University of GuyanaSchool of Education and Humanities

TST 328-Tourism MarketingMrs. Camille Robertson

Question: Mischa’s serves hamburgers fresh off the grill. This

assures high quality but creates left over burgers if the staff

overestimates the demand. Mischa’s solves this problem by

using the meat in chilli, taco, spaghetti sauce, patties and meat

pies. Relate how airlines solve the perishability of unsold seats.

Give additional examples of perishability and how service firms

address it.

Date Submitted: March 21st, 2007

TABLE OF CONTENTS PAGE

Introduction 3

Transportation 5

How airlines deal with perishability 6

Other service industries 8

Food and Beverage 8

Food 8

Beverages 10

Hotels 10

Agriculture 12

Entertainment 12

Conclusion 13

Bibliography 14

INTRODUCTION

Tourism is a service-based industry that has been a real income

generator and contributor to the GDP for most of the world. It is an

activity that provides transportation, accommodation, meals,

attractions, entertainment and other services for the potential tourist.

In order for these services to become known, proper marketing needs

to be done. Phillip Kotler defines marketing as a social and

managerial process by which individuals and groups obtain what they

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need and want through creating and exchanging products and value

with others. This deals with wants, needs, demands, satisfactions and

marketers.1

Marketing is defined by the CIM (Chartered Institute of Marketing)

as, “the management process responsible for identifying, anticipating

and satisfying consumers, profitably”.2 Marketing is made up of three

elements, which come together to form a marketing system:

1. The attitudes and decisions of visitors (demand) concerning the

perceived offer of the destination – according to their needs,

wants and desires

2. The attitudes and decisions of organisations (supply) concerning

the position of their offer – in the context of the business

environment they face.

3. The way in which the mix is put together and communicated –

before, during and after the visit/experience.3

With tourism marketing, you are marketing a service that is intangible

in nature. Instead of moving the product to the customer, the

customer must travel to the product.

A service is a product produced through an exchange transaction that

does not confer ownership but permits access to and use of a service

at a specified time in a specified place.4

There are four characteristics of service:

1. Intangibility: product cannot be evaluated or demonstrated in

advance of its purchase. It cannot be seen, tasted, felt, heard, or

smelled before it is bought. When a service is completed, the

customer is left with feelings such as elation, delight, and

satisfaction

1 Phillip Kotler. General Marketing. Marketing Management. Prentice Hall. 20052 Dibb, S. et al. Marketing: Concepts and Strategies. Houghton Mifflin. 20013 http://www.cim.co.uk4 Russell Wolak. Et al. An Investigation into Four Characteristics of Services. Journal of Empirical Generalisations in Marketing Science. Volume Three 1998. Kingston Business School, London.

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2. Inseparability: the product is often consumed and produced

simultaneously

3. Heterogeneity: high variability in service delivery. This is mostly

a problem for services with a higher labour content, as different

people deliver the service performance.

4. Perishability: this is the basis of our paper and this means that

services cannot be stored and carried forward to a future time

period. Services are time dependent and time important which

makes them very perishable. The issue of perishability is

primarily the concern of a service producer and the consumer

only becomes aware of the issue when there is insufficient

supply and they have to wait for the service.

Tourism is a service, and therefore suffers from aspects of

perishability (the product cannot be stored) and intangibility (which

results in the customer not being able to sample the product before

purchase).

Perishability is a major concern when marketing destinations and

managing visitor attractions. The concern is that if service capacity is

not sold on a particular day, then the revenue is lost and cannot be

recovered. Service production therefore is best understood as a

‘capacity to produce’ not a quantity of products. 5

Hotel operators with a fixed number of rooms, and transport

operators with a fixed number of seats, face identical problems of

matching available demand to perishable supply. The marketing

response to intangibility and perishability is to ‘manage or manipulate

demand’.6

Service producers tend to create something else and put it on the

market by using what would have had to be thrown away to make

5 Russell Wolak. Et al. An Investigation into Four Characteristics of Services. Journal of Empirical Generalisations in Marketing Science. Volume Three 1998. Kingston Business School, London.

