Ryanair's Marketing Strategy in Tourism & Hospitality

Executive Summary

This paper is to analyze the factors that lead Ryanair Holdings to success and understand and evaluating the marketing strategy that Ryanair implement in order to be one most successful and well-known operating company in the aviation industry. This study looks at external and internal key influences of the environment of the Ryanair Company. Also assess the impact of business macro and micro environmental factors, with the use of market analysis and relevant theories, and examines and evaluate how the marketing management functions actually are being applied in Ryanair Company.

Introduction

Ryanair Holdings plc (Ryanair or 'the company') operates low fare scheduled passenger airline serving short haul, point to point routes between the UK, Ireland, and Continental Europe, as well as Morocco. The company offers various ancillary services, scheduled services, and has hotel, travel insurance and internet services and the in-flight sale of beverages, food, and merchandise. Ryanair operational bases include Alicante, Athens, Budapest, Frankfurt main, Hamburg, Ibiza, Lisbon, Liverpool, Santiago, Stockholm and Valencia. The company markets accommodation services, holidays, car hire and travel insurance services. It also sells rail and bus tickets. The company is headquartered in Dublin, Ireland. Ryanair is undoubtedly one of the most remarkable entrepreneurial stories of the past 10 years in Europe. Furthermore that Ryanair has developed a very outspoken communication style, using advertising and media to a great deal to publicize its ‘revolution’ in air travel.

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Mission and Vision of the Company

Ryanair's mission is “to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost containment and efficiency operation.” “Ryanair’s objective is to firmly establish itself as Europe’s leading low-fare scheduled passenger airline through continued improvements and expanded offerings of its low-fare service.” Ryanair has been extremely successful gaining customers and growing rapidly since its inception in 1985. The airline industry is competitive, but because of Ryanair’s ability to keep fare prices extremely low, it has survived the turbulent times that many airlines have not.

Ryanair’s outlined strategy focuses on eight different strategies, as found on their website:

• Maintain low fares
• Deliver best customer service performance
• Provide frequent point-to-point service on short haul routes
• Achieve lowest operating costs in the industry
• Take advantage of the Internet
• Commit to safety and quality maintenance
• Enhance operating results through ancillary services
• Focus on growth in targeted specific markets

These strategies focus on the core competency of Ryanair to ensure that it offers exceptional value in the saturated airline market. By continuously providing the best value, growth is expected to continue for years to come.

History

“With a staff of just 25 people, the Ryan family started Ryanair in 1985 in Dublin, Ireland, with the sole purpose of creating an airline with the lowest fares in all of Europe. Ryanair has climbed to the top since its establishment in 1985. It went from flying a short hop from Waterford to London into one of Europe’s largest carriers. They acquired their first jet in 1987, two years after starting Ryanair. After the airline was taken public in 1997, the money raised was used to expand the airline into a pan-European carrier. The airline began to grow rapidly, revenues have risen from 231 million Euros in 1998, to some 1843 million Euros in 2003 and net profits have increased from 48 million Euros to 239 million Euros over the same time period. Ryanair during the 90’s decided to model themselves after Southwest Airlines, in the United States. Southwest is an airline that is known for their low-fares and Ryanair’s motto was low fares, no frills. Ryanair continues to grow.” (Ryanair, 2019)

External-Internal environment analysis

External Environment analysis is conducted to analyze the nature of the environment the firm is operating and identifies the forces that affect the company either positively or negatively and the possible opportunities, or threats Ryanair faces. The analysis will happen in two phases. First on a macro-environment level to analyze the general business environment factors and then on a micro-environment level to analyze the competitive situation in the industry that Ryanair operates.

Macro environment-PESTEL Analysis

PESTEL is an acronym for the six key strategic areas of change: Political, Economic, Social, Technological, Ecological and Legal and a technique for understanding the various external influences on a business. The Pestel analysis report is a framework used to understand the impact of external factors on the macro environment that influences the business of Ryanair Company.

