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’s 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 (which has extended till 2012) 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.
PEST Analysis
Political Factors
An examination of the local economy within Dubai does show a significant degree of government intervention in both the construction industry and industrial development within the area.
Not only that, it was noted that changes to labor codes which allowed companies to hire and overwork workers had actually resulted in a significant degree of cost savings for government based infrastructure development. While such factors do not directly impact the operational aspects of the various hotels that belong to the Jumeirah group they are an important detail to take note of.
Economic Factors
One of the current economic factors that affects guest rates for the Jumeirah group is connected to the current global economic turmoil that has made consumers more hesitant to utilize the services of the Jumeirah group.
This prolonged recession has actually resulted in a direct slowdown of infrastructure development within Dubai and has cast doubt over the ability of the region to continue to maintain its current level of distinction which is the primary factor behind foreign guests foregoing to stay within the country.
Social Factors
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.
Technological Factors
Through the use of online advertising customers can now be reached and enticed to try out the services of the hotel. This can be accomplished using online ads and viral marketing campaigns, both of which have been proven to be cost effective methods of marketing.
Environmental factors
There are next to no environmental factors within the local area that would affect the hotel business within Dubai. Temperatures stay at a constant level throughout most of the year and there are no seasons or heavy pollution thus environmental factors are not an issue.
Legal Factors
When examining the current legal situation in Dubai nothing seems to facilitate any apparent problems with regards to the operational aspects of the hotels of the Jumeirah group.
Ansoff Analysis
Market Penetration
When examining the Jumeirah Group’s hotel division it can be seen that their projects such as the Burj Al Arab, the World Trade Center Residences and its various resorts has achieved a considerable degree of market penetration due to their popularity and uniqueness.
Product Development
While the hotel chain has sufficiently developed a great luxury hotel lineup it has insufficient affordable hotels within the Dubai and international market. As seen in various economic reports people have become unwilling to spend on luxury and have begun to concentrate on practicality which makes the Jumeirah Groups current predilection towards high end hotels a liability instead of an asset in this period of economic uncertainty.
Market Development
Overall, the Jumeirah group has been noted as using online advertisements and international commercials to attempt to gain a greater consumer base. While such attempts have only marginally worked due to the current economic problems the region is facing it has created an overall positive effect for brand recognition in international markets.
Diversification
In terms of diversifying its operations it can be seen that the Jumeirah group, by establishing various hotels around the world, has in effect diversified its level of performance to encompass a worldwide market and as such can be considered a step in the right direction for the company.
SWOT Analysis
Strength
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 populace. This creates a certain degree of “hype” in order to try the services and experience the luxury that people are talking about.
Weakness
The hotel chain’s relatively high prices 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.
Opportunities
Several opportunities exist for the Jumeirah group in the form of expanding their hotel chain to other countries abroad, creating discounted prices to entice customers to try out the hotel as well as utilizing online marketing platforms to attempt to reach a greater consumer base.
Threats
One of the main threats of the Jumeirah group within Dubai is 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.
Discussion
Based on a SWOT analysis of the Jumeirah group it can be see 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 populace. This creates a certain degree of “hype” in order to try the services and experience the luxury that people are talking about (Chacko, Williams, & Schaffer, 2012).
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 has 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 comes 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 weather 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 (Deskins & Seevers, 2011).
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, which 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 (External Accounts To Withstand Instability, 2011).
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’s 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’s 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 it is 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 and Marketing to Consumers
What must be understood is that hotels don’t 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 (Evans, 2009). 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 (Hoping for an Obama effect, 2010).
While it may be true that travel agencies and tourism organizations don’t 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 in order 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 (León-Darder, Villar-GarcÃa, & Pla-Barber, 2011).
To illustrate this point one can imagine a person buying a scoop of dark chocolate ice cream at an ice cream store due to 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 don’t 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 doesn’t 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 select group. Thus in this particular case international marketing becomes a necessity.
In the case of international marketing, while hotel chains don’t 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 (Lafferty & van Fossen, 2005).
Examining Current Strategies of the Jumeirah Group (hotel division) in sustaining a competitive advantage
One of the inherent problems in running a hotel business is that no matter how good or luxurious a hotel is the fact remains that consumers are not isolated to coming to that particular area.
