Quoted From:  71–966 PS 2001

CONGESTION IN THE U.S. TRANSPORTATION SYSTEM (107–10)

HEARING BEFORE THE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTH CONGRESS FIRST SESSION

                              http://www.house.gov/transportation/fullchearings/04-04-01/04-04-01memo.html

2.2.  SWOT Analysis

The SWOT analysis provides us with an opportunity to examine the strengths, weaknesses, opportunities, and threats of operating Air Lounge.

Air Lounge has much strength to give it an advantage over the competition. These strengths include: a multi-lingual and friendly staff, comfortable facilities, and the availability to all passengers regardless of what class they are traveling in. At the same time, Air Lounge has several weaknesses to consider. Including limited space availability and high maintenance costs.

In addition to exploring the strengths and weaknesses, Air Lounge also must consider possible opportunities and inevitable threats. Opportunities include customer loyalty and future expansion, while threats refer to competition moving in next-door or possible effects from increased security levels.

2.2.1.                      Strengths

1.  Multi-lingual and friendly staff. As Air Lounge is located within the international terminal, our staff will be consisting of those fluent in the major languages including, but not limited to, Spanish, French, German, Russian, Chinese, and Japanese.

2.  Comfortable Facilities. Part of the Air Lounge experience includes access to comfortable chairs with massage functions, plasma TV screens, shower facilities, gym usage, as well as napping rooms. These napping rooms will be equipped by the Metro Naps system.

3.  Open to all passengers regardless of class. Unlike other VIP lounges that cater only to those holding Business of First Class Boarding Passes, Air Lounge will be one that is open to all passengers, no matter what class they are traveling in. 

2.2.2.                      Weaknesses

1.  Limited Space Availability. Air Lounge rents approximately 4,000 square feet at JFK Airport, International Terminal. Should there be a long delay on all flights, people can stay here for a rather long time. This would stop Air Lounge from admitting new customers, as there are a maximum number of people that can occupy the same space at the same time.

2.   Cost factor associated with maintaining the equipment used in various sections of Air Lounge. There is a considerable cost factor to be concerned with in maintaining the calm and relaxing atmosphere of Air Lounge. If any of the chairs, TV’s, or gym machines break down, Air Lounge would assume all costs of getting them fixed, regardless of whether or not the customer was at fault.

2.2.3.                      Opportunities

1.  Customer Loyalty Program. As people travel more often we can start to offer loyalty programs to ensure that customers come back and recommend the Lounge to other travelers.

2.  Expansion to other terminals/airports. As we are able to collect some basic data from customers checking in, we can start thinking about expanding to the different terminals within JFK or even to other terminals across the globe. Preferably one that has a similar percentage of delayed flights and international departures/arrivals/transfers.

3.  Compile database of customer demographics. As people check into Air Lounge, they will be required to fill out some sort of form that can later be manually entered into a database. This database can then be analyzed to determine whom the best target market is as and marketing will be done accordingly.

2.2.4.                      Threats

1.  Possibility of other lounge opening in same terminal. If a competitor decides that the international terminal has a lot business, they may consider opening a lounge of themselves.

2.  Shut down if security level increases. Air Lounge is dedicated to serve those customers who already have their boarding pass and has passed by the security area. If the security level at JFK is raised than Air Lounge runs the risk of being shut down if it is thought of as a security risk.

2.3.    Competition

The competition for Air Lounge can be separated into two primary categories. There are the lounges located within the same terminal as Air Lounge and the other areas of rest located outside of the terminal. The places located outside the terminal are typically nearby hotels.

Competition within the same terminal

- chairs located outside the gates of departing/arriving flights. As far as we can tell there is no other dedicated lounge located within the same terminal as Air Lounge.

Competition outside the terminal (includes at JFK and outside JFK)

-  Priority Pass Members – Priority Pass is the world’s largest airport lounge program. A membership gives individuals access to over 500 VIP lounges, covering 275 cities worldwide. Standard membership is $99 a year with each visit costing $24, with unlimited time access. At JFK, Priority Pass is accepted at the Kal Lounge in Terminal 1 and at the United Red Carpet Club in Terminal 7.

-  Hotels located near JFK. There are several hotels located within 2 miles of JFK, and   many of which offer a shuttle service between JFK and the hotel.