· Political

• Uncertainty that Brexit caused: UK’s departure from European Union in March 2019 brings in significant uncertainty with regards to the aviation business environment. If UK remains in open skies agreement with EU, thinks shall be status quo for the Ryanair and the UK aviation industry. However there is a high possibility that UK will not remain in open skies and until the final terms are decided uncertainty shall prevail. Thus Ryanair will have to focus on growth away from UK until Brexit is completed.
• Terrorism: Recently there has been an increase of terrorist attacks in Europe with targeted countries like UK, France Germany or Belgium. Governments have stepped up efforts to combat this situation. These attacks gave already affected tourism. However if these attacks continue the tourism industry will get affected and consequently the demand for air travel will go down impacting Ryanair. Also an improved security system is costly and requires regular monitoring and maintenance.

· Economical

• Oil prices: oil prices around 60$ a barrel
• Weaker GBP after Brexit The economic state of a county has a great impact on the airline industry.UK economic problems might influence Europe’s economic performance witch creates uncertainty to Ryanair and put pressure on fare prices.

· Social

• Ryanair should be aware of demographic changes because the large numbers of customers from Europe is difficult to segment
• Consumer willing to spend more on ancillaries if ticket cost is less

·Technological

• Changes on technology affect the airlines industry to a very high level. The quick adaptation to the technological change can overcome competition and increase market share. Enhancements in digital platforms, to improve customer experience. Also innovations, such as fuel efficiency, less polluting and noisy production.

· Legal

• Because of Brexit Ryanair has to comply with both UK and EU regulations
• Ryanair is being investigated by European Commission for receiving an illegal state aid to promote Montpellier as a tourist destination.

· Environmental

• EU regulation of emissions for airlines may increase costs for Ryanair. EU has passed legislation which mandates airlines to operate under the EU emissions trading scheme. If Ryanair exceeds the granted CO2 allowances the deficit needs to be procured from the market or auctions held by government agencies. If the EU changes the co2 allowances grant, it will need to further improve it environmental efficiency to reduce emissions.
• Company has to focus on environmental initiatives

SWOT Analysis

The SWOT Analysis is conducted to review the Strengths, Weaknesses, Opportunities and Threats of Ryanair

· Strengths

• Ryanair is the first low-cost, no frills airline in the European market covering more than 200 destinations and 1800 routes. Ryanair’s name has become a synonym to low airfares.
• The largest airline in Europe, transporting more passengers than any other regional airline. As a result Ryanair has a strong presence in the European market, gaining an advantage against the competition (Reuters, 2017)
• Well integrated policy that can be a key to competitive advantage(Low cost strategy)
• Stable financial performance( Ryanair,2018)
• Ryanair website offers everything from cheap flights, car rentals or accommodation to travel insurance.
• Industry Position enhances brand image: Ryanair industry position enables to improve its customer loyalty and customer retention metrics as well as enhance the brand image at a global scale. (Ryanair,2018)

· Weaknesses

• Customers are charged for their baggage when competitors are providing it for free or less cost comparatively.
• There is a public perception for Ryanair to be an airline that is obsessed on the bottom line at any cost
• Poor customer service
• Legal proceedings: Ryanair is involved to several lawsuits as aforementioned on the PESTEL analysis. For instance European commission investigates Ryanair agreements with several airports. As a consequence, such legal proceedings would adversely impact the brand’s image and result in huge financial penalties.
• Brexit: Ryanair has a strong market presence and a base in the UK and that can result to several challenges for the company such as UK regulations or fare prices pressure.

· Opportunities

• Growth of global tourism industry: The international tourist arrivals grew by 7% to reach a total of 1,326 million in 2017 and the total international tourism receipts grew 5% to a total of US$1,340 billion in 2017. Europe accounted for 51% of the overall International Tourist arrivals followed by Asia and the Pacific (24%), Americas (16%), Africa (5%) and Middle East (4%) (UNWTO, 2018). This amount of growth enables the company to exploit it and significantly increase its margins and revenues.
• AGB program (Always Getting Better): AGB program, a Ryanair’s program that launched in 2014, provides a wide range of customer service and digital enhancements such as a new website and smartphone app, new uniforms and cabin interiors, allocated seating, leisure and family products. Through AGB Ryanair can focus on customer experience.
• Network and fleet expansion will help the company to expand its market reach and customer service, and as a result bring an increase to its customer base and financial performance.

