Marketing & Sales Engels inkijkexemplaar

MARKETING& SALESHOSPITALIT Y MARKETING & SALES FOR THE HOSPITALITY INDUSTRY ELLEN VAN KOOTEN 1

Chapter 1 | The Marketing Concept 12 13Chapter 1 14The Marketing Concept 16 19 The chapter at a glance  24 1.1 Introduction 27 1.2 The wishes of the guest are central  30 1.3 The entrepreneur 32 1.4 You do not run a business alone 35 1.5 The business concept 1.6 Marketing tools 1.7 Business formula  1.8 The marketing policy  1.9 Control questions For more information, exercises, answers and supportingmaterials: 11

Chapter 1 | The Marketing Concept marketing and sales for the hospitality industry part 1 Business con- ceptCompetition Wishes of The the guest entrepreneurMarketing Business policy formula www.masaho.nl - questions: e-mail to [email protected]

Chapter 1 | The Marketing Concept1.1  | IntroductionPeter can finally make his dream come true. The local hotel-café-restaurant is up for sale in thevillage where he lives. The current owner has made a mess of it and now wants to sell as soon aspossible. The business has an area of more than 400 m2. The village is near a big city. In additionto the local residents, there are also a lot of commuters. Peter is currently a manager at a bistroin a nearby village. He also really wants to start a bistro here in his own village. The hotel roomsand the large hall could really do with a makeover, but that will have to wait. His first goal will beto get more guests to come to the new bistro.The start of a businessBooks and the Internet are full of stories about the creation of successful hospitality businesses.It often goes something like this: a person has had the idea to start something for themselves foryears and then walks past an empty property and begins to dream. If it were up to me, I’d paintthe walls in an earth tone, create a large open kitchen, put a terrace there, serve French-Dutchcuisine and so on. Before he knows it, he’s started his dream business. He rents the property,arranges the permits, chooses the suppliers, hires staff, borrows money from the bank and draws-up the business plan. Not necessarily in that order. Over time, everything looks exactly as he haddreamed. The business is officially opened and is really busy in the first month, but it slows downafter that. He has to borrow more money after the first year. After three years, the bank ceasesfunding and the business is forced to close.A sad but common story. About 35% of cafés close within three years of start-up. This rate is atabout 30% for restaurants. Fortunately, there are also some success stories. Think of big companieslike McDonald's, Hilton, La Place and Febo. And there are also plenty of small businesses that havesuccessfully run for years.It’s important that you study these failures and the success stories as they relate to the field ofmarketing. Why didn’t it work for this particular entrepreneur? Why is this company so successful?We try to gain insight into the ins and outs of the hospitality industry. 13

Marketing & sales for the hospitality industry 1.2  |  The wishes of the guest are central Marketing comes from the words market getting and answers the question: in which market can I sell my products? The golden rule of marketing is that the buyer/consumer determines the success of a company. The consumer chooses where he wants to spend his money. This is called the consumer’s purchasing power In order to attract the consumer’s money to your business, you need to be as well informed as possible about what the consumers want. Consumer purchasing power Business- Offer Offer formula Consumers can use their purchasing power anywhere. The most attractive offer for the consumer has the best chance to attract their purchasing power. Within the hospitality market, consumers are often called guests. An entrepreneur may, for example, focus on guests who quickly want an affordable and simple meal. Or he may focus on businesses that want a relaxed place to have meetings. Or the entrepreneur focuses on families that have something to celebrate. Of course you cannot meet all needs. You also need to look at what wishes your company can fulfil and the cost of fulfilling those wishes.14

Chapter 1 | The Marketing ConceptTop 10 hospitality irritationsAn entrepreneur is constantly focused on the mostimportant part of the business - the guest.If something irritates a guest, he or she might notreturn. Here is the check list of irritations.1 The quality of the service. The staff should be attentive, knowledgeable about the menu and welcoming.2 Followed by a long wait. The staff must look around. Seek contact with the customers.3 Next is the quality  and presentation of the food. Guests want an attractive plate of food consisting of high-quality, fresh ingredients.4 Hygiene. Guests place a lot of importance on the toilets and their cleanliness. So make sure that these are cleaned regularly.5 People who eat out often complain about children and the nuisance they can cause. Try to seat families close to each other. They have more mutual understanding of the nuisance that children can cause.6 Make sure that the staff is careful and precise. This is especially important when calculating the bill. All guests expect that proper care is taken regarding the bill (the wallet!).7 D isturbances caused by other guests. Durin dinner, the customer does not want to be irritated by noisy groups, anti-social types and other troublemakers.8 We all want enough space at the table, so annoyance number 8 is tables that are too small. Make sure that the tables are a decent size and properly laid out.9 We want to pay a fair price for the food. In particular, starters and desserts are sometimes overpriced.10 It’s irritating for the customer to sit in a draught. It might be smarter to have one less table and thereby create more walking space.Source: www.kenniscentrumhoreca.nl 15

Marketing & sales for the hospitality industry 1.3  |  The entrepreneur There are many self-employed people active within the hospitality industry. Cafés and restaurants in particular are often run by this type of entrepreneur. The entrepreneur is then usually active in his business and puts his stamp on it. He is often clearly recognisable to the guests and can act as an attraction. Characteristics of an entrepreneur The entrepreneur must have a number of specific characteristics if he wants his business to remain successful in the market. Characteristics of the successful hospitality entrepreneur • A successful hospitality entrepreneur understands what hospitality is and can implement this vision within his business. • A successful entrepreneur sets goals. • Successful entrepreneurs know their strengths and weaknesses. • A successful entrepreneur is always on the lookout for opportunities. • Successful entrepreneurs know where they stand. • Successful entrepreneurs are financially well-grounded. • A successful entrepreneur always wants the best. • A successful entrepreneur enjoys what he does. • Successful entrepreneurs are willing to work long hours. • Successful entrepreneurs ask for help from third parties. An entrepreneur should also not be bothered by uncertainty. He has no regular income, no certainty and takes a risk. The entrepreneur should be in tune with the wishes of the consumer (especially with small-scale businesses). It is an advantage if he easily interacts with his guests. An entrepreneur who really loves his product will put in the effort. The entrepreneur should have the gift of maintaining good oversight. He must be able to view his business from a distance, so to speak, and analyse its strengths and weaknesses. He should also be able to detect the opportunities and threats in the market. The entrepreneur should set business goals and be able to underpin his decisions. It is a good idea for an entrepreneur to also have a hand in the administration. He can outsource this to an administrative office, but he must have insight into the figures. This is how, for example, he can discover that his passion for products is costing too much. The entrepreneur must have knowledge of certain sales figures (e.g. turnover per guest, turnover per square metre or the turnover per man-hour). He can then use these figures to determine what he needs to change in order to achieve a better result.16

Chapter 1 | The Marketing ConceptFour beginner’s mistakes 3 Insufficient administration Immediately after starting up hisNew entrepreneurs often make the samemistakes. Annoying for them but good for business, a good entrepreneur eagerlythose just starting out. begins working in order to make money. That’s as it should be. Just do notThose who do not make the errors listed forget about the administration. Thebelow have a better chance of success. administration of many young businesses too often consists of a shoe box full of1 The wrong location receipts and invoices. The location and/or the price of the property can cause major problems 4 Forgetting about the tax authorities in the early days and even threaten Many entrepreneurs become quite the survival of the business. Properly determine in advance what is needed for optimistic when the sales start to flow the business premises. You’ll have after the start up of the business. The to take accessibility into account when money earned is enthusiastically spent or your concept mainly focuses on young reinvested in the business. Getting the people between the ages of 16 to 18. first tax assessments in the post (often after a long time) can cause a shock. The2 Insufficient preparation assessments often cover a long period Beginners sometimes forget to ask and therefore involve large amounts. They’re sometimes so much that the themselves the following questions: entrepreneur is unable to pay the tax 'Am I cut out to be an entrepreneur?' owed and must close. and 'On what type of guests will I focus?' 17

