Target market research
Executive summary
Entry into a new market is never easy. A lot of research goes into evaluating the target market to assess its profitability, type of target customers and the cost of operation. While this is often a challenging endeavor, it is a process that is necessary as it gives a rough idea of the nature of the business operations that are more likely to bring desired result. For this reasons, a thorough research concerning New Zealand as an ideal destination for Vibe hotels was conducted to assess whether it was a good market to enter. The city of Auckland was given the most consideration as it offers the most promise for serving as location for establishing Vibe Hotels premises. New Zealand has been experiencing a high amount of tourists every year which sparked the interest in the country. Due to the high number of tourists visiting the country, there is a significantly high demand for hospitality products that the country is finding challenging to deliver. Although there are a few organization offering tourism and hospitality services, there are few hotels in the area which makes it an ideal market. Vibe Hotels should therefore highly consider establishing a basis of operation in Auckland, New Zealand.
Target market research
In the year 2015, New Zealand was ranked first as the country where it is easiest to start a business in the world by a survey conducted by the World Bank. The country is well known for its stability, fair dealings and openness especially when it comes to conducting business. It is also ranked as the second most ideal place to start a new business. The study was conducted amongst 189 other countries and the only country that is better for starting a new business is Singapore. When it comes to corruption, the country was ranked as the least corrupt country in the world and was rated third by Forbes as the most ideal country to conduct business in. These statistics are an indication that New Zealand has a good environment that greatly encourages companies to consider it as a target market. The good environment is facilitated by New Zealand citizens who often employ the use of fair play in their interactions as well as practicing honesty, trust and integrity in all their transactions. With such an environment, great consideration ought to be given to the country and this paper will therefore focus on identifying why New Zealand is an ideal target market for Vibe Hotels.
When identifying an ideal target market for the hotel industry, one must look at various factors that offer a promising market for such a business. Some of these requirements include a good hospitality and tourism industry, a stable economy, accommodating legal regulations, lack of intense competition and a demand for the product that the company is going to provide (Salle, 2014). New Zealand is therefore an ideal location for Vibe Hotels as it boasts of all the amenities that are a necessity for the success of the hotel industry. The country is well known for the breathtaking view and amazing scenery that attracts tourists from across the globe. The attractions are so vast that the country can accommodate tourists of all ages with different interests as it has a lot to offer as a tourist attraction site (Salle, 2014). Over the years, the reputation for New Zealand as a tourist destination site in the international market has continued to grow and more people are willing to visit the country for its beautiful attractions thus making it a top tourism destination site for a significant number of people across the world. An increase in the number of tourists flocking into the county has greatly boosted the economy due to the high inflow of foreign exchange that is facilitated by the tourism industry.
New Zealand receives both local and international tourists who visit the country for various reasons such as holidays, business, educational purposes, visiting friends or just to enjoy the occasional sporting and cultural events held in the country. While other attractions draw in their fair share of tourists, most tourists visit New Zealand for the purpose of enjoying the scenery as it is the most attractive element of the country’s tourism industry (Salle, 2014) While this may be the case, a lot of effort has been put in place to ensure that tourists enjoy their visits into the country as much as possible. To ensure a memorable stay, services such as transport, accommodation, entertainment, food and tour and travel activities are provided as a way of making the tourists’ visit more enjoyable and accommodating. Although New Zealand has relied so much on agriculture as the driver of its economy, tourism is becoming a promising venture and more effort has been put into improving the country’s hotel and tourism sector. It is estimated that about 10 percent of the country’s population is employed in the tourism sector and the number is expected to increase with time (New Zealand Government, 2017).
In the past, the hotel industry was considered as a risky venture in New Zealand with other investments like retail centers and office spaces being given more priority over hotels. Most people were not willing to venture into the hotel industry as it was not as successful as other businesses in the country. However, the country has continued to grow and the hospitality industry has become very lucrative due to the rise in demand for hospitality products. Vibe Hotels must therefore consider New Zealand as an ideal target market due to the growth it has made as a tourist destination site (Salle, 2014). Tourism has become a key factor in the country’s economic growth due to the increase in the demand for tourism products and tourists visiting the country. Because of this, the tourism industry has contributed to 9 percent of the country’s gross domestic product which is roughly 18.6 billion dollars attained from the hospitality industry every year (Statistics New Zealand, 2015). In the case of employment, one out of every ten people in the country is employed in the tourism industry. For businesses identifying the country as a target market, the popularity of the tourism industry will make it easy to find employees to ensure that the company is able to serve its clientele and also to meet its target objectives.
