Responding to the ever-evolving landscape in Hotel Business – Giovanni Angelini

(GA, Oct 2013)

RESPONDING TO THE EVER-EVOLVING LANDSCAPE IN HOTEL BUSINESS

Are hotels planning for the continuous changes that the industry is facing?
The “Basics” comes first in hotel business
Useful reminders & guides on marketing your hotel
Evolving of meta search marketing
Commoditization in hotel business?
Employees voice, listen to it
Values or “antiquated” charges/fees?
The changing role of the hotel’s CEO
Industry related facts & figures

Are hotels planning for the continuous changes that the industry is facing?

The hotel/hospitality industry is constantly faced with an evolving landscape on responding to business needs; new trends, new customers’ likes & dislikes/demands, advanced technology & connectivity, new tools & equipment, etc. Also constant increase of operating/fixed costs, less committed/more demanding labor force, complicated ownership/investor’s structures, a fast growing middle class travels from new geographical sources (continuously changing times).

All those, and others, are putting pressure to hotels in responding to business demands, remain competitive and generate the ever-increasing owners’ expectations on ROI’s. In addition, the prolonged financial and economic downturn and very slow recovering in the US and Europe is adding additional pressure to the industry.

Perhaps the biggest operational evolvement is around the booking process and communication with customer (The age of connectivity), how to deal with third party websites, new channels & sources of business, social media strategies, efficiency of brand’s website, etc. (The velocity of information). Unfortunately, most of those changes have been at hotel’s direct costs or at dilution of the hotel’s rate/RevPAR and have become a challenge for the industry to handle.

For hotel leaders, there are no other ways than to assess how the organizations/hotels are handling all those changes, be prepared for more changes to come and try to be as “future-proof” as possible with the hope of better economic environment and more favorable balanced demand & supply situation in future.

The following are simply some basic guidelines and reminders for hotel executives on planning and responding to the changes;

New sources of business/revenue streams and its potentials (i.e. BRICS countries and others)
Consumer-buying behavior and dealing with third party website’s
Emerging categories of travellers, expectations and creation of values
Emerging markets over the next few years, new changes, demands and needs
Complexity of effective revenue management & booking process
Decreasing customer loyalty to hotel brands
Social media strategies
New products-facilities-designs to respond to the new “generations” that for the hotel industry represents the future business
Innovations & technology constant advancement & effective usage
Availability-attitude & commitment of the labor force/managing talents
Expectations from the different generations of customers (baby boomers, generation “X”, and generation “Y”)
Constant increase of operating costs and of fixed costs
More branded hotels and less individual products (competition)
Investor’s expectations on ROI and short term views

And the list can go on and on….., there always be changes within this industry but how to be future-proof? Who will emerge? Who will lead? And who will follow or disappears? Who will merge? (Survival of the fittest)

On the positive side, with the constant increase of the middle class, people from all-over the world “needs & wants” to travel and they need hotels to stay. With this, the challenges comes on who will do a better & more effective job on attracting & retaining customers, be profitable and make progress. It is also worth reminding ourselves that the fundamentals haven’t changed. Hotels and the products & services that they offer have to be consumed in much the same way that they always have been; sleep & food being their main products that customers purchase. Hotelkeeping lies at the heart of the business of the hotels and exceeding guest expectations remains the objective.

Basic Priorities: In this evolving business landscape, it is important for hotels to set priorities and strategies and address the four key elements;

Quality of the physical product/competitive facilities
The people culture & employees experience
Effective revenue management & market position
Customer experience/value & repeat business

Physical Product: This of course comes first. The physical product has to be competitive. The property must offer all key facilities in line with the market position of the hotel and in no way management should let the product deteriorates. New facilities-concepts-services are to be added at all times and proper renovation-upgrades to be done regularly. It is to be noted that the 3-4% of the GOR (reserves) that traditionally the hotel/s put aside is not sufficient to maintain the property competitive. Major renovations/upgrades are necessary every 7-8 years and for this, there is needed for additional capital (the long term financial projections of the hotel should reflect this). In principle, existing hotels products/facilities cannot be “left behind” or be inferior as compared with the new hotels/product entering the markets as customers will not accept it.