Marketing & sales for the hospitality industry An entrepreneur’s responsibilities regarding the marketing and sales policy An entrepreneur usually starts a business with the intention of earning an income from it. This involves risk. For example, the entrepreneur will earn (too) little/less if too few guests visit or the costs are too high. He may also get stressed or worry about having everything run properly in the business. In addition to operational, financial and personnel responsibilities, the entrepreneur is also responsible for the turnover. For example: • create a market analysis; • establish financial policy and determine sales prices; • maintain external contacts; • introduce innovations in the business; • take care of financial administration and registration; • monitor and be accountable for the financial situation; • promote the business, including setting up guest and customer satisfaction surveys; • the entrepreneur carries out commercial activities; • identify and handle complaints; • receive, inform and advise guests; • arrange special packages, parties and orders. B1-K1-W5: Carries out commercial activities; Description to improve the market position, image and The hospitality/bakery entrepreneur profiles name recognition of the business. himself positively within his network and positively promotes and presents the business Behaviour in different ways. He uses various activities to • Collects information from various sources ensure the name recognition of the business. He maintains relevant information through about guests/customers, competitors and various media. He keeps up to date on the important developments and innovations activities and developments at suppliers and in the hospitality industry, determines the fellow competitors. On the basis of information importance of this for the business and obtained and initiatives of employees, he takes analyses the information. promotional-related decisions such as placing * Recognises opportunities and threats in an advert, dispersing promotional leaflets, order to implement improvement actions, vouchers, press releases, having own website, investments or innovations, and shows webvertising, industry fairs, etc. He discusses organisational ability by translating and decisions with employees and carries out impro- anticipating opportunities into concrete vement proposals in the business processes. proposals and actions. • E  stablishes active contact with people, Result invests in building and maintaining good Substantiated proposals and decisions on relationships, and uses networks to obtain improvement actions to be implemented, information for the business. investments, new production methods or • M akes a strong and positive impression products on others. Source: Kenwerk.nl18

Chapter 1 | The Marketing ConceptTarget group 1.4  |  You do not run a business alone To build a healthy hospitality establishment, the entrepreneur must put the guest first. The entre- preneur will have to choose what type of guests he wants to have in his hospitality establishment. We call this his target group. The type of target group will influence the business. If the entrepre- neur chooses young people aged between 15 and 21 as the target group, he will have to set up his business differently than when he has an older target group. It is important to know exactly what demands the guest places on the hospitality product. It is useful for the host or hostess to have insight into the characteristics and requirements of the main guest groups that visit a hospitality establishment. He needs to know why guests use the services of his business. A division into the following three groups is usual: • the business guest; • the leisure guest; • the tourist. The business guest The business guest focuses mainly on how a business represents itself and chooses a business based on these expectations. He pays less attention to the price and more on the quality of the business. Depending on the reason for his visit, the business guest sets specific requirements for the way that hospitality is expressed towards the guests. The leisure guest The leisure guest’s choice of a particular hospitality establishment depends on the reason for going out. He therefore has a wide choice of hospitality establishments. The leisure guest pays attention to the price and quality on offer when choosing the hospitality establishment. Sometimes the price is the reason for the visit, and the low price may be at the expense of service and presentation. In other situations, the atmosphere of the hospitality establishment can be the decisive factor. The tourist The tourist mostly visits hospitality establishments during his stay. Due to the many possibilities in tourist accommodation, price plays an important role in his choice. The informational needs of the tourist as a guest are usually quite large and he generally has enough time to consume at leisure and to experience the entire service process. 19

Marketing & sales for the hospitality industry Searching for the right target groups Every hospitality establishment tries to attract its own public. But how do you make sure that it is the right public? For example, by aligning the atmosphere, music and staff to your target group and to monitor those elements well. The entrepreneur must describe the target group and also think about what other groups provide added value to his business, without clashing with the primary target group. Through the use of atmosphere, lighting and music, the entrepreneur can ‘put off’ the unwanted target group. It is best for the entrepreneur to focus on other target groups at different times of the day. For example, the entrepreneur can focus on shoppers in town during the day and on students in the evening. When an entrepreneur wants to focus on different target groups, it makes sense to keep this in mind when scheduling staff. When employees fit in well with a target group, it creates an additional link between business and guest. Consumption Consumption circumstances Circumstances A guest’s reason for visiting a hospitality business greatly affects the expectations of the guest and what requirements he places on the hospitality product. The guest also has different requirements if he is alone compared to when he is with someone else or with a group. The assessment of the hospitality product is very personal and highly dependent on the consumption circumstances such as: while shopping, in connection with a visit to the theatre or cinema, going out or a holiday. Consumption circumstances are situations with regards to consuming. The company, the atmosphere in the hospitality establishment, the mood of the consumer, the music, the reason for consuming, basically everything that affects the consumption of the guest. Competition (other providers) The entrepreneur has to deal with many more people than just the guests. Because competitors can also grant the wishes of guests. As an entrepreneur, you will not only have to look at the demand side of the market but also at the supply side. What companies are already located there? What do they charge for a meal? What does their menu look like?20

Chapter 1 | The Marketing Concept Schedule 1: the hospitality market Guest Hospitality Competition business Other participants in the market environment In addition to the competition, the entrepreneur also has to deal with the bank where he borrows money. What demands does the bank set? He will have to choose the right suppliers. The entrepreneur will need to apply for permits at the municipality. What rules and regulations does the municipality set? There are also other agencies and groups which the entrepreneur must deal with. Micro level The decisions of the individual entrepreneur are called micro-level decisions. All developments Internal within the hospitality establishment are internal developments. Developments outside the business are called external developments. It is difficult for the entrepreneur to influence externalDevelopments developments. The level of the development determines whether the entrepreneur has some External influence or none at all. For example, the entrepreneur has no influence on national legislative developments. When the local town council must make a decision, the entrepreneur can thenDevelopments speak with the relevant council member. Factors in his immediate vicinity, such as competition, customers, suppliers, bank, city development and the decisions of the town council are factors on Meso level the meso-level. At the meso-level we look especially at the supply and demand conditions in the local market. 21

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Chapter 1 | The Marketing Concept Schedule 2: the hospitality market Meso-environment Customer groups Other participants and vendors Guest Intermediaries Marketing policy: distinguishing the business formula from the competition as positively as possible bycatering to the wishesof the guest Hospitality Competition business Micro-environment Other providersMacro level National factors that the entrepreneur cannot change take place at the macro-level. These factors can directly affect the entrepreneur’s operating profit. For example, spending in the hospitality industry can decline during times of high unemployment. An increase in taxes by the government can influence the spending of the guest. A lot of technological changes can mean that the entrepreneur must adjust his POS system. The profit of the hospitality establishment is primarily influenced in the long term by developments at the macro-level. 23

