in the top group of the global markets” also adding that: “We have a strong commitment to the UK, it’s a really important market for us and Scotland is a very integral part of it”. (Ed Clowes,2018)

He also pointed to the UK’s strong travel demand both outbound and inbound and its strong mix of leisure and business travel.

The new added destination is also expected to benefit the airline’s freight division, Emirates SkyCargo. Their Boeing 777-300ER which will fly on the new route, will be able to transport around 20 tonnes of cargo per flight.

Gordon Dewar (CEO of Edinburgh Airport) said that he hoped the new route would attract more visitors from India, Thailand and the Middle East to the city.

b)  Core concepts of marketing for travel and tourism

We can’t start discussing the concepts and principles of marketing without understanding what marketing is.

 A more actual and complete definition is given by Julie Barile, Vice President of eCommerce: “Marketing is traditionally the means by which an organization communicates to, connects with, and engages its target audience to convey the value of and ultimately sell its products and services. However, since the emergence of digital media, in particular social media and technology innovations, it has increasingly become more about companies building deeper, more meaningful and lasting relationships with the people that they want to buy their products and services. The ever-increasingly fragmented world of media complicates marketers’ ability to connect and at the same time presents incredible opportunity to forge new territory.”

With their customers in mind, their needs and preferences, Emirates managed to create different policies and strategies as an effective marketing plan of the marketing mix.

The so called 4Ps model, a term coined by Neil Borden, combines the four elements (product, price, promotion and place) in order to capture and promote a brand or product’s unique selling points which will differentiate it from its competitors.

Over the past years Emirates changed more than six slogans, keeping in line with the constant progress and development of their services and their marketing strategy.

  Their current slogan is “Hello tomorrow” which exemplify the pleasure in waking up to a brand new modern and actual morning, the comfort and the excellent services provided to their customers. 

Product-customer value

In their portfolio, Emirates have a mixed fleet of Boeing wide-body and Airbus aircraft. In order to maintain a high level of their fleet, they ordered the delivery of the biggest aeroplane to date, placing in 2017 a US$15.1 billion order for 40 Boeing 787 Dreamliners.

 The consistent and excellent services provided helped the airlines to grow rapidly and increase their revenues. In order to provide qualitative services, Emirates maintained both a professional and personal approach towards their customers. They were the first to supply personalised videos in all classes, the first to provide showers on the flights and even private suits.

“Emirates’ award-winning in flight entertainment system, reaches a new milestone by offering over 1,000 movies – more than any other airline. The expanded film catalogue offers over 2,000 hours of entertainment that would take 119 trips on the world’s longest A380 flight from Dubai to Auckland to get through.”(Emirates,2018)

The company provides all their customers First class services, whether in business or economy class, but of course the business class will benefit extra comfort such as seats that can convert into flat beds, minibar, storage facility for privacy and security reasons and private suits, massage functions etc.

Besides the services provided to their customers, Emirates also offers better housing and healthcare services to their employees, therefore keeping their internal customers happy. Hence, this gives an overview in their product strategy in the marketing mix.

Price-means cost

Emirates airlines has a diverse price strategy, providing low cost tickets in comparison with other airlines, but generating revenue through volumes. They have developed shorter and low cost routes. Due to direct flights, the airline adopted effective price policy for the shorter routes.

The company identifies the various needs of the customers belonging to different financial statuses. Emirates also uses premium price policy for its premium customers who urge for luxurious and customised services during their flights.

In order to satisfy their customers, the airline also offers several types of rewards through their loyalty programs: Emirates Skywards and Business Rewards by earning miles.

Promotion-information and communication

Emirates engages in various promotional activities through advertisements in magazines, newspapers, television and radio, websites etc. The company is spending 4-5% of its profits on advertising and communication with its customers.

They are also committed in various sponsorships in sports both in the UAE and around the world for over 30 years.

  The Sheikh Al Maktoum, Chairman of Emirates Airline & Group, points out that sponsorships play a vital role in their marketing strategy. “We believe sponsorships are one of the best ways to connect with our passengers. They allow us to share and support their interests and to build a closer relationship with them,” he said. (emirates.com,2018)

The airlines sponsored ICC Cricket World Cup 2011 and 2015, in football their partnership portfolio includes Arsenal and Emirates stadium(third largest stadium in England), Real Madrid, Paris St. Germain, Benfica, AC Milan etc. which increased their reach to millions.