People Culture: The hotel/Group has to distinguish itself in the market by providing exceptional and caring services. For this, it is imperative that a strong people culture is put in place addressing all basics; recruitment, training, retention, career advancement, benefits, incentives, quality measurements, motivation, etc. It is a labor intensive industry, therefore, employees/colleagues comes first, cannot compromise here.

Focus on engaging and developing employee skills, emphasize & reward and maintain a two ways open communication. Become a learning organization with a strong coaching culture and employee experiences. Demands from the labor force is evolving very rapidly and must respond.

Effective revenue management: Are we a direct-sale-oriented organization or we put costs/expenses first? Easy answer; in order to compete, need to have a very strong revenue culture. The hotel industry in general has not done a good job on maximizing the revenue potentials and there is a shortage of qualified people and talent in this area (a reason to train, motivate and compensate well with objective to retain). Must accept that in most cases a good Reservation Manager does not make an effective Revenue Manager. (Same applies to Directors of Sales vs. Directors of Marketing as they need different skills & discipline) and there are times when promoting a good Reservation Manager and/or Director of Sales produce negative results for the hotel.

Must also accept the facts that the online travel agents (OTA’s) have done a much better job with exceptional results on attracting aggressive talents and on booking hotel rooms at very high commission and at the expenses of the hotels.

The Revenue Managers of the present and of the future need to have strong discipline, leadership skills, motivation to produce, understanding of the digital marketing trends, consumer buying behavior, maximise potentials from all channel, open/close room categories-inventories, rate parity, give clear directive to sales people, keep the GM fully informed on the overall situation, be smart forecasters, etc. Revenue management is not a mid-management position; it is an executive position, has to report directly to the hotel GM’s, must have authority and most importantly accountability.

Note: For Asian hotels: In some cases, the volume of F&B revenue is similar to the rooms revenue and advisable for those hotels to have F&B dedicated sales people with objective of maximizing revenue potentials as much as possible and create followers within the local market that in most cases are the best customers.

Customer experience/value: Be clear about what you stand for and of the ultimate value you create. What is your competitive edge? Do your homework and find out what are your customers expectation truly value and deliver the promise at every touch point with all your customers. Note that customer’s expectations are evolving fast and must respond accordingly.

Is quality assurance in place? And how efficient is on guiding the employees on providing that memorable and efficient service?

Implement, manage and analyze in detail the available measurements; satisfaction surveys, employee research, brand studies, quality assurance audits, mystery shopping, social media monitoring, market shares, repeat business, etc. Make it easy for customers to do business with your hotel from reservation to check-out and remember that value is what the customers expect and want. (Value Generation)

Pride/behavior, self-importance and in some cases arrogance are some of the“sins/behavior” of hoteliers/GM’s. They claim that they are the best at something, are never wrong and have tendency of creating a distorted & unrealistic image of themselves and of the hotel. But at the end is “that” monthly report from STR (or similar) that counts. Those reports tell us where the hotel stands in the market. Numbers don’t lie… Accept this and respond accordingly. If the market share of the hotel is below the average within the competitive set, in no way the GM can claim to be the best at what he/she does.

Driving business really comes down to value generation and is the hotel providing true value to customers? Or only claim it?

Hotel leaders/executives have to be creative on responding to customer needs however must maintain balances when it comes to innovations and ensure practicality and customer’s acceptance. (There is a say within the industry; “The definition of a pioneer or of an innovator is a person with his face in the mud and an arrow in his back”)

If you have not thought about a new product-services but it is working well within the industry/competitors, then copy it and try to make it better, there is no shame in it, everyone is copying in one way or in another.