6 T. Levitt. Marketing Intangible Products and Product Intangibles. Harvard Business Review. Volume 81. 1981

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something else of value. For example, left over meals. “Mischa’s

serves hamburgers fresh off the grill. This assures high quality but

creates left over burgers if the staff overestimates the demand.

Mischa’s solves this problem by using the meat in chilli, taco,

spaghetti sauce, patties and meat pies.”

To deal with perishability producers can do one of three things:

1. Increase supply to match demand

2. Decrease demand to match supply

3. Manipulate both demand and supply

TRANSPORTATION

The transportation sector is one of the most important components of

the tourism industry because it provides the service of transferring

tourists from one destination to another. The airline industry in

particular is responsible for taking individuals to places where trains

and cars cannot go, or even if they can, it would take triple the

amount of time an airplane would.

How Airlines deal with unsold seats

An airline seat left empty represents revenue, which can never

be regained. This indicates high-risk nature of the tourism industry.

Marketers in the tourism and hospitality industry have to develop

complex pricing and promotion policies in an attempt to see ‘off-

season’ periods and create greater synchronization of staffing levels

and supply with demand patterns.7

It is said that there are 25,000,000 seats flying empty a year around

the globe.8 Airhitch, a website which tracks down unsold seats, serves

to fill these empty seats and enable travel possibilities for a lot of

people that would not otherwise have them. Airhitch serves as a

clearinghouse between airlines who have seats that are left unsold at

the last minute and people who would dearly love to be in those seats

when the plane takes off.

7 Chris Cooper, etc, Tourism Principles and Practice, Longman Group, Ltd, 1993. Pg. 231

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Airline marketing prices are kept as high as possible for as long as

possible, but as it nears the point of perishability (flight date and

time) a buyer must be found for it at any price rather than let perish

(operate at a loss). This means that, the closer to departure for each

flight, the more desperate the airline is to sell seats that it thinks are

not going to be sold. For example, A passenger at an airport

requesting a seat hours before departure time will be given a discount

in price (to prevent the seat leaving unsold). 9

However, there are times when the airlines have the upper hand.

Passengers traveling last minute are sometimes charged at a higher

cost by air airlines. There are instances where a person needs to buy

an airline ticket for an urgent travel today or tomorrow and would be

willing to pay just about any amount of money for the ticket, because

it is very important to them. So basically the airline, on one hand

would love to sell these ‘last minute’ tickets for very high prices to

‘must travel’ passengers, but also would be pleased to sell them at

almost any price to people that would only travel if they see an

incredible discount. This means that should you take a flight

somewhere and look around you. The chances are that the person

seated next to you may have paid four times more than you, for the

exact same flight. Or maybe you were the sucker and paid four times

more then he did. Worse still, many of the people seated in first class

probably aid less for their seats then you did for your uncomfortable

middle seat way at the very back, next to the toilets, galleys and

engines. 10

Also it is noted that airlines basically write off seat as lost and wasted

at least three days before it departs. This is because the procedure for

converting an interested potential passenger into an actual passenger

(strapped in the seat with a plane taking off) is very complicated and

8 http://www.airhitch.org/info.htm#how9 www.airhitch.org/info.htm#how10 www.travelinsider.info/2002/0621.htm

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sometimes involve middlemen (Travel agencies, tour operators, etc)

and the more middlemen who are involved, the more complicated it

gets. Often the air carriers consider going through this process is

simply not worth if for the small amount of revenue they perceive

would be gained from such an operation. Southwest airlines stated

that costs are recovered for those unoccupied seats by pricing the

occupied seats high.11

Mr. Junior Horatio of North American Airlines stated the practice of

yield management and this is partially accredited to the airline still

being in operation. He stated that with three to five days of the flight

departure time ticket prices are lowered but are not advertised, since

most airlines wish to sell their airline tickets at the highest price

possible. He further said that stand bys are encouraged, in that in the

event a confirmed passenger is delayed or does not show on time for

the departing flight, standbys are placed to fill these seats so as to

avoid it going empty.12

Jet Airways noted that an airline seat is a perishable product, so

therefore the idea is to sell it at any cost if the aircraft is about to fly

with empty seats. Flights that have excessive seats, they may offer

attractive discounts to fill them.13

Some airlines, in an attempt to decrease the risk of seats perishing,

encourages standby or some even overbook. Overbooking is a form

airlines take in order to reduce perishability. This is where one would

often find that two or more passengers would be issued the same seat

number because they would have both paid for that particular seat.