2.4.  Product Offering

Air Lounge will provide its customers not only a place to relax and enjoy before boarding your place but also a place that allows you to work your mind and body. Including the following, but not limited to:

·  Napping facilities equipped by Metro Naps

·  Full gym available for customer use

·  Shower facilities for a small additional fee of $5. This will include individual sized toiletries and fresh towels

·  Complimentary coffee, tea, and various soft drinks

·  Little café for those that are hungry. Offerings include: muffins, danishes,sandwiches, etc.

·  Wireless internet connectivity or you can sign onto one of our standing computer terminals to quickly check e-mail and other news

·  Children friendly areas – as to not disturb the quiet atmosphere that other customers come for

By providing all these services, Air Lounge customers can now look forward to traveling by knowing that their time at the airport will not be spent in a hard plastic chair. Complimentary beverages, different facilities including a gym and showers will allow customers to refresh and stretch out prior to boarding a plane.

2.5  Keys to Success

The keys to the success for Air Lounge are:

·       The creation of a quiet, comfortable, relaxing atmosphere that is reasonably priced and available to airport passengers of all flying classes.

·       The establishment of Air Lounge as a haven for relaxation and entertainment.

·       The creation of an environment that is not restricted to first-class and business-class airport passengers. Air Lounge will position itself as a haven for individuals wishing to escape the discomfort and pandemonium of the airport while waiting to board the airplane.

·       Great lounge chairs and other amenities such as refreshments, flight information monitor, internet, newspapers and magazines, telephone, plasma screen television, WiFi, showers and hairdryers

2.6  Critical Issues

The risks involved for Air Lounge are:

·       Will there be a continuing demand for the services offered by Air Lounge?

·       Will airport security and airlines become so efficient that delays are diminished leaving the need for airport lounges to dissipate?

·       Will individuals be willing to pay for the services Air Lounge offers?

·       Will business and first-class lounges expand their market to include all economy-class travelers?

3        Marketing Strategy

Air Lounge has three main strategies. The first strategy focuses on attracting airport travelers held up by delays. By providing a leisure environment, Air Lounge hopes to provide comfort and convenience to weary travelers that will become loyal users of Air Lounge.

The second and most important strategy focuses on pulling in international travelers. International flyers are more susceptible to security delays and are required to check in up to three hours prior to boarding. According to the University of Wisconsin Business services, because of recent laws and procedures implemented for national security, international travelers experience significant delays in both departing from and arriving in the United States and countries abroad[1]. This group of customers also serves as an important function because their overall percentage of travel is increasing while the percentage of travel for domestic travelers is decreasing. The Bureau of Transportation Statistics has reported that the number of domestic passengers declined 1.4 percent in August from a year earlier while international passengers increased 6.5 percent. Additional reporting has showed that domestic fights were down 4.5 percent from the previous year while international flights were up 2.8 percent[2].

Most airport lounges are available to only business-class, first-class and/or frequent flyers who are members of some elite travel club such as: Priority Pass, Admiral’s Club, Crown Room Club and Red Carpet Club. Air Lounge’s third strategy focuses on targeting economy-class, travelers who feel that annual fees does not warrant their joining a club and who want to experience the comfort of an airport lounge before taking a long haul flight. Moreover, Air Lounge’s non-membership policy will be based on a pay-as-you-go concept. Customers will simply pay for lounge use as and when they use it.

3.1  Mission

Air Lounge provides travelers with the ability to relax and escape the stress of the airport, enjoy complimentary refreshments, and rejuvenate in a comfortable environment.

Air Lounge’s marketing will consistently build on this mission. Everything we do, from the pricing structure for our services to the ambiance we create, must be done with this mission in mind. We cater to international, economy-class airport travelers. Our ambiance and our services are designed for this clientele and our marketing efforts are focused on capturing this market.

3.2  Marketing Objectives

Air Lounge’s marketing objectives for the first three years of operation include:

·       To introduce new concept                     

·       Maintain a staff of enthusiastic employees excited to respond to customers’ needs.

·       To build customer awareness of services

·       To build Air Lounge’s brand

·       To generate revenue

3.3  Financial Objectives

The goal of this marketing plan is to outline the marketing strategies, tactics, and programs that will make the vision outlined in the Air Lounge business plan a reality in the year 2007. The business plan forecasts sales of roughly $1.6 million in the first year of operations.