Marketing & sales for the hospitality industry Schedule 3: the hospitality market Political, legal, technological and economic developments Customer groups Meso-environment Guest Demographic developments Socio-cultural trends Intermediaries Hospitality Marketing policy: Competition Other participants and vendors business distinguishing the business Micro-environment formula from the competition as positively as possible bycatering to the wishesof the guest Other providers Macro-environment 1.5  |  The business concept An entrepreneur often has a basic idea, around which he starts his business; something that he uses as a starting point. This way of thinking affects the entire business. For example, the purchasing process will be based on the entrepreneur’s idea and so will the staff that he hires. Concept is another word for way of thinking. The entrepreneur’s concept not only affects what products you buy, but also where and how often you buy them. The staff hired also depends on the entrepreneur’s concept. This starting point is reflected in all the business processes. The McDonald brothers started a drive-in restaurant in California. Nothing special. They had really thought the production plan through. In that plan, the kitchen was standardised and everyone had their own task. As a result, they did not need skilled staff and the production could be increased. This meant that the brothers could save on costs. All the work had to be efficient and clean. This was clearly visible to the guests, so that they were convinced that everything was crystal clear and prepared quickly.24

Chapter 1 | The Marketing ConceptBusiness concept The business concept is the basic idea of the company. In theory, there are five different concepts.Production concept 1 Product concept The entrepreneur focuses on creating the best possible product because a good product sells itself.Production concept 2 Production concept Everything in the business is aimed at creating as many products as efficiently as possible. In summary: produce as cheaply as possible.Sales concept 3 Sales concept Mass production makes cheap production possible, but how do we make sure that all those products get sold? The objective of this concept is to sell as much as possible.Marketing concept 4 Marketing concept Increased consumer wealth means that they can get what they want from many different sources. The entrepreneur will only make a profit through good market research and by providing products and services that are exactly what consumers want. The wishes of the guests are the focus point of all decisions made within the company. Social 5 Social marketing conceptmarketing concept What does society want? Consumers are more prosperous than ever and are now starting to see the importance of a clean environment, healthy food and a fair distribution of income. In short, well-being for everyone. The entrepreneurs that use this concept think that there is more to it than just making a profit. Businesses must also contribute something positive to society. 25

Marketing & sales for the hospitality industry C oca-Cola – Responsible Marketing Everyone can enjoy Coca-Cola products. At home or on the road, at school or at work. However, young people and schools receive a special approach. Responsible sales and restrained marketing towards children under the age of 12 spearhead the policy, in order to promote a balanced lifestyle. Children under 12 years Although 7 is the most commonly used age, Coca-Cola has decided to not focus any ad- vertising on children under the age of 12. This is expressed in concrete actions: Complete absence in primary schools. No adverts on television channels whose programmes primarily are aimed at children under 12 years (e.g. Nickelodeon). No adverts or sponsorship with (digital) TV, radio, social media or the web. No ads on other channels before, during or after television programmes for children under the age of 12. Coca-Cola also operates under the guideline of not purchasing any media if more than 35% of the viewers of a TV programme are under the age of 12. No adverts in magazines aimed at children under 12 years (e.g. Donald Duck). No product sampling aimed at children under the age of 12. Not sponsoring school events. Special approach to secondary school students Coca-Cola encourages secondary schools to offer a varied assortment, with the lower- calorie drinks such as light drinks and water getting a prominent place in the vending machines. More than 95% of our vending machines in secondary schools meet these 'Mix-it' guidelines. Coca-Cola took the step towards even more choice and variety with the (co)signing of the ‘Healthier Food Supply at Schools’ charter (‘Gezonder Voedings- aanbod op Scholen’) at the end of 2011. It was agreed in this charter how they cooperate with educational institutions and community organisations to ensure that healthy food and beverages are on the menu at schools between now and 2015. By providing information on vending machines about the calorie count in our drinks, they want to encourage secondary school students to choose a product with fewer calories more often. Coca cola26

Chapter 1 | The Marketing Concept Boost sports They want to use different activities to draw the attention of young people to the impor- tance and fun of sport. Coca-Cola has organised the Olympic Moves sports platform for secondary school students for the past 10 years, together with NOC*NSF and the KVLO. In 2014, Coca-Cola also started a long-term partnership with the Jeugdsportfonds (Youth Sports Fund). The Jeugdsportfonds creates sports opportunities for children up to the age of 18 from low-income families and allows them to participate in sports at a sports association. No promotional activities Coca-Cola does not sponsor school events, and if (sports) activities are supported at school, this takes place without a commercial fee and with little to no brand appearance. We do not sample our products at schools or in the immediate vicinity of a school, and we do not carry out promotional activities that could increase consumption. Clear communication about energy drinks In recent years, Unesda, the European Union for Drinks manufacturers, worked on a Code for Energy Drinks. This was approved in May 2010. This requires the beverage sector to clarify the label of energy drinks by stating that the drink contains caffeine and that it is not suitable for certain target groups. Coca-Cola endorses this code as part of our responsible marketing principles. Source: www.cocacolanederland.nl Coca cola 1.6  |  Marketing toolsMarketing The entrepreneur must indicate in his business plan what tools he's going to use in order to reach Tools his goals. The hospitality entrepreneur has six marketing tools at his disposal. The entrepreneur can use these tools to align his business with market changes, such as a change in guest behaviourMarketing or a change in what is on offer at the location. Changes to these marketing tools are called Activities marketing activities. 27

MarkeMtinagrk&etsinagle&s fsoarlethsefohrotshpeithaolistypitnadliutystirnydustry The marketing mix (the six Ps) Place Every hospitality entrepreneur chooses a location for his business concept that aligns with his target audience as much as possible. For example, he takes into account the transport possibilities of his target audience, foot traffic, customer attractors, customer retainers, parking facilities, appearance of the property, purchasing power link, attractiveness of the entertainment/leisure district, etc. Product The needs and wishes of the target group are also key when choosing the quality and composition of the products and services to be offered. Do you opt for a very wide range of drinks in a bar, or is a small but affordable range better? How many dishes need to be on the menu and with how many different preparation methods? What services will be provided in the hotel? Presentation The exterior view, the furnishings, the style and atmosphere of the hospitality establishment determine its image. This image should meet the target group’s expectations and wishes. These expectations and wishes are related to their consumption circumstances: why are they in the restaurant? Personality The involvement of the entrepreneur/manager and staff in the hospitality establishment, how welcoming they are and their social skills determine to a large extent how guests perceive the service level of the hospitality establishment. The guest’s expectations will depend on the reason for visiting the business. The staff should assess this and live up to it. Attitude, body language and motivation are key. Price The price that the entrepreneur asks for his product should align with the guest’s value assessment at the end of the service. In other words, there must be the right value for money. Please note that guests generally find it difficult to give an assessment on the quality of the business. Promotion The hospitality entrepreneur will have to communicate with his target group one way or another. He must make clear what type of business he has and what he has to offer. The hospitality entrepreneur can use advertising, personal selling, direct mail, promotional activities and public relations. Promotion is a proven way to distinguish yourself from the competition.28

Chapter 1 | The Marketing Concept Marketing mix The composition of the marketing tools is called the marketing mix.Business formula When all the marketing tools have been considered and consciously aligned with each other, you have a business formula. And this is the subject of the next section. Calimeromarketing Karen Romme states in her book Calimeromarketing that a small business owner develops a marketing strategy that closely aligns with himself/herself. The entrepreneur’s personality is the most important tool in this. A calimero business is a company with a few employees, which is built around the entrepreneur and in which he or she plays a defining role. Every business needs to do marketing. Large and small. However, small businesses are not small major companies. In order to be successful, a small business entrepreneur has to deal differently with his business and the resources. Small businesses do not have as many employees, do not have a wide range of products and services, and have a small budget. This means that the rules of the game are different for small business owners, for example: 1 Actively proclaim the message 2 Give priority to existing guests 3 Recruit new customers in a personal way 4 Structurally build a powerful network Source: www.calimeromarketing.nl 29