Accept and welcome comments-criticisms-complaints as you need to know how your customers judge you and where you stand “Remember that complaint is a gift”. Must respond to online customers comments and this should be a daily/weekly task of any hotel GM’s. With the explosion of social media, potential customers will look at comments given to the hotel and of course they want to know the hotel attitude on responding to those. Comments on TripAdvisors and on other social media have to be answered under the GM’s name, this is simply discipline and a role/responsibility of the GM.

People will travel, they will make demands on hotels and hotels will/have to rise to the challenge, embrace changes and focus on the customers, there are no other ways!!! And if some hotel executives have problems on positively responding to changes, they don’t belong in this industry.

Notes on Revenue management (Rooms);

Is the pricing strategy applied competitive? And in line with the hotel market position?
Online channels continue to experience dramatic growth in hotel bookings but do not take away your focus on “Old-fashioned” channels as those are the most profitable
Always search-focus on channels which drive the greatest long term value to the hotel
Revenue managers are to become digital marketing experts
Maximise on the “perception” that if a guest doesn’t book directly with the hotel web-site, the guest is not going to get the best room available in the property.
Quality and creativity of food & beverage and competing well with independent restaurants and with other hotels
Physical product, facilities & services of banquets/ function rooms (potential of MICE business)
Etc….

2- THE “BASICS” COMES FIRST IN HOTEL BUSINESS

Every hotel should have their own updated SOP’s and the following are simply basic reminders and guides for the caring/responsible hotel executives;

With so much attention on getting income up and costs down, have we lost sight on some of the basics in hotel business?

“How to Give Your Hotel a Competitive Edge”? One of the messages that kept coming up over and over is about getting the basic right and provide consistency.

The Welcome (Sense of arrival)

Do your guest always get greeted with a smile and made to feel special?
Importance of eye contact and calling guests by name whenever possible.
How well do your staffs anticipate guests’ needs before they ask for things?
Do you know what constitutes a good welcome for your guests? Do they like to be fussed over or would they prefer to be left to their own devices?
Efficiency and speed of check-in and check-out process.
No telephone interruptions during interaction with guests at check-in and check-out in particular.
Avoidance of guests irritations with complicated registration cards on arrival and on credit cards/payments (repetition of information given on booking)
Proper property maintenance: elevators, public areas, signage, drive-way, lighting, directions etc…(Image)

The practicality (Sense of comfort)

How practical are your hotel rooms? Unless you experience a night’s stay for yourself you won’t be able to see what works and what doesn’t. Ask yourself these questions:

Is the room & bathroom spotless clean? No mildew in between tiles/marble in the shower area, all equipment (TV control, telephone, light, switches, etc.) with no stain/dirt on it, dust, etc.?
Do I have to strip the desk or dressing table of promotional items before I can put anything down?
Is there an adequate luggage rack for my two luggages?
Is there anywhere to hang my robe? Or hang the bath towel so it can be reused?
Good quality bathroom amenities and easy to recognize/use.
An efficient cloth line in case I have to wash something?
Is there a magnifying mirror with light?
An easy to use iron-board and proper iron?
Are there sufficient international power sockets accessible if I need to plug in my laptop and phone chargers at the same time?
Does the showerhead and water pressure gives a decent shower and is there an efficient drainage?
Can I see myself in the mirror whilst holding the hairdryer?
Do I have a sense of good security? Proper lighting in the elevators & corridors, CCTV, room door with double lock and security latch, observation port, sound-proof and fire-proof door, smoke detector and sprinklers in the room & corridors, properly indicated escape route, etc.?
Can I sit comfortably at the desk without banging my knees, and have enough light at the desk to read by without sitting in my own shadow?
Can I open a window without using strong force? Can I comfortably watch TV from the chair/sofa?
Do I have to strip off half a dozen unnecessary pillows before I can get into bed?
Are the light switches easy to understand and use? Is there a master switch?
Is there sufficient light to read in bed? And is there a night light?
Can I make my own quality coffee/tea in the room? Ice bucket?
Is the in-room safe of a good brand, easy to operate without having to kneel down on the floor?
Is there a good selection of TV channels (news, sport, movies) and foreign language channels in line with geographical source of business?
And so on…..