While Dubai is considered to be one of the most well planned cities in the world with extensive infrastructure development it is still just one city in a world where there are quite literally hundreds of metropolitan centers in countries such as the U.S., Germany and China. Businesses are not isolated in one particular area, they scattered throughout the globe with various consumers utilizing hotels as a home away from home.
This statement is based on a PEST analysis regarding economic factors which contribute/ hinder people staying at the hotel. It specifically indicates that based on the economic factors of the PEST analysis one of the current economic factors that affects guest rates for the Jumeirah group is connected to the current global economic turmoil that has made consumers more hesitant to utilize the services of the Jumeirah group.
This prolonged recession has actually resulted in a direct slowdown of infrastructure development within Dubai and has cast doubt over the ability of the region to continue to maintain its current level of distinction which is the primary factor behind foreign guests foregoing to stay within the country.
Taking this into consideration it can be seen that one of the main limitations of the Jumeirah group in Dubai is the fact that due to the nature of the hotel business the product, namely the hotel, cannot go to the consumer rather the business has to wait for the consumer to come to it.
Based on an Ansoff analysis regarding product diversification and market development it can be seen that overall the Jumeirah group has been noted as using online advertisements and international commercials to attempt to gain a greater consumer base (Middle Eastern hotel trade shows resilience to downturn, 2011).
Unfortunately such actions have not been as successful with such attempts have only marginally worked due to the current economic problems the region is facing. It is due to this that in terms of Ansoff product diversification one way in which the Jumeirah group has mitigated this problem is to expand beyond its current customer base within the Middle East into countries such as Germany, China and the U.S.
With hotels located in such areas the Jumeirah group is able to sustain a certain degree of competitive advantage as it is able to access consumer groups it was not able to before and as such is also able to raise brand awareness by a certain degree (Sidron, 2001).
Based on a SWOT analysis of possible opportunities that the Jumeirah group can pursue their subsequent expansion into foreign markets in this particular manner is indicative of a positive utilization of existing opportunities which should help the company survive the current recession.
Arrangement of Distribution
Currently, the Jumeirah distributes its services across a wide array of different types of hotels, resorts and price schemes. Each hotel and resort, while luxurious, provides differing price schemes and packages that are prearranged to suit a variety of different budgets. This makes it easier for consumers to pick particular packages in what they believe would be more affordable to them.
Prices, market conditions and organization objectives
After the global financial recession occurred in 2008 hotel guest rates have been abysmally low within the past 4 years with fewer people willing to travel or stay at a hotel due to financial uncertainty (Smeral, 2009). Taking this into consideration the Jumeirah group has actually implemented special discounts available through their online websites where consumers can get up to 20% off for staying at particular hotels and resorts.
While hotel rates still range between 1000 to 5000 dirhams and above the fact remains that the discounted hotel rates have actually encouraged an influx of consumers looking to take advantage of the decrease in prices.
Based on an examination utilizing Ansoff which examined the degree of product development within the Jumeirah group hotel division is the fact that while the hotel chain has sufficiently developed a great luxury hotel lineup it has insufficient affordable hotels within the Dubai and international market.
As seen in various economic reports people have become unwilling to spend on luxury and have begun to concentrate on practicality which makes the Jumeirah Groups current predilection towards high end hotels a liability instead of an asset in this period of economic uncertainty.
Another interesting aspect to take note of is the fact that while prices at the various hotels of the Jumeirah group have gone slightly lower they are still considered rather high when compared to hotels of a lesser caliber.
The reason behind this is rather simple, the Jumeirah group prides itself in providing luxury services for its clientele, that is its main objective and as such it is a necessity to charge commensurate prices in order to provide such services.
While such a scheme has worked in the past it has run into major problems in the present due to the current level of economic turmoil in international markets hence the fact the Jumeirah group attempted to continue providing luxury services while encouraging guests to come by slightly lowering prices.
It is based on the Ansoff analysis of the current product development scheme currently being utilized by the hotel that it can be seen that the focus of the Jumeirah group on luxury has come back to hurt them in an era where people are searching for practicality and a such is indicative of the need to change the hotel chain’s current approach towards getting customers.
Reference List
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