Marketing & sales for the hospitality industry 1.7  |  Business formula At successful hospitality companies (like McDonald's), the six Ps are clearly recognisable, delibera- tely chosen and aligned with each other. These businesses first carry out market research, create a marketing plan, and deliberately choose a particular combination of marketing tools. Developing a good business formula takes a lot of time and money. Only by creating good annual plans will a business formula be distinctive enough. Every hospitality entrepreneur must realise that a business formula is never complete. The marketing tools (and thus the business formula) must be adjusted due to the constantly changing market and business developments. A good business formula appeals more to the target group and immediately clarifies what the guests can and should expect. Generally, there are two types of business formulas:Service-oriented A service-oriented business formulabusiness formula This business formula focuses on personal service with an emphasison service and flexibility. The host must ensure personal attention when dealing with guests. The host should ask about specific wishes and be attentive and helpful. The traditional restaurant is an example of a service- oriented business formula.System-oriented A system-oriented business formulabusiness formula The service is standardised in this business formula. Speed and consistent quality are central. Hospitality gets a very different interpretation and will seem much more impersonal. Counter service and self-service are two examples of business formulas that fall under this system.30

Chapter 1 | The Marketing Concept Burger King American fast food concepts other than McDonald's are also trying to win a spot in the Dutch market. The first branch of Burger King opened in Rotterdam in 1981, ten years after the introduction of McDonald's in the Netherlands (1971 in Zaandam). Burger King opened its fiftieth branch on 30 March 2006, located in Haarlem’s Central Station. Burger King took over the Canadian coffee and doughnut chain Tim Hortons in 2014. With this acquisition, Burger King became the third biggest fast food chain in the world. Product Burger King is based on the good quality of its products. The Whopper has a fanatical fan club, which looks down on the products of their major competitor. Burger King uses this better quality as means of competition. Personality Burger King is a franchise concept. An entrepreneur interested in Burger King must sign a 20-year contract. The franchisee must invest a lot in the branch and in themselves. A franchisee gets a minimum of 900 hours of training. There is also ongoing coaching and personnel training. Burger King also has company restaurants; these are led by a restaurant manager who falls under the management team of the head office. Presentation The latest house style is 1960s retro with a lot of chrome furniture, red leatherette on booths and chairs, and a black and white chequered tile floor. Place Burger King only wants to locate at so-called triple-A locations. A well-known example is the Burger King restaurant at Schiphol, which is the most visited branch in the world. The location determines the success of every fast-food restaurant. Burger King can be found in the centres of large cities, at a dozen train stations and recently once again along the motor- way. Promotion In terms of promotion, Burger King stands in the shadow of the major competitor. Given the turnover, it is logical that the budget is smaller than that of McDonald's. To achieve its objectives, Burger King increasingly uses mass communication such as television commercials. Price Quality must be reflected in the price. That's why Burger King is a little bit more expensive than McDonald's. Consumers think it’s normal to pay more for quality. A lower price would give the impression that the product is not that much better. 31

Marketing & sales for the hospitality industry 1.8  |  The marketing policy Management The business concept must be practical. The management of the hospitality establishment must have a deliberately chosen business concept as a starting point. It is wise to work methodically in Business plan order to implement a successful business concept. The entrepreneur first creates a business plan Marketing plan in which he specifies the goals he wants to achieve. For a good overview and clarity, he divides the business plan into the following component plans: financial, staffing and marketing plans. He indicates in this marketing plan how he will supplement or adjust the marketing tools (the 6 Ps) to achieve the set goals. A new marketing plan is usually written every year.32

Chapter 1 | The Marketing ConceptMarketing objective Marketing policy Marketing policy An example of a marketing goal is: we want to increase the average spend per guest by 5%. Another example: we want to increase the turnover on wine in the restaurant by 10%. In order to achieve such a marketing goal, marketing activities have to be carried out which also incur costs. We speak of a marketing policy when a business writes systematic marketing plans and implements them to achieve set goals. The marketing policy process Consumer Wishes 1 Adjustment What, how and where business formula will consumers 5 Market research 2 Scheduling of Marketing concept Marketing 3 Activities 4Market research Market research Market Market research is an indispensable part of the marketing policy. Without a market, a hospitality establishment has no outlets. When devising plans, the entrepreneur should be well prepared and research what the possibilities are in the market.External analysis Market research takes place at external and internal levelsInternal research The entrepreneur does external research by looking at the supply and demand for certain products and services. A guest survey is an example of research into the demand for a hospitality product. A competition analysis is an example of research on the supply of a hospitality product. The external analysis must provide the entrepreneur with the opportunities for and threats to his business. The knowledge gained enables the entrepreneur to adjust his policy. Internal research should answer the question of where the business is stronger than the competition and where the business is weaker than the competition. This gives the entrepreneur a better picture of what he does well and what needs improvement. The results of market research and business analyses form the basis of the business plan for the following year. 33

Marketing & sales for the hospitality industry Explore the area An entrepreneur who wishes to set up a business is faced with a lot of questions. What products and services will he provide? Where will he establish his business? How does he determine the prices of his products? In order to answer these questions, it is important to have an idea of the current market and its possibilities. How does an entrepreneur get an idea of this? A number of practical solutions for the entrepreneur: 1 Regularly go for walks in the area at different times and have a chat with other business owners in the area. Also talk with potential guests and observe their behaviour. 2 Count the number of passers-by within a certain time and try to figure out the peak hours. Check the hours of operation of the competitors. 3 Visit the competition and be really observant. Remember the strengths and weaknesses of their business and use this information. 4 A survey is a suitable tool for specific questions. Make sure that the questions are clear and do not provide ambiguous information. A survey should also be quick to complete. Guidelines for the future The market research gives the entrepreneur guidelines for the future; thanks to the research, he knows what has to be improved in his company to take advantage of certain opportunities. An entrepreneur who is up-to-date with upcoming changes in the market can adjust his company accordingly. He will have to realise that not everything can be changed just like that. The abilities of the entrepreneur and his staff cannot change in the short term. This can be worked on in the longer term with the help of training. The financial state of the company also determines the possibilities of the business. The entrepreneur cannot change everything at once, he must continuously make choices. By creating well-prepared plans, the entrepreneur can properly compare the different possibilities and make the right choices!34

Chapter 1 | The Marketing Concept1.9  |  Control questionsPlease answer the questions and find where the answer is located in the chapter:1 What does the word marketing mean?2 The hospitality industry consists of three sectors. What do we call these sectors?3 Each sector consists of five business types. Give at least three examples of these.4 What is a hospitality entrepreneur?5 Three groups of guests (target groups) are generally distinguished in the hospitality industry. What are the groups?6 List at least three characteristics for each target group.7 What is a business concept? Give two sample concepts of a hotel, restaurant or café. 35

Marketing & sales for the hospitality industry 8 Use this schedule for a business concept and fill it in. Business philosophy Description Central is/are Product concept Production concept Sales concept Marketing concept Social marketing concept 9 The marketing mix consists of 6 marketing tools. What are they? 10 Explain the difference between a service-oriented business formula and a system-oriented business formula.36



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Chapter 4 | Supply-side analysis of the hospitality marketChapter 4Supply-side analysis of the hospitality market The chapter at a glance 1034.1 Introduction  1054.2 The market and supply conditions  1064.3 Competition strategies  1094.4 Macro and meso environmental analysis  1114.5 Facts and figures of the hospitality industry  1204.6 Conclusions  1234.7 Questions about the chapter  126For more information, exercises, answers and supportingmaterials: www.masaho.nl 103