Connectivity

Is there adequate space to work and connect?
Is Wi-Fi available, uninterrupted connection and is provided free?
Are the local calls free or charged?
Easy to make long distances/international calls and are the charges reasonable?

Note that quality of internet service is one of the very top problems experienced by guests and major source of complaints.

A good night’s sleep

When was the last time you slept in one of your own hotel beds? Even if guests don’t make use of the hotel facilities or get up early enough for breakfast, the one thing that all guests will expect is a good night’s sleep. So check out the beds. A top quality mattress and base is the key; and unless you check your beds regularly you won’t know when they need replacing. Is there a choice of pillows (hard, soft and non-allergenic?) Are the bed sheets of good quality and properly ironed? How often the duvet and pillows washed/cleaned?

A good night’s sleep will also be affected by light, noise and temperature. Do the curtains meet in the middle and cut out street lighting and the sunrise? Is there any noise from outside such machines, air-conditioning units, traffic, music from corridor or bar, from lift shafts, banging pipes, connecting doors, neighboring rooms, etc…And how is the room temperature? Is the air conditioning or heating system clear to adjust without having to call reception? (Remember that hotels sale “sleep and food”). When staff service a room, do they routinely put everything back to the standard layout, or leave things the way guests have laid them?

The condition and cleanliness of all areas

Do you have a strict audited cleaning and maintenance programme in place? And does this ensure that the bedroom and bathroom are spotlessly clean (including under the bed, on top of wardrobes, under the basin?) And when was the last time anything saw a lick of paint? Take a look with a fresh pair of eyes and check whether anything looks tired and in need of a facelift. It’s a good idea to walk the customer journey at least once a week to check this out. Better still ask others to do this on a rotating cycle; different people will pick up on different things, and even if you can’t address anything at once, at least you’ll know where needs attention and can schedule it into your maintenance plan and budget.

And when it comes to renovations, do you go all out on small number of rooms, or do you spread your budget to the benefit of all areas? There’s no one answer to this question, but think about the impact on your guests, your staff and your business as a whole. Remember that hotels require major upgrade every 8-9 years and funds should be properly budgeted from the beginning.

Perceived value for money

All of the above and more, of course add to the perception of value for money, but value for money will mean different things to different people/generation. So how well do you understand what is important to your guests? Is what they receive as good as or better than what guests are expecting?

You should be constantly looking for ways to add value for guests, and particularly look for items that are low cost to you, but high perceived value to your guests. Is everything provided that would be expected at the price point your guests have paid? Do you let guests know everything that is included in their rate? And do you include everything they might expect to be included such as a breakfast, parking, WiFi, local calls, gym/pool, etc.?

Value for money also means a clear and transparent cancellation policy – having to pay for something you have not used will not be seen as good value!

Your final objective is to ensure that your hotel achieves the best RevPAR within the hotel competitive set (and of course profitability) and you continue to surprise/impress your customers and develop a solid repeat business. Always remember that customers are smarter than you and they have many choices to stay plus your competition will do their very best to take away your customers from you.

Note:

In those evolving times and technology era for the industry, it is important to remain transparent & personal. Comfort-practicality-consistency is what customers expect at all times, no bad surprises….

3- USEFUL REMINDERS & GUIDES ON MARKETING YOUR HOTEL

Revenue Culture

The whole management team and sales/marketing staff of the hotel are involved on attracting and on retaining a customer (manage by revenue, not by cost cutting).

Segments Management

There is a say within this industry that “if you don’t manage your room segmentations, you don’t manage the hotel but the hotel manages you”. Which one is your most important segment? Where is potential? Increases-decreases? Reasons etc… Develop an action plan for each segment. Maintain a healthy mix of business and be clear on who are the best accounts & segments.