When flights are overbooked, it guarantees the airline full capacity

and they can always resolve this conflict by making an offer to the

passenger to fly on a next carrier or offering them compensation

11 www.airhitch.org/info.htm#how12 Interview 13 www.jetairways.org

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packages like staying at a hotel or even paying a passenger to give up

his of her seat.

OTHER SERVICE INDUSTRIES

Food & Beverage

The Food & Beverage Industry is vital because individuals need to eat.

These can be in the form of restaurants, fast food outlets, Food and

beverage entities resolve the issue of perishability through several

means, some of which include dumping, giving to charity and giving to

employees. The use of both Local and International examples will be

used to justify that indeed each entity handles the issue of

perishability differently.

FOOD

1. Humphrey’s Bakery . This entity is located in Ketley Street,

Charlestown. Georgetown Guyana. This Bakery uses its

perishable bread to make Chester Cakes.

2. Glow Amigo Restaurant , which is, located at Queen Street use

their left over Baked Chicken to prepare some of the next day’s

meal including Fried Rice, Chowmein and Cook- Up- Rice. They

would normally strip the Baked Chicken and cook it in the food

and also make sandwiches or salads.

3. Kentucky Fried Chicken is an International business

operation, however, the main branch of Guyana, which is

located at Stabroek Market deal with their perishable items via

three methods. The first being, upon closing hours once KFC

realizes that they have extra chicken they usually give all

present customers extra chicken along with their current

orders. Secondly, once, there are closed and they have excess

chicken and fries they would dump the perishable items.

4. The Oasis Cafe , which is located on Carmichael Street, would

let their employees consume all perishable items (for example

Salads) after the buffet is closed.

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5. Roti Hut gives their perishable items only if it is in a large bulk

to Joshua’s Home and if it is not a large amount they would

dump the perishable items.

6. Olive Garden which is located throughout the United States

solve the issue of perishability by using their left over tomatoes

to make sauce for the Spaghetti and also sun dry the tomatoes

to put them on Pizza or to serve with other meals.

7. Pizza Hut , which is located on Vlissengen Road Georgetown,

said that they solve their issue of Perishability by dumping the

left over dough. The dough is said to have a life frame of eight

hours.

BEVERAGES

Beverage is one of the basic necessities required within the tourism industry.

1. Demerara Distilleries Limited (DDL)

They deal with their perishable items that are approaching the

expiration date they usually sell off those stocks through the form

of promotions. For example, buy one 1-liter Pepsi and get the

second free or at half price.

2. Ansa Mcal & Banks DIH

Both of these companies usually solve the issue or perishability in

their company by merging with wholesalers and event promoters

through the form of having special Happy Hours on those Beer that

are approaching the expiration date or those that are abundant in

stock. During these happy hours promotion they may normally sell

their beers at a reduced price; for example, 3 Banks Beer for $500

and 9 Carib Beers for $1000.

HOTELS

Hotel rooms are perishable commodities. A person standing in a hotel

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check in line in front of you would have probably paid less for the

same room with the same service.

Some travelers get immense discounts by booking rooms at a hotel

consolidator or reservation service or they book rooms at the last

moment. This is done because unsold rooms are lost revenues, which

are negotiable. Hotel consolidators negotiate deals with hotels by

buying blocks of rooms sometimes last minute advance. Reservation

services save hotels money on their rooms.14

In a statement, the site founder, Mr. Anant Jain, said that the business

model on which the site is based is that hotel rooms are perishable

commodities, the value of which perishes. ``As hotels get closer to a

given date, their incentive, to sell that room increases. Hotels try to

sell these rooms which otherwise would have earned no revenue at all

and the customer will be able to stay in a luxury room at the minimum

possible rate,''

Most hotels try to practice yield management. Yield management is

suitable when selling perishable products. Its aim is to provide an

optimal mix of services at a variety of price points at different points

in time or for different baskets of features.15 Yield management seeks

to minimize the issue of perishability. This practice is one that

depends on the amount of rooms one thinks they will be able to get at

the full price that the hotel offers. If too many rooms are protected

then they can be empty rooms at the end of the period and if too many

are not protected then the hotel forgoes the extra revenue it may have

received from other guests. When managers think of practicing yield

management on their business they pay more attention to two of the

five characteristics:

It is expensive or impossible to store excess resource (we cannot

store tonight’s room use for tomorrow nights customers).