Chapter 4 | Supply-side analysis of the hospitality market marketing and sales for the hospitality industry part 1 Market typeCompetition Supply-side Competition analysis analysis strategyEnvironment Environment meso macro analysis analysiswww.masaho.nl - Questions: email to [email protected]

Chapter 4 | Supply-side analysis of the hospitality market4.1  | IntroductionThe first place Kim ever went out to eat with her parents, was a Chinese restaurant.It always smelled of herbs and spices and fried rice. The service was really friendly. She alwaysordered her favourite dish: babi pangang. Practically every Sunday evening, the whole familywould go there for an hour or so to eat dinner before Studio Sport came on television. It oftenseemed like half the town had the same idea because there were always people they knewsitting at the other tables. When Kim went to live on her own in the city, there was also a Chineserestaurant on her street. It had the same kind of service and almost the same food on the menu,including her favourite dish. There were an Indonesian restaurant, a Greek restaurant and a Thairestaurant two blocks away. There was also a lovely tapas place around the corner that was runby real Spaniards.Marketing helps the entrepreneur to make a profit. The entrepreneur is going to sell products andservices where there is a need in the market. In order to estimate future demand properly, he mustkeep an eye on all the supply and demand conditions in the hospitality market. Only by noticingchanges in good time will he be able to take the right decisions. This chapter looks at the supplyconditions of the hospitality market.The supply of hospitality products no longer comes just from traditional hospitality establishmentslike restaurants and hotels. A cheese sandwich from the petrol station, a meal service via thebutcher, a farmer who rents out 'hotel rooms’, a supermarket that sells more than 20 differentready meals; these are just a few of the existing developments. For a restaurant owner, thesame type of restaurant in the area is a direct competitor. A cafeteria is an indirect competitorof the restaurant owner, and even the meals offered by the supermarket form a certain level ofcompetition.We begin this chapter with studying the concept of 'market'. What is meant by a market andwhat possible types of markets are there? Then we're going to look at how we can analyse thecompetition. We end this chapter with the question of how we must deal with the competitionnow. 105

Marketing & sales for the hospitality industry 4.2  |  The market and supply conditions Many villages and cities in the Netherlands have a square with a name that includes the word 'market'. This could be ‘De Grote Markt’ or just ‘De Markt’. The square in question is likely to be a place where regular markets are/were held. A place where stalls are set up, in which people offer all kinds of goods. The people from the village can do their shopping at the market. At the end of the day, all the stalls are once again emptied and taken down. The market has ended. Markets are also often mentioned in the newspapers and on television. Examples include the labour market or the coffee market. However, if you ask someone where that market is, they wouldn’t be able to say. There is no specific answer because the labour market is everywhere. There are jobs (labour demand) and there are people looking for work (labour supply) almost everywhere in the Netherlands.Concrete market The concept of 'market' has two meanings. One is the market that is organised in a particularAbstract market place and the other is the total trade in a particular product. In marketing, this is called a concrete market and an abstract market. It is a concrete market if the demanders, suppliers and the goods are all located at the same place. For example, the weekly market held in almost every village and town. The hospitality activities around the Leidseplein in Amsterdam could also be considered as a concrete market. An abstract market is the entire supply and demand for a particular product and everything that influences it. Examples include the labour market, the housing market, the foreign exchange market and the hospitality market. Market types A market consists of demanders and suppliers. The number of suppliers and the comparability of the product determine the level of competition. It’s important for the individual entrepreneur to know how many suppliers are on the market. This determines his behaviour on the market and his freedom in setting prices. If he is the sole supplier, he has a large degree of freedom in setting his price levels. He has no competitors, so all he needs to take into account is the willingness of the buyers to pay the requested price. But there are also market situations in which the entrepreneur is one of many suppliers with or without comparable products. In that case, the entrepreneur will behave quite differently on the market. Economists have described four theoretical supply situations. Practice shows that the market for some products approaches these theoretical situations, but you’ll often see differences in reality.106

Chapter 4 | Supply-side analysis of the hospitality market 1. Monopoly: One supplier with a unique product. 2. Oligopoly: A limited number of suppliers with the same product or similar products. 3. Full competition: Many suppliers with the same product (homogeneous product). 4. Monopolistic competition: Many suppliers with comparable products (heterogeneous product).Monopoly Monopoly The monopoly market type has only one supplier. The monopolist’s product is unique, there are no other entrepreneurs who offer the same or a similar product. From the consumer’s point of view, you could say that there are no replacement products on the market. The monopolist has a strong position; he can charge almost any price he wants. Of course, there must be purchasers who are willing to pay the price. We see a number of monopolies in the medicine market because their products are protected by patents. Up until the introduction of mobile telephones in the Netherlands, KPN also had a monopoly. The ANWB is another example of a former monopoly in the Netherlands, but it lost its monopoly after the introduction of Route Mobiel.Oligopoly Oligopoly With an oligopoly market type, there are a limited number of suppliers. Two situations are possible.Homogeneous In a homogeneous oligopoly, the same product is offered by the suppliers. Think primarily about oligopoly suppliers of raw materials and semi-finished products. The buyers in this market can very easily compare prices because the product is the same. This is why the suppliers keep a close eye on Price cartel each other's prices. A price reduction by one supplier is directly followed by price reductions with the other suppliers. Sometimes there are mutual agreements made regarding the asking price. A price cartel is formed when agreements are made about the asking price. This is prohibited in the Netherlands.Heterogeneous With a heterogeneous oligopoly market type, comparable products are put on the market and oligopoly differentiated by the suppliers. They try to distinguish themselves as much as possible through advertising and packaging. Examples include laundry detergents and petrol. The suppliers suggest Non-price product differences that are sometimes negligible in order to prevent price wars, this is called competition non-price competition. Take advertising for washing detergent; one washes whiter than white, the other is now an even better value and the third is colour-safe. The heterogeneous oligopoly market type is often encountered in the hospitality market at the local level. Every restaurant has its own hospitality product and restaurants can differ considerably in this. Often the choice for a hospitality establishment is made based on what is offered by that business and not by the price. Another example of a heterogeneous oligopoly is three cafeterias in the same residential area. 107

Marketing & sales for the hospitality industry The cafeterias keep an eye on each other's chip prices, but will profile themselves against their competitors based on the quality of their products, the chosen range and any homemade items. The more special the selection, the more freedom the entrepreneur has in determining the price. Market Development Beverage Providers Bars adapt slowly In addition to the fact that the weather gods were kind to bars in 2014, the bars increasingly distinguished themselves by communicating a clear story. They had to in order to compete with other types of entertainment on offer (e.g. festivals and events). New concepts pop up and formerly 'flat' categories like beer are becoming sophisticated by using craftsmanship. See, for example, www.craftbrewersconference.com or dutchbeerpages.com Tea and coffee shops; where will it stop? Coffee and tea shops really know how to play to the wishes of consumers, with fast high- quality coffee to-go and coffee to-stay concepts. In addition to fresh mint tea, loose (dried) tea and tea with milk (including Chai Latte) are on the up. The sector innovates based on the preferences of the young and trendy consumer. The growth of chains like Coffee Company and Starbucks is continuing. See, for example, www.coffeecompany.nl/about/ or www.starbucks.com/about-us Source: Foodservice, essentials 2015 Full Full competition competition A market with full competition has many suppliers, many demanders and a homogeneous (identical) product. All market players are aware of price developments. The individual demander or supplier has no influence on the price. The market determines the price. We do not encounter this market type in the hospitality industry. This market type is not attractive to suppliers. This is why hospitality entrepreneurs try to think of anything that will distinguish them from their competitors. Only the market for agricultural products consists of a homogeneous product and can contain many suppliers and many demanders.Monopolistic competition Monopolistic competition In the case of a monopolistic competition market type, you can find many suppliers offering comparable products. The more a supplier can make his product stand out from the competition and can adapt to the wishes of the customer, the more freedom he has in determining prices. This makes him less sensitive to the behaviour of the other suppliers. We primarily see this market type in the hospitality market of large cities, both in the beverage supply sector and the meal supply sector.108