Source or Business/Geographical

Measure your source of business on monthly basis by countries, regions, cities as appropriate and pay special attention on new geographical sources as those may become very important to your hotel.

Forecasting

Importance of forecasting accuracy on monthly basis. Forecast volume, rate, RevPAR, revenue for each segment for following month, next 3 months, year-end and advisable to implement a 12 months rolling forecast. Monitor accuracy on monthly basis.

Website + SEO

You will need an optimized websites for your hotel. If you want to generate direct sales through your website think keyword searches and consumer segments, before burying yourself in the design aspect. Your store can be pretty, but you need people passing by and stepping in to have a change at a sale. SEO is very often heavily neglected.

Reservation Delivery & Automatic Inventory Control

The logical next step from making operations technology more effective and more accessible is to ensure that all systems are integrated in real-time to prevent double bookings and other inventory management issues. Because the number of sales channels will most likely also increase over time, this will be an important feature in a property’s future PMS to help Revenue Managers perform more effectively.

Ideally, a property’s PMS should link directly to the property’s various booking channels both through OTAs and direct – and into the CRS. Obviously, this will save the reservations team a great deal of time; instead of having to manually update each reservation, new reservations will be delivered automatically into the CRS and will update the inventory available across all sales channels in real-time. This feature will go a long way to ensure that rooms are available for each customer who walks through the doors or calls or books online, and that a property will not overbook their rooms.

Dynamic Pricing

Extremely important but not efficient in many cases. Hotels must realize the importance of truly dynamic pricing.

Today, the majority of properties use fixed rate pricing of some types: some updated daily, some weekly and some seasonally. Unfortunately, not enough properties update their pricing in real-time as market conditions, demand, consumer booking habits, external influences, inventory, etc. With time, it will become standard for every hotel’s RMS to collect and analyze data, offer the right rate at the right time to encourage additional bookings, and then update the price across all online sales channels, automatically and in real-time. This will happen every minute of every day in every hotel around the world, and hotels will see a big difference in the number of bookings and the revenue earned from the online channel after implementing dynamic pricing. Hope that this is not a wish/dream but in the best interest of hotel business, it becomes reality.

Packages

It has been proven that many travellers for both city hotels and resorts respond positively to packages and this is an excellent way to attract business specially during low periods. Also proven that “Cheap” packages do damage to the reputation. Packages works, it needs creativity and knowledge of what the market wants.

Sales Reps/Managers (Director of Sales and Director of Events)

Have sale representatives put your hotel on the local map with local business nearby. Visit prospective and current clients regularly, bring the gifts/promotion items, understand what are their needs, spoil them, and make them addicted to you. In most cases, corporate business is one of the most important segments for the hotel, it generates high rate and repeat business. Sales representative and sales managers are to be under the direct supervision of an aggressive Director of Sales (do not create confusion between Director of Sales and Director of Marketing). Large hotels may need both positions while small hotel may have to combine due to the costs. For medium size-large hotels strongly recommend to also have a qualified Director of Events handling MICE business.

GDS + Consortia

Apollo, Galileo, Worldspan are seen by many as a dying breed. But these Global Distribution Systems are reinventing themselves, and are still an important source of business and leisure travel for many destinations. Moreover, mega agencies like Amex, ABC Corporates Services, TQ3 Travel Solutions, World Travel BTI, Carlson Wagonlit and others are very effective distribution channel to reach corporate travelers of large corporations.

OTA’s

The poster boards of the hotel and travel industry in the online age are important distribution channels. Their commissions and models vary and you must analyze them well to make sure they add value to your overall strategy. Be certain they aren’t shifting direct business away from your direct sales efforts, but really generate incremental bookings/RevPAR.

Tourist Offices (Local & Overseas)

Talk to your local tourism office and find out how they can help you to promote your hotel. Make sure you have a representative listing on their website and that you are well-promoted in their office. The Convention Buro should be your other best friend. You should be on the top of their list for group requests for conferences and city-wide events in your destination.