They also have innovative programs such as “The kids go free” in which meals, tickets and accommodation for the kids free with two paid members, which also generated a lot of business for the company.

Place-consumer access to the products

Strategically, Emirates runs out their operations from Dubai occupying a central hob for all international routes, connecting Eastern and Western cities in the world. Famous for their long routes, they also introduced new short ones as well which increased the number of travellers. Starting with only two aircraft in 1985,a leased Boeing 737 and an Airbus 300 B4, they have now a fleet of more than 265 aircraft and they currently fly to over 155 destinations in more than 80 countries around the world. They are basically the largest operator of Airbus A380s and Boeing 777s.Over 1500 flights depart Dubai every week to destinations on six continents.

 “By 2020, we will have more than 250 aircraft serving some 70 million passengers across six continents. It will make us the largest airline on the planet by international passenger traffic,” said Tim Clark, president of Emirates airlines.

They fly 19 times daily to Dubai from a choice of six UK airports, offering convenient connections to over 150 destinations.

By mid-2020s, Al Maktoum International Airport will reach a capacity to handle 160 million passengers and 12 million tonnes of cargo. (arabianbusiness.com)

c)  The impact of the marketing environment on Emirates

Every business organisation is a part of the business environment in which operates. There are many factors that closely or distantly affects the business, which is called a business environment.

 The three levels: internal, micro and macro environment.

The micro-environment has a direct impact on the business activities whereas macro-environment is a general business environment in a dynamic change that cannot be kept under control.

The internal factors show Emirates’ key resources to identify it’s SWOT and draw how the business’s value chain is structured.

SWOT analysis

Micro-environment for Emirates

Threat of new entrants– low impact, as the current airline industry has a low entry barrier due to investment costs.

Power of suppliers-two leading suppliers Airbus and Boeing which are in obvious competition, gives a low supplier concentration and high impact. Probability of vertically incorporating supplier is unlikely.

Power of buyers–moderate impact; bargaining leverage between budget & luxury tickets for same destinations.

-Differential advantage regarding world class service, choices of menu for elite class, own private terminal, non-stop direct flights, A380 aircrafts etc.

Availability of substitutes-moderate impact; buyers propensity to substitute for cheaper prices, but in luxury segment Emirates is the leader.

Degree of rivalry- moderate impact;37 airlines fly to and from Dubai

               – rate of industry growth in Middle East strong

               -sustainable competitiveness through continuous innovation of on board services: Spas, fully reclining seats, live TV 

Macro-environment

PESTEL analysis

Political

Emirates airlines plays a major role in aiding Dubai’s government achieve its objective of promoting the city as a preferred destination. As Dubai government is the sole owner of the industry, the company was able to adhere to the policies given in order to conduct effectively and successfully their business operations. They have a huge advantage ahead over privately owned ones as they been created and funded by the Government. Due to agreements between countries in the Asian-Pacific area that facilitate better trade, Emirates benefited of a favourable political scene.

Economic

In spite of many dangers that encounter in different parts of the world, the management was able to surpass such struggles and overcome to a better economic condition. Unlike many others, Emirates is one of the fewest airlines to feel the economic and aviation downturn of the last years. And that was possible only due to excellent marketing promotion of Dubai itself, as a tax-free shopping destination. Their hub in Dubai it’s also promoted as best geographically positioned between Europe and Asia/Australia.

Over the past fiscal year Emirates’ revenue reached $25.2 billion, with profits rising to $762 million. (Batrawy A.,2018)

Emirates said in spite of political challenges impacting traveller demand and fare adjustments due to a competitive business environment, the decline of the U.S. dollar against currencies in most of Emirates’ key markets had a $180 million “positive impact to the airline’s bottom line.”(Batrawy A.,2018)

“Since January 2017, Emirates has carried over 59 million passengers. The airline served over 63 million meals on its flights departing Dubai, and moved over 35 million pieces of baggage in Dubai to its network of 156 destinations. Emirates registered over 3,600 passenger flights on average per week, or over 191,000 flights in 2017, travelling more than 886 million kilometres around the globe, which is equivalent to over 16,000 trips to Mars.”(Tadros R.,Dec.2017)

Social

Emirates should be aware of demographic changes based on age, affluence, regions and numbers of people working in order to have a complete image of the demand as a whole and the demand of particular services and products.

