Question

Apply the concept of the product life cycle to a hotel. How does a company keep its products from going into the decline stage?

Answer 1

The product life-cycle (PLC) concept can describe a product class (fast-food restaurants), a product form (fast-food hamburgers), or a brand (Popeyes). The PLC applies differently in each case. Product classes have the longest life cycles. The PLC concept is a useful framework for describing how products and markets work. Decline is the period when sales fall off quickly and profits drop.

Sales of most product forms and brands eventually decline. The decline may be slow or rapid. Sales may plunge to zero, or they may drop to a low level and continue there for many years. Sales decline for many reasons, such as technological advances, shifts in consumer tastes, and increased competition. Carrying a weak product can be very costly to the firm and not just in terms of reduced profit, but also in terms of hidden costs such as wasted management and sales force time and tarnished brand image in the future. Companies must pay close attention to their aging products. Regularly reviewing sales, market share, costs, and profit trends for each of its products will help identify products in the decline stage.

A good hotel example is how Starwood redefined their luxury brands by doing a thorough psychographic analysis of all of their customers. This helped them to truly understand the wants and needs of the majority of customers that visited each hotel brand and to refine the services and even servicescape aspects of their various brands to truly fulfill the wants and needs of each main customer segment.

In the introductory stage, the owners or managers of the hotel will probably need to spend money to increase the public’s awareness of the hotel. Many hotels decide to have a soft opening in order to “work the bugs out”. The hotel will generally lose money during this stage.

In the growth stage, occupancy and sometimes ADR are increasing rapidly. The benefits of advertisements and other forms of promotion are being felt.

In the maturity stage, more competitors have entered the market and sales are flat, although still robust. It is important to keep the hotel in good repair and to update any necessary design elements or technologies to keep the hotel in this stage.

In the decline stage, occupancy levels drop. The property is considered old and out of date, or the location is no longer desirable. A company can keep its products from reaching the decline stage by targeting new markets, by using careful pricing strategies, by decreasing the number of product lines and by changing or increasing its distribution channels.