Specialized Industry Organizations

Convention and meeting organizers, specialists, incentives etc. You should approach them and work together with them to attract corporate and leisure groups specially during low and medium demand periods. It will help to diversify/improve your hotels’ market mix.

Mobile

Hotels are starting to move beyond their own website into mobile marketing. Don’t think a mobile app is something every independent hotel needs. Let’s start with a basic mobile website which allows you to easily navigate an image gallery of the hotel and has a simple click to call button. From there you can work on integrating your booking engine and develop a more advances mobile hotel website step by step.

Do you have a story/competitive edge?

Your hotel needs to have something unique, refreshing or innovative at all times, a story which people like, and think worthwhile to share with their friends. Memorable service is at the basics of all, this you have to get it right.

Being remarkable is not that hard either if you think of it. Use practical imaginations that customers remember and appreciate (exceed customer expectation as much as possible).

Local & International Press

PR has and will always be important to reach your domestic market. Make sure you build a good relationship with journalists and editors of regional and international newspaper and magazines/publications. This way if they want to do a travel story, you are the top of their list.

Social Media & Review Website

Yes we know by now (I hope so at least) we need a Facebook, Twitter, Weibo, Flicks, You Tube etc….page and profile (platforms). We have to manage our presence on these social media actively and create fresh new content every week and month. A blog is great tool for this. Next, manage your online reputation. Encourage your guests to leave reviews on TripAdvisor and similar, incentivize if needed to get guest pictures and videos. Your profile on the hotel and travel review websites needs to be active and dynamic. Don’t forget to respond! You have to be involved (respond and be transparent). It has become necessary that hotels have presence on social media channels. Do not look at social media as a promotional platform but look at it as a business platform specially during low season/periods. (Some good examples in the market; few brands/groups are asking clients to post their comments on TripAdvisor while other brands/groups use Facebook pages for their rewards programme member)

Notes:

The above are useful reminders for any hotel executives. Obviously, it does not cover every aspects of promoting and marketing a hotel especially with the ever changing trends – innovations – technology, therefore, there is need of constant improvements-updates in order to respond the market situations.
Discipline on managing for value, be a customer centric, have efficient measurable data daily/weekly revenue meetings, clear competitive set, clean database, efficient & accurate forecasting process, clear targets – objectives – incentives, etc.
Of course all the above are to be part of the annual marketing plan, a concise easy to understand-use document that requires periodical updates and most important attention from the top.

4- EVOLVING OF META SEARCH MARKETING

What is Meta Search?

Meta Search is neither a distribution channel nor a one-time marketing initiative. Meta Search Marketing is an advertising model that typically utilize the cost-per-click (CPC) advertising format while the advertiser pays only when someone clicks on their listing and is taken into their booking engine (converting social media followers).

Meta Search Marketing in hotels is online advertising that requires real-time room availability and pricing information. (The concept has evolved from organic data display to pay per click advertising platforms)

Popular Meta Search sites (as of 2013)

Google hotel finder (Google hotel finder beta, Maps, SERP etc.
TripAdvisor Meta Search
Kayak.com
Trivago.com (Europe)
WeGo.com (Asia Pacific)

Complexity of hotel inventory distribution technologies

Hotel pricing has become very complex as a result of more sophisticated revenue management technologies. As one of the first step for any hotels is to ensure that all distribution systems and technology platforms “Talk the Same Language” including;

PMS (Property Management Systems)
CRS (Central Reservation Systems)
GDS (Global Distribution Systems)
Online Booking Engines
OTA’s
Etc.

Technical integration between the booking system and interface with each distribution channel.

Guest Experience

Guest visits website with meta search function e.g. TripAdvisor and inputs arrival and departure date
The site shows price from different distribution channels
Direct booking channel of the brand and directed to the booking channel

How important is Meta Search for hoteliers?

Simply one of the very best ways to direct/guide guests to book directly with hotel website. Also leveling the playing field with the OTA’s and giving guests the chance to book directly with the hotel.