The crew should be aware of the cultural differences of their passengers, such as offering liquor to Saudi customers or not to offend Muslim ones during Ramadan by offering them snacks/drinks. Threats to current products might be increasing, opportunities for differentiation and market segmentation might be emerging. Emirates is being effected by the situation of the society in which they operate. However the company adhere to the principles of maintaining a good reputation and relations in the society that they belong to.

Technological

Emirates are fully aware of the importance of sustained investments in latest technology, pursuing a leading position in the 5 star standard airline.

In 2008, Emirates was the first airline to enable passengers to use mobile phones to send text messages and make calls during their flight. In 2013-14, they marked the one millionth mobile phone call, and the 13 millionth text message sent on board by our passengers since the service was introduced.

They launched “live” television channels, so passengers can stay abreast of global news and sports events from the skies, and expanded access to affordable high-speed connectivity for passengers in every cabin, so their passengers can browse the internet or stay in touch with friends and colleagues on their personal devices. To date, a quarter of the aircraft in their fleet are already equipped with Wi-Fi and will continue to roll out installation across all of their aircraft. (Going further, The Emirates Group Annual Report,2013-14).

During the years they been awarded numerous awards such as the World’s airline of technological advances, Best global Airline website, Best in flight entertainment, Best IT developer in in-flight entertainment etc. (Emirates)

Environmental

Emirates are concerned about the level of pollution their big fleet creates, but they also focus on developing bio-fuel technologies. They take part in various environmental sustainability projects such as trees planting and a reduce level of waste they send to the landfill. With regards to the recycling considerations, on each flight they also recycle used headphones instead of disposing them and they offer recyclable cutlery.

The are sponsoring environmental protection organisations.

Natural disasters affect the business such as eruptions of volcano in Bali which lead to delays and cancellations between July-August 2015.

Legal

Due to the phenomenal growth some European and American competitors are campaigning to limit Gulf carriers to their home markets.

The conflict about alleged state subsidies for Gulf carriers reached in June 2015 IATA Annual general meeting, calling to stand up against “protectionism”. This could affect the configuration of the future one world alliance in aviation.(Flottau J,2015)

However, the macro-environmental threats can affect any business, regardless their entities.

d)  Factors affecting consumer motivation and demand

Tourists’ motivation to travel is an important element that has to be considered as a defining component of demand, the basis of choosing a particular trip. The motive depends on both external and internal factors to the person, and will encourage the consumer in the process of decision making regarding the choice of product.

Based on the push-pull approach, people are pushed by internal desires (personal escape, thrill and adventure, social interaction, shopping etc.) In other words people travel because they are pushed by their personal drives and pulled towards a particular destination. Factors such as social, personal or situational helps a company designing their offers/packages accordingly. An individual’s needs are likely to change as he/she progresses through life, hence influenced by the phases of the family life cycle.

(Fratu D.,2011)

Maslow believed that at different times, people are driven by different needs arranged in hierarchical order of importance. Needs can arise both consciously or unconsciously, they are periodically renewed, although they can change the form of their manifestations.

“Hence, it is crucial to examine tourist motivation so as to be able to recognize markets in which tourist motivations match the destination” (Sandybayev A.,2018 about Kozak, 2002a).

e)  Principles of market segmentation and uses in marketing planning

Marketing segmentation is the process of dividing the market into several groups and/or segment(s) based on factors such as demographic (age, gender, family size, family life cycle, income, education, religion etc.), geographic (nations, regions, cities, counties etc.), psycho-graphic(people’s values, attitudes, lifestyles, interests) and behavioural factors (occasions, benefits, user status, loyalty status).

By doing so the marketers will have a better understanding of their target audience and thereby make their marketing more effective (Gunter and Furnham, 1992, pg.43).

Emirates airlines has positioned itself based on geographic and psycho-graphic segmentation strategies in order to be able to target their audience. They are able to select

potential customers through this strategy in order to identify their potential buyers, by adopting different messages depending on target audience.

They have three major groups of target audience: tourism and business, expatriates and transit passengers, mainly targeting executives and businessmen, aged 30-60 who are looking for luxury and comfort in travel, regardless their nationality.