The growth of the hospitality and tourism industry can be attributed to the increase in the number of international visitors coming into the country. In the year 2013 for example, there were 2.7 million tourists who visited the country and this was a six percent increment from the number of international tourists who visited the country the previous year (MBIE, 2016). However, despite this tremendous growth in the hospitality industry in New Zealand, there has been a lack of supply to meet the demand that exists in the country’s hospitality market. Although there are various hotels operating in the country, they greatly fall short when it comes to dealing with the high demand for tourism products that the country is experiencing. The hotel industries for example have experienced an increment in hotel occupancy rates and room tariffs as a response to the unavailability of the supply needed to meet the tourism industry demand in the country. In a place like Auckland for example, a 78.8 percent occupancy rate was recorded in the period of between the year 2012 and 2013 and this was a 3.8 percentage improvement in the hotel occupancy rates (MBIE, 2016). Despite the fact that New Zealand is growing to become a lucrative tourist destination site, few developments have been put in place to take advantage of the demand that will be created. It is because of these reasons that Vibe Hotels should jump on the opportunity to enter New Zealand and take advantage of the increasing demand for hospitality products before competition intensifies. Entering the market early will ensure that the Vibe Hotels will be well established and well positioned to meet the needs of the targeted customers long before competitors start entering into the market.
At present, there are only 16 projects that have been initiated and they are expected to provide an average of 2,900 rooms for tourists who visit the country. The projects will result to a 12% increase to the inventory for accommodating tourists (New Zealand Government, 2017). However, most of these projects are from off shore developers as hotels are yet to take advantage of the opportunity created by the increase in tourism demand. This is despite the continuous growth of the number of visitors flocking the country for its various attractions. Hotels that are venturing into the area are focusing on converting offices into hotels or extending buildings to accommodate the requirements of the hospitality industry. This is mainly because such projects take shorter periods to complete and facilitate faster cash flow since they take shorter periods to open up than constructing new buildings. However, although the approach taken by this hotels in getting operation sites is quick and allows business to start faster, they are far below the expectations for meeting the needs of the type of clientele that are flocking the tourism market in New Zealand (Salle, 2014). Vibe Hotels should therefore venture into this market and instead of extensions or conversions, the hotel should focus on constructing a new business premises that meets the needs of the targeted customers. While this may take time, it will guarantee that tourists enjoy their stay and feel the hospitality that Vibe Hotels has to offer. Time factor is also not an major issue as the tourism demand is expected to be high since the number of tourists visiting New Zealand is expected to continue increasing.
New Zealand’s tourism industry comprises of both domestic and international tourists. in the year 2012, a total of 16.6 million domestic tourists went on overnight trips to other parts of the country (NBIE, 2016). These tourists spent roughly three nights while travelling to their various destinations within the country. A total of 31 million trips were made by domestic tourists travelling for distances exceeding 40 kilometers from their homes for hospitality and tourism purposes. As for international tourists, over 2.99 million tourists visited New Zealand in 2015 from countries such as China, the United States of America, the United Kingdom and Japan (NBIE, 2016). Majority of those visiting the country were tourists coming for holidays followed by those visiting friends and family and then followed by those travelling for business related reasons. For international tourists, majority of them spent an average of 24 days in the country before travelling back to their homes. This indicates that the country attracts a high number of tourists which makes it a favorable market for the hotel industry. With such a continuous flow of tourists, the country is guaranteed of a continuous demand for hospitality and tourism products and Vibe Hotels ought to establish this as an ideal market to enter.
There are several other factors that make New Zealand an ideal target market for Vibe Hotels among which is security. According to a study conducted by the Global Peace Index in 2015, New Zealand was ranked fourth in relation to security out of the 158 countries examined (Salle, 2014). Security is essential in that it determines how safe employees, company property and the entire hotel infrastructure will be if the country is selected as the site for setting up Vibe Hotels. Security is also important in that it encourages tourists to visit the country as their security is guaranteed. While New Zealand has various tourist attraction sites, security is crucial for the hospitality industry as tourists will only visit places where their safety as well as that of their property is guaranteed.
