Marketing assignment on: Service sector of hospitality industry

1. SUMMARY

India is ranked high in the output by the service sector. The hospitality industry, which is a part of the service sector, can be divided into two parts: entertainment areas and accommodation.

Mark Twain (American Author, 1835-1910), cited“India is the only millionaire……the one land that all men desire to see, and having seen once, by even a glimpse, would not give that glimpse for all the shows of all the rest of the globe combined.”

The two ideas discussed in the report are appropriate for an emerging country like India, Brazil, Russia, China, etc as they are new to these economies. Both the ideas, H₂Go & GET-SET-WET are related to the hospitality industry from the amusement park & theme park category, but are different in their scale of operation & number of offerings.

Both the business ideas are proposed to be set up in Bangalore, India, as it is the IT hub of India. Also, Bangalore is one of the richest cities of India & contributes substantially to the revenue from tourism.

The report explains a comparison between the two ideas & evaluates these ideas on the basis of a cost-benefit analysis & opportunity cost analysis. And based on these analyses, the time & resources are devoted to H₂Go theme park, as it is a more feasible option.2. INTRODUCTION

2.1 Hospitality & Service Sector

The service sector or the service industry of the economy, also known as the tertiary sector consists of the “soft” parts of the economy, as it involves production of services rather than end products.

For the past three decades, there has been a transformational shift from the agricultural and manufacturing sectors to the service sector in industrialised economies. This shift is often termed as ‘tertiarisation’. The service sector is the fastest-growing sector & the largest sector contributor to the economy in the Western countries.

India is ranked 13th in terms of output from the services industry. This industry contributes 55% to the GDP and employs 23% of the labour pool. .The hospitality industry comprises of various fields in the service industry which includes, restaurants, event planning, transportation, lodging, theme parks, cruise line, tourism industry, etc. The success of the hospitality industry depends on the disposable income & availability of leisure time.

A hospitality unit like hotel, restaurant, or theme park comprises of various groups such as direct operations, management, marketing, facility maintenance & human resources.

The theme parks in the hospitality industry offer a wide range of offering including food and beverage, gaming, accommodation, entertainment, meeting & events and recreation. Therefore, there is a lot of scope & opportunity in the theme & amusement park sector.

There are various Amusement & Water Parks in India in Delhi/NCR, Hyderabad, Mumbai, etc. Most of these parks are either resorts, amusement parks or water parks offering food & beverage & entertainment services. But, the concept of a theme park is still missing in India, which would provide all offerings under one roof.

2.2 Business opportunities

Theme Parks like Rainforest Cafes which portrays the wilderness of forest, restaurants like 51st fighter group that has a World War 2 theme in music and other environmental aspects etc are a commercial success in various parts of America & Europe, but are still are a foreign idea to the Indian market.

The first business opportunity is a novel theme park, named H₂Go which would be a combination of an amusement park-cum-restaurant-cum-retail store-cum-resort. H₂Go would be one of a kind theme park with an aquatic theme. The amusement park, H₂Go Amusement would have slides depicting aquatic life & aquatic animals. Food services would be offered at H₂Go Cafe, specialising in sea food. H₂Go Shop would provide retail offerings like merchandise of the theme park, aquariums, etc. And H₂Go Resort will let the visitors stay back to enjoy a couple of days at the theme park.

The second business opportunity is also a theme park, but the concept is unique as it will provide a drenched experience to the visitors. This theme park, GET-SET-WET, would be a water park with water games that could be played by people from all age groups. Besides water games GET-SET-WET would offer services like food & beverage.2.3 Rationale behind the ideas

Entertainment through amusement & water parks are not unknown to the Indian population, but the amusement & water parks of the yester years have only limited their offerings to the traditional services. And with the changing face of the Indian consumer it is important to innovate the offerings in this sector.

Some of the reasons that support these novel business opportunities in India are:

• India being an emerging economy & being among the largest democracies in the world is witnessing a metamorphosis in the distribution of income. Majority of population is working either with a corporate or is self-employed.
• Even the young population is no more dependent on their parents & earns their living by either working full time or part time.
• With more working people there is more disposable income in the hands of the people.
• Moreover, people who are earning don’t want to spend their life at their work places, rather they have even more appetite for leisure & recreational activities.
• And flexible work schedule gives them the freedom to pursue their vacation as per their convenience.

3. COMPARISON REPORT

The two business ideas H₂Go & GET-SET-WET are comparable on the following grounds:

• Both the business ideas are based on the same theme that is ‘Aquatic’ theme, but, are different in the sense that H₂Go is a complete family one stop entertainment theme park whereas GET-SET-WET is more of a recreational park in nature.

• The offerings provided by H₂Go are more in number as compared to GET-SET-WET. H₂Go provides all the facilities of an amusement park, H₂Go Amusement, multi-cuisine restaurant, H₂Go Cafe, private label retail store, H₂Go Shop & resort, H₂Go Resorts. The private label retail store, H₂Go shop will offer merchandise like T-Shirts, caps, key rings, school stationery, mugs, stuff toys, photo frames, paintings, etc with prints of aquatic animals.