The success of Emirates airlines Emirates, “operating from the same location and also serving almost the same destinations using the same airports shows the importance of segmentation and how vital it is in the service sector proving that

segmentation is a more vital tool for marketing services than for marketing goods.”(Palmer,2011)

The airline is targeting their customers based on special festive or religious celebrations such as Ramadan, Haj or Diwali.

Dividing customers on different segments by classes helps the company define the quality of products and the prices of the journey. (M1)

f)  Importance of strategic marketing planning for Emirates

Marketing planning is an ongoing process through which a business creates marketing strategies and plans the stages in the target market.

The Ansoff Matrix shows four possible alternative growth strategies: market penetration, market development, product development and diversification.

(Prof.Dr.El Namaki M.S.S,Emirates Airline -In a league of it’s own,2007)

Emirates strategies include penetration, product development and market development strategies and even a recent element of diversification.

Market penetration-Middle East is Emirates’ main market segment, and the justification of main creation. This market has been fully penetrated in a deliberate policy of market penetration.

Product development-Is on of modest proportion. It relates to product specifications and the type of services offered more than the introduction of changes in the product mix.

Market development-Geographic expansion in 2013 including US market

Diversification-Emirates Airline has diversified activity into related industries and sectors such as airport services, event organisation, engineering, catering, tourism and hospitality and real estate which increased their BU(Business Unit).i.e.(DNATA is able to cover Emirates’ catering needs whilst generating revenue by supplying the needs of competitors. Strategic benefits are: mitigation of financial risks, marketing power and gain of knowledge.

The motives of airline group diversification are linked to strategic market positioning.

g)  Relevance of marketing research and information

Marketing research and information helps managers to understand the market and provide the right product to the right audience. It is also important to get feedback with regards to the customers’ satisfaction, ensuring repeat business. Identifying market opportunities, information on market share, nature of competition, sales level and channels of distributions will help a business formulating their market strategies.

 Emirates is one of the fastest growing airlines in the world and the Middle East’s biggest provider of airport and travel services. The company had benefit from the leadership of very good managers who have each proven to be leaders in their field of expertise.

Their management style ensured the company remain competitive within the market by giving several benefits to their staff, especially retaining and motivating the right talents.

Emirates collect their information through three channels: Internal records, marketing intelligence and market research. All managerial levels: strategic, tactical, knowledge and operation level are well developed. Strategic decisions regarding profit increase, budgeting, new investments, market analysis, operational information are well developed through different systems(IT and IS).Emirates’ famous Skyward system helps them stay close to their customers.

Internal information helps them evaluate their performance and detect in time threats as well as opportunities.(M2)

h)  Influence of marketing on society, ethical issues Emirates should be aware of

Besides providing customers useful information about services and products, marketing helps set and manage consumer’s expectations. The main aim of marketing is the individual satisfaction as a customer.

Businesses spend high amount of money on marketing to improve their sales, public awareness and image.

Word of mouth marketing plays an important role in 20-50% of buying decisions. Therefore, an unsatisfied customer would create a lot of damage to the image of a product, service and business.

Aiming to satisfy the consumer’s needs, marketing affects the well-being of people, society and businesses, and socio-economic conditions and development are interdependent.

 Information spreads very fast through internet, which can have both a positive or negative impact over a marketing campaign.

Ethical issues in usage of IT concerning internet crimes (hacking, falsification of data) can affect the airline and ethical issues in usage of IS concerns the legality in which information is collected and used.

Having six different businesses, Emirates should improve their Partner Relationship Management between them and their channel partners.

i)  In conclusion, Emirates is a great and advanced airline that delivers high level of services and guaranteed security (only three aircraft experienced serious problems).

During the years they have improved and gained trust due to their amazing service which made them one of the most famous airline in the world.

In order to maintain their growth and image, Emirates should approach offensive strategy after analysing in detail it’s internal and external environment. Reduction of cost through improvement and development of operations activities in reply to the threat of low cost airlines. They should also extend their routes worldwide, especially attractive areas such as Canada.

Two great opportunities for Emirates are World Expo 2020 and Qatar World Cup 2022 which they need to exploit.

Emirates was able to withstand the “turbulences” in the most trying times, grew in recognition and became a global airline based in the Middle East.

By all means Emirates’ growth is impressive but the real answer lies in the question whether this growth was the real result of genuine strategic planning or the outcome of Dubai’s impressive economic blessing.

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