Another factor that makes the country ideal for setting up Vibe Hotels in New Zealand is its stable democracy. The country operates under a stable British modeled political system. The government is made up of only one house of parliament and the Queen of New Zealand, Queen Elizabeth II plays the role of head of state (Salle, 2014). The citizens are also democratic and 80 percent of them show up for the general elections to vote for their respective leaders. The legal system in the country is based on English law and it prides itself on having an independent justice system. When it comes to private property rights, contracts are upheld and rights are protected for all citizens equally. Transparency is also enhanced and this is facilitated by an independent media that monitors corporate organizations and the government alike.
New Zealand also has a strong economy which is promoted by the agricultural sector as well as the tourism industry and the manufacturing sectors. The country is strongly focused on economic freedom and is open to international trade allowing the country to bounce back quickly even after the recession period (NBIE, 2016). When it comes to infrastructure, the country has world class transport and communication systems that ease operations within the country. The roads are of high quality and this makes it easier to transport goods and services within the country. The roads are also ideals as they will ease travelling for tourists from one place to the other while visiting the various destinations. Other than roads, there are major international airlines that are accessible from various urban areas giving access to tourists from different parts of the country. There are also shipping lines that operate internationally as well as an extensive railway system that will ensure that the hotel can easily transport all raw materials and products needed for operation. Over 119,000 people are directly employed in the tourism industry and 67,000 work indirectly in New Zealand. Vibe Hotel will therefore be well equipped when it comes to seeking workers since the hotel industry is already considered an ideal source of employment (NBIE, 2016).
While New Zealand is an ideal target market for Vibe Hotels, there are some factors that may make it challenging for the company. With the increase in demand for hospitality products and services, New Zealand is likely to become the target destination for most hotels looking for a new place to start operations (New Zealand Government, 2017). The increasing number of tourists will make new Zealand a lucrative market and this will lead to aggressive competition amongst companies looking to establish hotels. Auckland for instance is the most lucrative area as there is a lot of tourists visiting the area and investors are likely to rush in and establish hotels so as to benefit from opportunities present. Although this may be a disadvantage, Vibe Hotels can overcome it by entering the market early before others start moving in. Vibe Hotel is a recognized brand and tourists all over the world will be more than willing to use their services. Early entry into the market will ensure that the hotel has already developed relationships with the tourists and that they recognize its brand. Early entry will also facilitate dominance in New Zealand’s tourism industry market as there will be fewer competitors offering similar services. Even if competition does become a factor in the future, Vibe Hotels will be well established and equipped with the resources needed to ensure that it stays above the competition.
Tourism is a valuable commodity for New Zealand and all efforts are being put in place to ensure that the tourism and hospitality industry is as profitable as possible. The interest in tourism has led to the refurnishing of even small towns to ensure that tourists have unlimited destinations to visit whenever they are in the country. This in turn has opened up the country to greater opportunities as more tourists are flocking into the country to enjoy all the attractions and amenities that it has to offer. Although entry into a new market is never easy, Vibe Hotel should take advantage of the opportunities created in New Zealand and establish the city of Auckland as its new basis of operation.
References
Ministry of Business, Innovation and Employment, (2016) “Economic overview” retrieved from, https://www.newzealandnow.govt.nz/investing-in-nz/opportunities-outlook/economic- overview
Ministry of Business, Innovation and Employment, (2016) “Stability and security” retrieved from, https://www.newzealandnow.govt.nz/investing-in-nz/stability-security
New Zealand Government, (2017) “New Zealand’s investment advantage” retrieved from, https://www.nzte.govt.nz/en/invest/new-zealands-investment-advantage/
Salle L, (2014) “New Zealand hotels sector experiencing strong demand” retrieved from, http://www.scoop.co.nz/stories/BU1405/S01007/new-zealand-hotels-sector- experiencing-strong-demand.htm
Statistics New Zealand, (2015) “Tourism satellite account: 2015” retrieved from, http://www.stats.govt.nz/browse_for_stats/industry_sectors/Tourism/tourism-satellite- account-2015/Summary_results.aspx