3.4  Target Marketing

Air Lounge intends to cater to travelers who have arrived at the airport hours prior to their flight departure and need to alleviate the boredom and dreariness of the airport. Furthermore, Air Lounge will be an attraction for travelers who have layovers between connection flights and need to relax and rejuvenate. These travelers will use Air Lounge’s shower rooms and take advantage of the complimentary refreshments available. Air Lounge’s target market covers a wide range of travelers: from people traveling alone or as a couple or as a family. Air Lounge will have games and other entertainment available for children.

Our primary target markets include:

·     The layover traveler. Travelers delayed for several different reasons will become an important part of Air Lounge customer base. An increasing number of travelers experience delayed flights, missed connections, and other unforeseen events that causes hours-long layovers in airport terminals. Complimentary refreshments, Washrooms and the tranquil environment will attract this demographic.

·         The early arriver.  Because airports have become increasingly crowded and security procedures take up more time, travelers, particularly international travelers, are required to arrive at the airport hours before their plane departs.  Air Lounge will provide a perfect place for leisure for single travelers as well as people traveling as a family. It will allow travelers to be entertained with Internet access; television and kids’ play area.

      3.5 Positioning

      Air Lounge will position itself as a contemporary lounge and beguilement area. Travelers facing layovers, delays or early arrivals will use Air Lounge as a place to relax, rejuvenate, and kill time.  Frustrated travelers will have an opportunity to calm down and take their mind of the stress of delayed flights. Flight screens will be strategically placed to allow them to access real-time flight schedules and information without having to leave the comfort of the lounge.  They will also have access to complimentary refreshments such as coffee, tea, juice and soda, as well as crackers, cookies and sandwiches to revive before continuing their long travel.  Washrooms will be equipped with soap, shampoo, towels and blow dryers to accommodate travelers who have faced a long travel and want to freshen up. Plasma-screened televisions, WiFi, and a fun room will be available to travelers with leisure time.

3.6 Strategy Pyramids

The following are the three key strategies Air Lounge will focus on:

Air Lounge first strategy focuses on attracting airport travelers held up by delays. Air Lounge plans on attracting these customers by:

·         Providing a leisure environment. Air Lounge will be equipped with amenities that satisfy customers’ needs.

·         A Customer Service desk will always be staffed. If a customer has any type of question or concern, an Air Lounge employee will always be available to assist.

Air Lounge’s second strategy will be focused on attracting weary international travelers who will provide an important function at Air Lounge. Air Lounge plans on attracting this type of customer by:

·         Providing comfortable lounge chairs.

·         Providing a quite environment

·         Providing multinational staff.

·         Providing a European-style atmosphere.

Air Lounge’s third strategy focuses on the average traveler, which includes travelers who feel that annual fees does not warrant their joining a club, but want to experience the comfort of an airport lounge before taking a long haul flight. This group also includes people who don’t fly often enough to take advantage of frequent flyer miles. Air Lounge’s non-membership policy will be based on a pay-as-you-go concept. Customers will simply pay for lounge use as and when they use it.

3.7. Marketing Mix

The objective of the Air Lounge marketing mix is to ensure that core-marketing strategy is implemented, and communicate properly Air Lounge’s value proposition to the potential customers.  Hence Air Lounge Service Marketing is founded on two notions:

1)      Differentiation is the primary basis for establishing a competitive advantage for Air Lounge operations.

2)      This competitive advantage can be enhanced by a process-driven and market-focused infrastructure.

After detailed comparative analysis of the existing ventures such as various airport VIP Lounges, and Priority Pass Lounge system we came to the conclusion that there are a few marketing tactics we can implement successfully in order to differentiate ourselves from competitors:

1)      More flexible way for customers to obtain services. ‘PAYGO’ methods assume that no one should think in advance to make reservation at the lounge.

2)      More aggressive advertising campaign inside selected Terminals as well as outside the airport (through in-flights magazines and Web). We also intend to investigate whether publicity actions (free coffee cups, pillows distributed among delayed travelers) inside airport Terminals will generate additional revenue and create more service awareness.

3)      Establish competitive pricing mechanism. Price differentiation (see below) along with flexible discounting should be implemented.

3.7.1 Services and Service Marketing

Our business goal is providing premium quality service, not only the physical equipment but also qualified staff. We will listen to every customer’s suggestion as well as complain; try our best to offer the most comfortable environment and the best service. We focus on the following:

l       Staff that have a strong customer-service ethic.

l       Well educated staff that provide professional suggestion and service quality

l       We will have experts who are responsible for: developing customer satisfaction programs, monitoring happiness levels, responding to customer concerns, and the general well being of every customer.

l       Personal recognition of our frequent travelers who return time and again.

l       Luxurious rooms that offer a sense of doing business from 'home.

l       Spa / Gym / Treatment Room, etc that offer the best quality to release pressure.