Chapter 4 | Supply-side analysis of the hospitality market 4.3  |  Competition strategies Strategies are policies that a business sets out for the long term. One of the strategies should relate to the competition. How should a company deal with competition? The well-known economist Porter distinguished three principles for how a competitive advantage can be used optimally.Cost leadership 1. Cost leadership A cost leader beats the competition by selling cheaper products than his competitor. He will have to keep his costs low. He does this by standardising the production and service processes as much as possible and by using economies of scale. As a result, he has lower costs and can offer a price that is lower than the market average. A condition of this competition strategy is that the customers in the market are price sensitive. Fast food outlets and some bars apply this strategy particularly successfully, just like buffet restaurants and Formula-1 hotels.Product differentiation 2. Product differentiation The entrepreneur distinguishes himself from his competitors by supplying products and services with a clear added value. The price may be higher than the market average. For a hospitality business, it’s about the right combination of features that appeal most to the guest and the services that set it apart from competitors. With this competition strategy, there must be a clear and demonstrable difference with the other suppliers on the market. Many mid-level and starred restaurants prove that this strategy can be successful in practice. Focus strategy 3. Focus strategyMarket segment People use this strategy on one or several groups of customers with the same wishes and needs. A group of customers with similar wishes and needs is called a market segment. By focusing on a small part of the market, the product can be tailored exactly to the wishes and expectations of those types of customers. It is usually better to be a leader in a small market than a follower in a large market. Examples include the small breweries dedicated to speciality beers like Hoegaarden, a vegetarian restaurant and a bar that specifically focuses on young people. 109

Marketing & sales for the hospitality industry The neighbourhood bar Many neighbourhood bars are struggling to keep their heads above water. Guests are attracted to bigger entertainment centres and the hospitality entrepreneurs of local bars are struggling to distinguish themselves. Still, there are examples of neighbourhood bars that are vibrant centres within their area. What drives these enterprising bar owners is their endless enthusiasm, commitment to the area and a heart for hospitality? These bar owners keep their guests by organising regular activities such as an annual getaway or a savings bank. They also organise events that draw a wider audience in order to recruit new guests. By regularly appearing in local newspapers and using door-to-door flyers, they ensure the necessary publicity and name recognition. The atmosphere is extra important for a neighbourhood bar. There should be a warm and welcoming living room-feel where even occasional guests feel at home. Lighting is always decisive in achieving the right atmosphere. The lighting must also provide a sense of security, so not too dark. This sense of security can be strengthened by clearly indicating the location of the emergency exit and by immediately putting an end to any aggressive behaviour. The neighbourhood bar can stand out from large entertainment centres through personal attention for their guests. Radiating hospitality and cheerfulness is important here, and so is lending an ear. Finally, a local bar must offer good value for money for drinks and snacks, whereby the entrepreneur must find a balance between friendly prices and a healthy return.110

Chapter 4 | Supply-side analysis of the hospitality market4.4  |  Macro and meso environmental analysisSo far, it’s been about the theory of possible market situations and competition types. In thissection, the research possibilities of the individual hospitality entrepreneur are central. Whatshould he actually research and what resources are available to him?The entrepreneur will have to do research on different levels. He has to keep an eye on nationaldevelopments, but he will especially want to know what is happening in his immediate vicinity.In order to get a good picture of the developments in the supply side of the hospitality marketin the coming years, he will not just have to keep an eye on national developments (macroenvironmental analysis) but also on developments within the industry sector (meso environmentalanalysis).Schedule: the hospitality market Political, legal, technological and economic developmentsCustomer groups Meso environment GuestDemographic developments Hospitality Marketing policy: Socio-cultural trends Intermediaries business distinguishing the business Other participants and suppliers micro formula as positively as possible from the competition when catering environment to the wishes of the guest Competition Other suppliers Micro environment 111

Marketing & sales for the hospitality industry Macro environmental analysis With a macro environmental analysis, the entrepreneur wants to map out clearly what develop- ments are current. He can use this analysis to create strategies and to assess how to deal with these changes. The following developments are listed mainly at the macro environmental level. 1. Demographic developments Demographic developments are details about the population structure such as totals, age structure, education and cultural composition. The hospitality entrepreneur will keep an eye on these developments, especially relating to his service area. Key questions include: How much will the aging population increase in the coming years and what about the declining number of young people? How the population coexists is also important. Are there many large families or many small families? Are there a lot of one person households or other types of cohabitation? Leisure activities, especially in own area Half of the leisure activities (50%) takes place within a radius of 5 km from the residential address. In particular, sports activities, hobbies, club activities and courses are done close to home. The Dutch spend about 16 euro per activity. In total, about 77 billion euros are spent on leisure activities on an annual basis. More than 15% of this is spent on consumables. Source: ContinuVrijetijdsOnderzoek 2. Political and legal developments Politics directly influence the hospitality business. The Eerste Kamer and Tweede Kamer (Upper and Lower Houses) form the legislative power of the Netherlands. People in The Hague determine, amongst other things, the amount of VAT, obligations of the employer to the employee, and the regulations governing the granting of permits. These developments can directly affect the hospitality business, just like with the deductibility of business meals. The law is important for the hospitality industry entrepreneur. The Drank en Horecawet (Beverage and Catering Act) has a strong influence on his business. It covers things like the minimum ages for alcohol consumption and the implementation of the enforcement policy. This law also covers the granting of permits. The entrepreneur will also want to stay informed of his liability towards the guests. This is also regulated in the law. For example, the Wet BIBOB (Public Administration (Probity Screening) Act) gives the government a tool to check, for example, the integrity of applicants for certain permits and subsidies or candidates for certain public contracts. This is to prevent the government from unwittingly facilitating crime.112

Chapter 4 | Supply-side analysis of the hospitality marketThe municipalityThe municipality is an important partner for the hospitality industry. In most municipalities,a hospitality establishment requires an operating permit. Granting this permit allows amunicipality to place demands on managers and business practices. A beverage andcatering regulation permit is required for hospitality businesses that want to sell alcoholicbeverages. Depending on the situation, a terrace permit, slot machine permit, waiverhospitality business operating hours, sufferance rights and an environmental permitmay also be required. The municipality also sets a zoning plan per area. It is always wiseto review this in order to find out what is and is not permitted and what, if any, futuredevelopments there may be.3. Technological developmentsA smart entrepreneur keeps an eye on technological developments. Especially the developmentsthat he can use in his establishment, such as a new computer system for the cash register or theautomatic tap systems.4. Economic developmentsThe economic situation of the country influences the spending of the guests. In bad economictimes, the entrepreneur might have to deal with declining sales. Included under economicdevelopments are income, unemployment, the rise of large companies in the industry and the like.Figures 2015 Figures PeriodKey indicatorsNumber of inhabitants 16,909,135 February 2015Economic growthUnemployment, seasonally adjusted 0.8% 4th quarter 2014Consumer confidenceInflation 7.2% January 2015Victimisation crimeHealthy or very healthy 2 March 2015 0.4% March 2015 18.9% 2014 80.3% 2013Source: http://www.cbs.nl/nl-NL/menu/cijfers/default.htm 113