14 http://www.onthegopublishing.com/hotel.shtml 15 http//.wikipedia.org/yield_management

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Commitments need to be made when future demand is

uncertain.16

Other ways hotels try to solve the problem of perishability is with

their reservation system, which most hotels around the world also

have in place. This system whereby potential guests make

reservations to stay at their property ensures that a credit card

number is collected to guarantee some amount of payment if the

guest does not show up on the dead- line set out by the hotel.

Hotels also tend to hike their prices during peak periods such as

Easter vacations and summer vacations. They also hike prices when

there are special events such as Carnivals, Mashramani and events

such as the current Cricket World Cup being played in the Caribbean.

AGRICULTURE

Farmers have several perishable items to sell which rot and smell

after a day or two leaving the farmer with lots of losses, thus farmers

have decided to either sell out there produce at a reasonable cost

when the day is almost completed at the same market venue which

may be out of their village, while others would take back to their

home-town and sell the produce at reasonable prices to the villagers.

Some farmers call this service a framer’s market.

Farmers also use these unsold produce to make animal feed for

livestock such as pigs, chickens, sheep etc. This stock feed also sold to

villagers at reasonable rates so as to bring in some amount of revenue

to the farmer while at the same time not allowing wastage.

ENTERTAINMENT

Entertainment promoters tend to reuse unsold tickets that were

scheduled to be sold at an event at some other event so as not to

16 http://ite.pubs.informs.org/Vol3No1/NetessineShumsky/NetessineShumsky.pdf

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bring more cost on themselves. In the United States, theatres would

usually sell their tickets at half price during intermission so as to full

the unsold seats, since they are a perishable commodity.

CONCLUSION

The tourism industry is filled with services and most of these

services are intangible products. These intangible products are often

perishable. Perishable goods are only able to last for a period of time

until they are no longer valuable. In this case, service industries are

faced with the task of ensuring that their perishable products are sold

or consumed so as to avoid loss of revenue or waste. As our paper

outlined, different service industries solve the issue of perishability

differently even if they are offering the same service.

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Reference

Cooper, Chris. Et al. Tourism Principles and Practice, Longman

Group, 1993.

Dibb, S. et al. Marketing: Concepts and Strategies. Houghton

Mifflin: Chicago. 2001.

Kotler, Phillip. General Marketing. Marketing Management.

Prentice Hall; London. 2005.

Levitt, T. Marketing Intangible Products and Product

Intangibles. Harvard Business Review. Volume 81. 1981.

Wolak, Russell. Et al. An Investigation into Four Characteristics

of Services. Journal of Empirical Generalisations in Marketing

Science. Kingston Business School, London. Volume Three 1998.

http://www.cim.co.uk

http://ite.pubs.informs.org/Vol3No1/NetessineShumsky/

NetessineShumsky.pdf

http://www.onthegopublishing.com/hotel.shtml

www.jetairways.org

www.travelinsider.info/2002/0621.htm

www.airhitch.org/info.htm#how

http//wikipedia.org/yield_management

Interviews

Mr. Leyland Stewart. Proprietor Glow Amigo Restaurant. March 1st

2007.

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Troy Cadogan. Manager Ansa Mcal. Telephone Interview. March 1st.

2007.

Mr. Junior Horatio. North American Airlines. March 2nd, 2007.

Demerara Distillers Ltd.

Mr. Lee Baptiste. Guinness Manager. Banks DIH Ltd. March 2nd, 2007.

Supervisor. Pizza Hut.

Supervisor. Roti Hut

Staff. Oasis Café

Staff. Kentucky Fried Chicken. March 3rd, 2007.

Marlon Humphrey. Manager Humphrey’s Bakery Telephone

Interview.

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