Air Lounge provides following services:

Air Conditioning 

Complimentary Refreshments (Soft Drinks) 

Fax service for a nominal fee and complimentary photocopies

FedEx service is available at vendor rates 

Flight Information Monitor 

Internet. Provided by T-Mobile

Morning newspapers, periodicals and magazines

Telephones with free local calls and data jacks with power outlets for your laptop computer

Television.  

Free WiFi service for members and guests

Showers and Hairdryers

Mini Gym.

Air Lounge team is very well aware of the devastating effects of sleep deprivation among passengers on heavily delayed flights. In busy international airports such as JFK the demand for sleep-related capacities has grown significantly.  One of the key services Air Lounge will feature is the unique napping area equipped with special napping chairs provided by Metro naps. Metro Naps offers a needed service to its customers and a remarkable business opportunity to its owners.  Air Lounge is going to franchise the equipment from Metro Naps.  

3.7.2 Web Plan Summary

The primary AirLounge.com strategy is to build an impressive destination website. The marketing of the site will be built around the core values and services that Air Lounge will offer. To our advantage our competition has not built any considerable Internet presence. Web award companies will review the Air Lounge.com site as a great destination on the Internet. We will build the revenue and market share partially around this traffic by providing annual membership subscriptions and building strategic partnerships with Web air ticket sellers.

3.7.3 Pricing and Price Discovery

Comparative analysis of the existing airport lounges brought us to the conclusion that Air Lounge will have significant advantages over the competitors: no affiliation with any particular airline, no membership required, for all class passengers, and extended hours of staying. Even though Priority Pass membership means that you don’t have to book JFK airport lounges in advance or even pay at the time of arrival, clients have to pay an annual membership fee + $24.00 per visit or be a frequent flyer. Moreover, lounges associated with Priority Pass have a dress code i.e. no baseball hats or jerseys. With Air Lounge you don't have to pay any annual fees. Our concept is "pay-as-you-go". Air Lounge has no dress code.

The table below represents the service comparison between Air Lounge and for some of the most popular airport lounges in US.

Sources are:
www.prioritypass.com http://www.continental.com/web/en-US/content/company/alliance/delta.aspx http://www.aa.com/content/travelInformation/airportAmenities/AdmiralsClub.jhtml http://www.nwa.com/services/bustrav/worldclubs/memru.shtml http://www.continental.com/web/en-US/content/travel/airport/lounge/default.aspx http://www.britishairways.com/travel/ecbenftlnge/public/en_gb

Our price schedule will be as follows: 

$30.00 for adults and kids 3 to 18;  

$15.25 for kids 3 to 11, and senior citizens;

Free for infants newborn to 2.

Taking into account all of the services offered, one of the major goals for Air Lounge should be to shape the customer’s perceptions and opinions of the Air Lounge service as being “So much value, for so little”. One of our advantages we have is that we don’t intend to hire any additional employees at least in the early stages of business development. Thus we can save significant amount of the budget on salaries and can compete on the basis of price with our competitors.as  “So much, for so little”.

One of our advantages is that we don’t intend to hire any additional employees at least at the earlier stage of development. Thus we can save significant amount of the budget on salaries and can compete on the basis of price with our competitors.

Price Discovery

Air Lounge will conduct close surveillance of the competitor’s business practice in order to estimate costs and cost’s role in forming price policy. Hence we can build more effective pricing strategy for ourselves.

Customer satisfaction surveys

We take advantage of survey provided by Zoomerang Company to understand what customer want, how we can improve service and customer satisfaction.

The cost of survey is $599/per year

http://info.zoomerang.com/index.htm

3. 7. 4 Promotion

Primary promotion will mainly focus on:

First: Advertising via in-flight magazine, billboard, local newspapers and internet. Through Mass communication advertisement, our business culture and customers awareness will be built. The goal is to get all travelers’ attention as many as possible.

Second: Offering discount, coupons as the main strategy during the starting of business, the strategy will continue to use depending on customer reaction.

Third, the customer source will heavily rely on personal selling from customers to customers. Thus establishing a long term relationship with customers is important. Through satisfaction survey, we can constantly chase customer preference.