Marketing & sales for the hospitality industry 5. Socio-cultural trends Socio-cultural trends are all the various developments in society. For example, the attention to health, fashion trends, nightlife behaviour, time allocation, mobility, habits and individualisation. In the hospitality industry, you can see that: • the spontaneous consumer plays an ever bigger role (people do what they want/need at the time); • consumers want gain, convenience and enjoyment; • guests want to be pampered in a pleasant environment; • consumers are more aware (in terms of environment, health, finances, time and geography); • more than ever, consumers are willing to pay for quality; • consumers want 'eatertainment' (eating should be fun). Implementation of the macro environmental analysis Putting the analysis on paper is a difficult task for many entrepreneurs. It is necessary for every entrepreneur to have an idea of the macro environment that has a major impact on the opportunities and threats for the hospitality business in the coming years. He will have to use publications as much as possible. He can get information at Statistics Netherlands (CBS), the Netherlands Board of Tourism and Conventions (NBTC), the Netherlands Institute for Social Research (SCP) and Foodstep. It is also important for the hospitality entrepreneur to stay up to date on current developments. The hospitality entrepreneur can stay up to date just by reading the newspaper and the trade magazines, such as Misset Horeca and a website like www.foodinspiration.nl. Meso environmental analysis For the macro environmental analysis, the entrepreneur barely has to step outside his business. It’s quite a different matter for the meso environmental analysis. For the meso environmental assessment, the hospitality entrepreneur has to study the industry developments and get a good picture of his immediate environment. Service area The hospitality entrepreneur will first look at the suppliers of hospitality products in his service area. He also examines the history and opportunities of his service area. A different service area applies for each type of hospitality establishment. A cafeteria often has a residential area or a village as its service area. A bistro or a theme restaurant usually gets guests from a city or from one or more village centres. The service area of a mid-level or luxury restaurant is usually much bigger. Depending on the strength of the business formula (e.g., a renowned kitchen), the average distance guests will travel can be as much as 25 km.114

Chapter 4 | Supply-side analysis of the hospitality market 115

Marketing & sales for the hospitality industry After the hospitality entrepreneur is aware of the number of competitors in his service area, he will want to know what kind of supply situation he is in. The hospitality entrepreneur will want to stand out from his competitors. He can only do this if he knows exactly how his competitors’ business formulas compete with each other. The hospitality entrepreneur will need to map his competitors exactly in order to deal properly with the competition. The meso environmental analysis also includes a detailed analysis of the demand side. We will discuss this analysis in the next chapter. Supply analysis Naturally, the hospitality entrepreneur wants to identify his competitors. In doing so, he will not only pay attention to the direct competitors (the same business type), but also to the indirect competition. The entrepreneur will have to look further than just the location where he is established. He must also pay attention to the surroundings. Given the mobility of the guests, there is also a certain amount of competition to be expected from hospitality establishments elsewhere in the region. The first task of the entrepreneur is to map the number of hospitality establishments in his service area. Supply data [companies], Municipality: Zwolle 2001 2006 2013 250 287 315 Hospitality and catering companies, total [companies] 94 97 111 Beverage sector, total [companies] 50 51 56 Fast food sector, total [companies] 54 54 58 Restaurant sector, total [companies] 5 5 5 Hotel sector, total [companies] 44 78 79 Catering/canteen, total [companies] Example The city of Zwolle had fewer hospitality establishments in 2001 than in 2013. The number of restaurants increased by 4, and the number of hospitality establishments supplying drinks increased by 17. There has also been a striking increase in the number of catered canteens in Zwolle. From 44 in 2001, to 79 in 2013. This is a national trend. Increasingly more companies have their canteens run by a caterer.116

Chapter 4 | Supply-side analysis of the hospitality market The next question that the entrepreneur should ask is: How has the supply developed in the last five years? He will then look at the history of his establishment’s location. You can see how the supply changed in this small city between 2001 and 2013. Looking at the number of restaurants, you will see that there has been an increase. Four new restaurants opened in 2008. The three Michelin star restaurant De Librije is in Zwolle. It will be interesting to see if the award of this third star will affect the supply of restaurants in the city of Zwolle. He will also want to know how much revenue potential flows to businesses outside his service area. The hospitality entrepreneur can compare supply data of his supply area to the average density of hospitality establishments in the Netherlands. Making this comparison can allow a starting entrepreneur to see which market areas offer good opportunities for locating his business. Where is the most room in the market? We distinguish two concepts: Oversupply Oversupply: There are more hospitality establishments in the service area than the averageUndersupply density in the Netherlands. Many large cities have a regional function, creating an extra supply of hospitality establishments. Places with tourist attractions are also appealing to hospitality entrepreneurs. Undersupply: There are fewer hospitality establishments in the service area than the average density in the Netherlands. If we compare Zwolle’s data with the Dutch average, it becomes noticeable that there are many company canteens located in Zwolle in comparison with other cities. This could be because Zwolle is a logistics hub, which makes it attractive to many companies as a distribution centre or headquarters. This would allow more larger business premises in Zwolle than in other cities and therefore more company canteens. Zwolle also has a lot of party catering. We can tentatively conclude that Zwolle is not a big tourist attraction, there are far fewer companies established in the hotel sector than average. The supply of restaurants in Zwolle is less than the Dutch average (5.1 per 10,000 inhabitants compared to 6.5 per 10,000 inhabitants). The growth in the supply per 10,000 inhabitants in the Netherlands does not apply in Zwolle. 117

Marketing & sales for the hospitality industry Supply data [companies], 2013 Zwolle the Hospitality and catering companies per 10,000 inhabitants [companies] 27.9 Netherlands Companies in beverage sector per 10,000 inhabitants [companies] 9.8 28.3 11.1 Companies in fast food sector per 10,000 inhabitants [companies] 5 6.1 Companies in restaurant sector per 10,000 inhabitants [companies] 5.1 6.5 1.7 Companies in hotel sector per 10,000 inhabitants [companies] 0.4 2.6 Catered company canteens per 10,000 inhabitants [companies] 7 ExampleDirect competition The analysis of the direct competition Companies with a similar product range or similar services in the same target group are each other's direct competitors. The hospitality entrepreneur can assess the competition based on the following points: • Characteristic description of the 6 Ps. • What are the strengths and weaknesses of the direct competitors? • How does the competitor distinguish themselves positively in the market? • How do the competing hospitality entrepreneurs profile themselves? • What competitive advantage does your own business have? place of presenta- product personality price promotion business tion policy own + ++ - +- - business - ++ A + +- +- + B ++ -+ C - -+ ++ D ++ ++ - +++ A through D = direct competitors Competition analysis118

Chapter 4 | Supply-side analysis of the hospitality marketIndirect competition The analysis of the indirect competition After the hospitality entrepreneur has studied his direct competitors, he will also want to know the strengths of his indirect competitors. How much revenue flows to other business types? The hospitality entrepreneur will never be able to determine precisely the extent of the indirect competition. He can make an estimate and ask himself the question of whether this type of competition is increasing or decreasing, so he can adjust his policy based on this data. He must keep an especially close eye on hospitality establishments with a business type similar to his own. This means that a mid-level restaurant will keep an eye on theme restaurants, luxury restaurants and any bistros. The customers who go to these business types could just as well be coming to his restaurant. Why aren’t they? Which indirect competitor is strong and why? 119