· Threats

• External factors : external factors such as rising oil price, currency movements, terrorism or recession
• Brexit might reduce prices in the UK market
• The high competition of the airline industry
• Increase in Irish corporation tax rates(IDA Ireland,2018)

Microenvironment-Porter’s Five Forces Analysis

Porter’s Five Forces is an analytical tool assists in analyzing the competitive environment for Ryanair and examines 4 parts

· Bargaining power of suppliers

There are only two suppliers of aircrafts in the aviation industry, Boeing and Airbus. The main supplier of Ryanair is Boeing. The other suppliers are the jet fuel. The price of fuel though are governed by world trade, so the price is fixed. Therefore, the bargaining power of Ryanair suppliers is high.

· Bargaining power of customers

Customers nowadays have a lot of choices for low price airlines in the market. Switching to another airline is quite simple, as there is no loyalty in low fare airlines because the customer will simply chose the lowest price. Therefore, the bargaining power of Ryanair customers is high.

· Threat of substitute products and services

Ryanair mostly operates short-haul routes. There are several substitutes for traveling short distances such as train, bus, car or sea transport. However, factors such as time, and price affect customer decisions. At the moment for short-haul routes, low fare airlines are the most convenient option. Furthermore, Ryanair provides price and time comparisons in their website with the trains that grant the same routes. (Ryanair, 2019) Therefore, the threat of substitute products and services are low for Ryanair.

· Threat of new entrants

The entry barriers of the aviation industry are extremely high. It requires huge capital, deals with airports, it’s really difficult to get flight routes. In general the aviation industry can be characterized saturated as there is already a huge number of airlines operating and it’s a really difficult and expensive industry to enter. Therefore the threat of new entrants is low.

· Competitive Rivalry

There is a huge number of competitors within the aviation industry. It’s a very competitive industry, with each airline using a strategy to profit from the industry. As for the no frill policy that Ryanair follows, there is a number of low cost airlines that form the head competition for Ryanair, such as Easy Jet, Wizz Air, and British Airways. The number of choices of the buyer give them high bargaining power and increase the competition amongst airlines. All of the above, form a high competitive rivalry for Ryanair.

Marketing Segmentation, Targeting and Positioning (STP)

· Segmentation

Market segmentation is the process of dividing a market into segments, based on certain characteristics. The segments created symbolize the consumers who will be attracted by similar marketing strategies because of similar interests or needs. “The division of the marketplace into distinct subgroups or segments, each characterized by particular tastes and requiring a specific marketing mix.” (CIM, 2018) The major segmentations are geographic, demographic, psychographic and behavioristic.

· Geographic

Ryanair operates throughout the European region across 37countries, connecting to 226 destinations.

· Demographics (Age)

Age demographic of Ryanair passengers: Age demographic of Ryanair passengers:

• 9 % are between 18 to 24 years
• 31 % are between 25 to 34 years
• 23 % are between 35 to 44 years
• 20 % between 45 to 54 years
• 16 % are 55+ years (Ryanair customer service survey, 2016)

According to the table 83% of Ryanair’s passengers are between 18- 54 years old. This is an age group that usually intend to travel more often.

· Psychographic

Psychographic segmentation is a method used to group prospective, current or previous customers by their shared personality traits, beliefs, values, attitudes, interests, and lifestyles and other factors ('Psychographic Market Segmentation | Directive Group', 2019)

1. Schedule optimizers: have to reach destination by a certain time and select their flights accordingly.
2. Corporate troopers: choose an airline and a class that has been selected for them by their company.
3. Mile accumulators: Consider flights as a way of building up their air miles entitlement.
4. Reluctant travelers: do not enjoy travelling and seek services that will make their experience bearable, such as special privileges and frequent flyer programs.
5. Tour takers: want everything to be arranged in advance.
6. Travel seekers: love travelling and are eager to have new experiences.
7. Frugal flyers: seek out the cheapest airlines, but still expect to enjoy their flight experience.

· Targeting

Ryan Air as a low cost carrier in the aviation industry, they provide some of the most competitive fares for consumers. According to the age group table, 83% of the passengers are between ages 18 to 54, with the largest percentage being the 25-34 age group, which demonstrates the target market of Ryanair is young and price sensitive. Examples of such, are young travelers who wish to save money, leisure travelers who are usually loyal, people visiting friends or relatives who usually look for the cheapest flight without need for amenities or low budget business travelers. Ryanair does not target travel agents because agents have a fixed commission and that would increase Ryanair’s costs and as a result reduce in their profits.