3.7.5 Advertising

3.7.5.1 In-flight magazine          

Meal Tray Cards:

In-flight TV

Internet: Yahoo- ads

     PS: here I use “Sponsored Search”, you can find more detail by below link.

     http://searchmarketing.yahoo.com/?cmp=Yahoo&ctv=fp_footer

     Basically, we can define our “key words” to decide the price of per bid, in fact,

     the higher price per bid, the more chances people will click our advertisement.

     Airport Billboard:

     http://www.billboardsource.com/products.php

3.7.6 Incentive Programs:

Discount:

1.                We offer 10% off discount during the first month for whole guests.

2.                Guest who can use our facilities for free on his or her birthday.

3.                Each customer will have an accumulated point card, every ten points will have an extra free entrance.

Coupon:

Coupons will be offered randomly through the internet or magazines

They will also be offered to departing guests to award them discounts on their next visit.

3.7.7 Sales Plan

Our sales plan is the combination of our sales strategies and sales process. As long as we follow the plans laid below we should be in good shape.

3.7.8 Sales Strategy

    The main sales strategy is to build customer loyalty, by offering premium customer service, establishing strong customer relationship and providing competitive price. Our business culture and reputation can easily be distributed from customer to customer. The man strategies include:

l       Display our company’s image as: Professional / Qualified / Comfortable / Homey

l       Focusing on personal marketing, treat customers as family.

l       Use various promotions to stimulate their willingness of becoming a member.

l       Offering high quality with easy price.

3.7.9 Sales process

l       Personal recognition of our frequent travelers who return time and again.

l       All staff wear uniform to shape our business culture

l       Sending email monthly to members to tell about latest news or discount/coupon information. Also, sending birthday card, etc at any special day.

l       Report to every member about any suggestion and complain as well as our current schedule to improve ourselves. 

l       Encourage members to invite their friends to enjoy at our lounge. We’ll have personal service to help understand more about us.

l       We offer all kinds of facilities, including computer, fax machine,

3.8 Marketing research

   By researching current competitors’ pros and cons, we can figure out the differentiation; and how to provide service that others don’t have, thus to create the competitive advantage.

Competitor: Priority Pass – The biggest competitor. Having lounges in 90 countries and over 275 cities. Its price lists below:

Priority Pass offers:

l       Free drinks

l       Free magazines and newspapers

l       Meeting room

l       Shower space

3.4  Financial Objectives

The goal of this marketing plan is to outline the marketing strategies, tactics, and programs that will make the vision outlined in the Air Lounge business plan a reality in the year 2007. The business plan forecasts sales of roughly $1.6 million in the first year of operations.

4. Financials, Budgets, and Forecasts

The marketing plan is built on these truths:

1.      The marketing budget is based on a percentage of sales value. Currently, that value is set at around 31%.

2.      Building a strong brand and brand loyalty is critical to the success of Air Lounge.

3.      Marketing is a critical component of the company’s business plan. Therefore, the amount of funds allocated to marketing activities is the second largest in our master budget.

4.      We plan to spend 31% of our sales on marketing in the first three years. However, we will consider spending more on marketing efforts if necessary.

4.1   Break-even Analysis

Air Lounge variable costs in relationship to per-unit revenues are very low. Fixed costs, on the other hand, are very high. Our fixed costs include: payment of debt, facility lease costs, equipment costs, advertising and marketing costs, employees’ wages and other costs the company must maintain on a monthly basis. These costs are fixed and are not impacted by an increase or a decrease in sales.

Currently, Air Lounge will break even at a yearly sales point of $1,606,061.95. At this sales level, Air Lounge will not be making any profits..

The following graph shows Air Lounge’s breakeven point when profits equal $0. At this point the company will have generated just enough revenue all its costs. Any dollar earned after this pint will go directly to net income.

The company estimates that in its first year in business, revenues will barely be enough to cover costs.

4.2    Sales Forecast

Air Lounge is expected to serve roughly 53,500 customers in the first year in business generating approximately $1.6 million in revenue. Sales are expected to increase from 12%annually as Air Lounge starts building relationships with frequent flyers and becomes more attractive to new clientele.

The next table details how Air Lounge sales were forecasted for the first 3 years of operation. The first column lists the number of international passengers as shown in the JFK Traffic report for the respective months. The next column shows the number of stranded passengers due to delayed departures. The Air Travel Consumer Report states that 75.40% of flights depart from JFK on time, while 24.60% of departures are delayed. In the first year, Air Lounge estimates to capture about 1.14% of those passengers with delayed flights. 

           Sales Forecast Table