Marketing & sales for the hospitality industry 4.5  |  Facts and figures of the hospitality industry Differences CBS, Foodstep and other parties The hospitality industry plays an important role in the Netherlands. The hospitality industry contributes to the economy, is a major employer and provides entertainment. Because of the hospitality industry’s role in the economy, there is a need for good figures on size, growth and developments of the sector. This is important for the sector and for the policy. CBS, Foodstep and other parties compile statistics about the hospitality industry and the food service channel. These figures partly reflect sales trends, but there are also differences. What are the differences? 1. Scope differs First of all, the scope of the statistics and publications from CBS and Foodstep differs. CBS produces sales statistics for the hospitality industry, i.e. hotels (including overnight stays), restaurants and bars. Foodstep reports on the entire food channel, including consumables sold by service stations and in retail trade, day recreation companies, sports and on transport. 2. Goals and target groups differ CBS target groups include the industry and consumers, but also policy makers and scientists. Foodstep’s target groups are parties in the chain, manufacturers/suppliers, wholesale/agents, and the individual points-of-sale, chains and operators possibly under the umbrella of trade associations. CBS measures the sales development of industries. This information is important for the industry itself. CBS also determines the volume growth of the industries and the economy as a whole. This is particularly important for macro-economists and policy makers. Foodstep’s objective is to map the growth and developments in the entire food chain by all industries as a policy compass for the food service industry. The information comes mainly from the food service chain itself, namely from wholesale and hospitality chains, caterers, private ongoing research into out-of-home visits and consumer spending, private research into product use in hospitality and catering, and statistics from CBS and trade associations. 3. Classification differences CBS uses the Standard Industrial Classification (SBI). This is an internationally agreed hierarchical classification of economic activities. CBS bases the SBI of a business on that company's registration with the Chamber of Commerce. A centre of gravity approach applies to this. For example, this means that a business that operates 75% restaurant activities and has catering activities or sells souvenirs for the other 25%, shall be classified in the Restaurants SBI. Foodstep is based on an industry-own outlet database. Foodstep uses the Data Outlet database as the industry population, which together with Datlinq (and more than 40 suppliers in food service) is kept up to date with several hundreds of thousands of contacts on an annual basis. Data Outlet classifies sales points at address level, which are translated into the industry classification used by Foodstep. This is in line with Koninklijke Horeca Nederland, Veneca and FSIN. Foodstep120

Chapter 4 | Supply-side analysis of the hospitality marketlooks beyond just the traditional hospitality industry. Hospitality facilities in companies with anothermain activity (recreation, retail, sports) are also measured as hospitality values.4. Source differencesCBS uses VAT registers and survey techniques. The Tax Authority VAT registers are the basis ofthe current sales and volume estimates of CBS for small and medium-sized companies. CBS alsoconducts surveys of large companies on a quarterly basis. The net sales data that CBS obtainsin this way are analysed quarterly in order to determine the growth for that period. The growthfigures are then given a weighted aggregate (taken together) to reach a growth rate per quarter byindustry. CBS uses the total net sales.Foodstep uses sources on product use and consumer spending. Foodstep is based on consumerspending on food, drinks and tobacco in food service with the exception of room rental, entrancefees and guest accommodation, including VAT.5. Subject differencesCBS measures sales, price and volume. CBS publishes sales developments, volume developmentsand price developments in the hospitality industry on a quarterly basis. Foodstep measurespurchasing, sales and consumer spending. Foodstep reports sales in consumer value and volumeper product group on 4-weekly basis. It is primarily about value developments for the entire foodservice and the underlying market segments. Foodstep maps the volume developments for majorproduct groups like coffee, tea, soft drinks, beer, chips, snacks, etc., down to the level of brand,type and packaging per channel.CBS: indices and growth figures. CBS publishes both year-on-year developments and seasonallyadjusted quarter-on-quarter developments. Foodstep: developments without seasonal adjustment.In its Food Service Monitor, Foodstep reports on the value development of out-of-home food anddrinks. The year-on-year development is determined based on a fixed group of sales outlets. Noseasonal adjustment is applied to this.6. Averages exist, average companies do notThe figures released by CBS and Foodstep are averages for various industries. The results ofthe underlying companies will typically deviate from these averages. By definition, some of thecompanies do worse than average and some do better. If several companies do relatively quitewell, there will be more companies below average and vice versa. 121

Marketing & sales for the hospitality industry Sale and cost indication: luxury restaurant SALES per year x 1,000 euro % of sales Total sales: 350 100% Meals/food: 220 63% Beverages: 116 33% Other hospitality activities: 14 4% LABOUR (in years) KEY FIGURES (on annual basis) 5,800 euro Unpaid employees:  1.0 Food and drink sales/m2: 64,100 euro Paid employees:  4.5 Sales per employee (in years): 23,100 euro Total number of employees:  5.5 Gross wage per paid year:  COSTS per year (x 1,000 euro) (percentage of sales) Min Max Min Max Total PURCHASES 95 108 27 31 Meals/food 61 71 28 32 (% sales meals/food) Beverages 28 32 24 28 (% beverage sales) Other activities 6 6 40 40 (% sales other activities) STAFF COSTS up to. 103 114 29 33 Wages and social costs 98 108 28 31 Payment to third parties 0000 Other staff costs 5612 Total OTHER COSTS 43 68 12 19 Housing/premises costs Selling costs 3 35 7 10 (no rent, depr. and int.*) General costs 7 13 2 4 3 20 4 6 CAPITAL EXPENSES with RENTING 29 69 8 20 Building rental 20 40 6 11 Depreciation 9 24 37 Interest 06 02 CAPITAL EXPENSES with 19 45 6 13 PROPERTY Depreciation 15 30 4 9 Interest 5 15 1 4 Example of a sales and cost analysis *depr. = depreciation  int. = interest Source: Article CBS/Foodstep122

Chapter 4 | Supply-side analysis of the hospitality market4.6  | ConclusionsThe art of entrepreneurship is to convert all the information into an understanding of the market.The hospitality entrepreneur must draw conclusions from the research data that he has collectedand compiled into tables and charts. He can make new plans based on these conclusions. Thehospitality entrepreneur must learn to draw conclusions from those figures and convert them into amarketing strategy.Internal analysis What do we do well What do we do less wellExternal analysis Strong points Weak pointsOpportunities Exploit ImproveThreats Grow Lean towards the strengths Defend Avoid Compete using strengths Get out of the market Seek collaborationFrom the Hospitality Entrepreneur/ManagerQualification fileContextThe hospitality/bakery entrepreneur is at first just an operator of one or more businesses.In many cases, he is the owner of the business (or businesses). Depending on the size ofthe business and the number of businesses/locations, the entrepreneur is more or lessinvolved in the operational management and business operations. In large companies, thehospitality/bakery entrepreneur is not the owner of the business (or businesses), but heinstead runs a business or branch.Professional attitudeTypical of the professional attitude of the hospitality/bakery entrepreneur is that he focuseson four aspects: Commercial effectiveness: he is guest, customer and market-oriented,has insight in business organisation and is organisationally aware. He must also have along-term vision, supported by financial and technical arguments. The hospitality/bakerentrepreneur is a trailblazer and an innovator. He is open to innovations and developspioneering ideas. He dares to take risks and can act in uncertain situations.Result of the occupational groupThe hospitality/bakery entrepreneur achieves the main objectives of the business, suchas generating profit and providing continuity. The hospitality/bakery entrepreneur isresponsible for the business operations, determines the policy (strategic) and ensures that 123