· Positioning

Ryanair as a low fare airline implements the ‘’less for much less’’ value proposition, as brilliantly described by Kotler and Armstrong in the 5 winning value propositions theory. This means that Ryanair meets their customer's lower performance requirements for the less cost. Ryanair implements this strategic positioning because their operating costs are too low, being able to sell cheap tickets. Also, not many people actually need extra amenities during a flight or the best service available, that’s why their targeted audience is in the middle class.

· Marketing Mix

A marketing mix is a combination of seven variables (product, place, price, and promotion, physical evidence, people and process), which can be arranged in different ways to develop marketing strategies to meet organizational objectives. Let’s take a closer look to Ryanair’s marketing mix.

· Product or Service.

Ryanair is a Low cost, no-frills air travel company to European destinations Food and drink are income streams, so there are no free amenities on the plane. There are other ancillary revenue. Other examples include phone cards and bus tickets. About 16% of profit is made this way. This way the costs are decreased

Ryanair is a European low cost airline. Low cost or no frills marketing strategies are of great interest to marketers since the marketing mix employed tends to run in opposition to what makes a great brand – and Ryanair is a great brand and a very successful business. In a nutshell Ryanair sells the cheapest tickets that you can buy

· Price

• Ryanair has low fares.
• 70% of seats are sold at the lowest two fares.30% of seats are charged at higher fares. The last 6% are sold at the highest fare. ( Ryanair, 2018)

· Place

• Ryanair does not use travel agents so it does not have to pay the very high agency commissions. It uses direct marketing techniques like the disintermediation strategy to gain customers and to extend products and services to them. This reduces costs.
• Ryan Air implements its reservation system called Skylights which allowed the customers to book their flights directly through their website saving them 15% on agency fees.
• Many of Ryanair’s destination airports are secondary. Secondary airports are smaller regional airports. Costs are lower and aircraft can be turned around faster.

· Promotion

• They spend as little as possible on advertising.
• They do not employ an advertising agency. Instead all of the advertising is done by Ryanair. For example they advertise themselves on their planes. They use simple adverts highlighting the low prices of the airlines.
• Ryanair uses controversy to promote its business. Ryanair and especially their CEO try to give a ‘’bad boy’’ image to their company because bad publicity spreads faster and wider than good publicity. Extreme statements from executives are a common phenomenon. For example, CEO Michael O’Leary once stated that larger passengers should be charged more [image: ]

· People

• Ryanair prefer hiring pilots when they are young as pilot cadets.
• Cabin crew pay for their uniforms to be cleaned. They invest in their own training. They are mainly responsible for passenger safety as well as ancillary revenues onboard.

· Physical Evidence

They pay as little as possible for the airplanes. Ryanair tries to obtain planes in the right moment meaning that after certain facts like for instance the cancelation of an order then Ryanair make an offer to BOEING for example that is their primary producer and obtain aircraft with discount.

· Process

• There is no check in.
• You cannot select a preferred seat. It is first come, first served.
• There are no air bridges. You walk or are bused to the aircraft.
• Baggage is deposited directly onto the terminal which reduces waiting time but increases danger of loses in my opinion.

Ryanair’s Marketing Strategy

Ryanair highlights its widely available low fares, route choice and service which has been enhanced by Ryanair’s AGB customer experience program. Ryanair primarily advertises its services in national and regional media. Also with the use of social media, press conferences and publicity stunts and topical advertising. Other marketing activities include the distribution of advertising and promotional material and cooperative advertising campaigns with other travel-related entities, including local tourist boards. Ryanair also regularly contacts people registered in its database to inform them about promotions and special offers.

Ryanair’s Social media infographics

Mentions and Engagement over Time

Ryanair performances per dimension

Conclusion

After thorough research and analysis of Ryanair’s profile, it’s clear the interesting marketing mix of company. In my opinion, no other company advertise the way Ryanair does and get so much publicity. However, it is a smart way to market yourself and get publicity even if people do not always agree. The cut costs policy seems to be a success story.

References

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