• The target market of H₂Go is people from all age groups whereas GET-SET-WET will be targeting people aged 15 to 45 years as spending time at GET-SET-WET would involve lot of physical effort.

• Such huge offering from H₂Go would require vast area of land spreading into several acres whereas GET-SET-WET can be set up in an area equivalent to an ordinary water park.
• Setting up GET-SET-WET would require lot of equipments for the water games including life jackets, safety helmets, swim wear and other safety equipments for all visitors making it more prone to accidents as compared to H₂Go.

• Moreover, H₂Go will also provide an additional educational benefit to students & kids coming at the theme park.

• Facilities like indoor leisure activities (Table tennis, Gym, Badminton court, Carrom, Chess, etc) can be provided to people staying at the H₂Go resort.

• Considering all the facilities provided by H₂Go, the entry to this park & H₂Go Cafe would be free of charge whereas other services at H₂Go i.e. resort, educational tour & cafe would be chargeable i.e. it would have a pay-as-you-go system. Although, entry to GET-SET-WET would have a pay-one-price strategy for pricing.

4. OPPORTUNITY COST ANALYSIS: Opportunity cost is the next-best choice available to pick among several mutually exclusive options. It can be described as the relationship between scarcity of resources and choices available. The concept of opportunity cost plays an important role in ensuring efficient utilisation of scarce resource.

Thus, opportunity costs are not confined to financial costs: other factors like the real cost of output abandoned, lost time, etc that provides utility should also be considered as opportunity costs. (Robert, 2005)

Therefore, the opportunity cost in the above case is the loss incurred by the company in making a decision to invest in one business idea instead of the other.
Now, as we evaluate the benefits incurred by the two business ideas mentioned above, the opportunity cost of choosing one alternative over the other would be investing the available time & resources in one substantial venture, H₂Go & sacrificing the opportunity of putting the resources into various medium-sized ventures like GET-SET-WET.

And to understand better the opportunity cost of choosing between the two ventures we would require to conduct a Cost Benefit Analysis discussed below.

5. COST BENEFIT ANALYSIS

A cost benefit analysis assesses the total expected cost of a project in comparison to the total anticipated benefits to ascertain whether the projected implementation is valuable for a company or project. If the result of this evaluation implies that the overall benefits associated with the planned action offset the incurred costs, then a project manager will move ahead with the implementation. (Tevfik, 1996)

A cost-benefit analysis comprises of three parts, potential costs to be incurred, proposed benefits and finally, difference between all identified costs & the expected benefits.So the costs involved in the above business idea, H₂Go will be majorly in three areas, land, equipment & manpower. The total investment to be made in this project will be divided into the following proportions:

• 60 % of the investment would be allocated towards the procurement of 60 acres land in the outskirts of Bangalore.
• 30 % of the remaining investment would be used to import equipment from European manufacturers.
• And remaining 10 % investment would be used for acquiring & training manpower.

The 60 acres of land available in the outskirts of Bangalore will be available at Rs. 150 per sq. Ft. costing 400 million (app.), making a total investment figure of 660 million (app.).

As a result of the marketing research, there is an estimation of 5 million visitors, visiting the theme park, H₂Go annually spending approximately Rs. 750 on an average which would generate a revenue of 37.5 million (app.). Moreover, retail merchandise would contribute 30% of the revenues, which would be used to maintain manpower & overhead expenses.

On the other hand, building a GET-SET-WET theme park would require 10 acres of land, which is available at  Rs. 150 per sq. Ft. costing 66.6 million (app.), making a total investment figure of 110 million (app.).

And in the funds available to us we can either set up one H₂Go in Bangalore or 6 GET-SET-WET theme parks in 6 different cities of India.

6. CONCLUSION & RECOMMENDATIONS

Performing a cost-benefit analysis is an effective method to weigh the pros and cons of implementing a proposed plan. But, considering the fact that opportunity cost not only involves the cost-benefit analysis, but also takes into account the non-monetary benefits like greater customer satisfaction, decreased production times, greater market saturation, greater customer base, increased reliability and durability, and improved company reputation are also important.Although both the business ideas are new & innovative yet it is important to make a choice because of scarcity if time & resources. Therefore after going through all the facts of both the business ideas, the most feasible is H₂Go theme park because the biggest advantage that this project enjoys is that it could be opened 365 days a year, whereas GET-SET-WET can be operated only in summers, which would lead to wastage of resources.

Moreover GET-SET-WET is only for a specific target market making it inaccessible to a mass population. Also H₂Go offers a wide variety of services making it a one-stop-entertainment, which is missing in GET-SET-WET. And because of these wide offerings H₂Go is a complete family entertainer, while GET-SET-WET will only witness visitors from a specific age group.

With a huge target market H₂Go can enjoy the benefits of mass marketing, while GET-SET-WET would require customised advertisement & promotional strategy.

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