It is the responsibility of every hotel executives to drive more direct bookings through the property website and lessen their dependency on the OTA’s. (Every hotel executives also must understand that OTA’s objective is to convert any visitor to the property page into an OTA client)

What is needed to put in place an efficient Meta Search?

First comes commitment from top management and understanding risks and benefits
Accept that this is not an “Auto Pilot” like set-and forget program but it must be properly managed requiring real-time room availability and pricing
Need of capable CRS access and tracking
Qualified revenue Manager/Director with direct targets/incentives
Must provide rate parity across all distribution channels
Monitoring of rate parity (that is often abused by the OTA’s) as often as possible and definitely on daily basis
Prevent that OTA’s outbid the hotel and push the property pricing listing below or out of the Meta Search menu

Notes:

Meta Search has not yet reached its maturity but developing very rapidly
OTA’s are adapting to Meta Search faster than hotels
Cost-per-click or cost-per-action basis can be expensive but hotels should use Meta Search to improve guest’s awareness of room pricing and solicit direct bookings
In general, travelers prefer to “shop” at one place that provides as much options as possible; pricing, room type options, value-added opportunities, etc.
The acquisition done by Expedia of Kayak and Trivago are clear indications that OTA’s will aggressively use Meta Search and this spells problems for hotels.

5- COMMODITIZATION IN HOTEL BUSINESS?

What is a Commodity?

A commodity is a good that is universal, typically an unprocessed grain, fruit or precious metal. By commodity, we refer to the fact that the buyer does not have to qualify the product, only quantify it.

But How Does a Service Become a Commodity? And for hotels?

In principle, services cannot be commoditized, as there are numerous variables that account for differences between the type and level of service offered by each provider, in this case, hotels.

The commoditization of hotels started many years ago with the rating systems by government and industry agencies all-over the world rating hotels from 1 to 5 stars. Each of these categories (star) defined a standard of quality and set of amenities. With these ratings in hand, the consumer could make a selection based upon the criteria they were interested in. So, without knowing anything about the brand or hotel name, a consumer seeking 4-star quality could shop this group on the basis of price for any given location, knowing/hoping that the service offerings would be at least in keeping with the selected category.

Impact of the OTAs

The arrival of online travel agencies such as Expedia, Travelocity, Orbitz, C-Trip, Agoda and many others was at first seen as a new dawn for hotels via rapidly expanded consumer distribution. All a hotel had to do was allocate inventory to the OTAs, then sit back and watch their occupancy soar. True, the room rate was affected by the aggressive OTA strategy, but it was all for the good of the hotel, wasn’t it?

Think about it. All of that hotel investment to build a broad-reaching location base and brand position, only to allocate a significant portion of your distribution channel to a third party, and moreover, pay this third party 20-30% commission for the privilege. The logic in doing this is questionable and must be addressed.

The OTAs, like any industry, have recognized the critical importance of advertising to create awareness amongst the general traveling public. They have spent millions of dollars in TV and print advertising to build their brand mindshare. And build they did! Travelers are shifting their purchasing behavior. Now, in many cases, they are much more likely to visit an OTA than book through an hotel chain website directly.

How many times we have seen OTA television ads claimed ‘5-star properties for a 3-star price.” If you are a hotel chain executive and you saw that advertisement, I wonder what thoughts crossed your mind. Not only does this sort of rhetoric lessen your property to a lower category, but it also works to undermine all of the strategic products segmentation that you spent years developing. In effect, the OTA’s have positioned themselves as a service, with hotels as their commodity. It’s an eye-opening realization and a battle-cry for change (or is too late?)

What Hotel Can Do?

Change at the strategic level does not happen quickly. Hotels (specially 4&5-star) need to differentiate themselves. And this comes primarily from delivering unique benefits to the consumer. These can be in the form of amenities, guest service, room décor, technology application, value-added extras, as well as effective advertising or market positioning.

Next, hotels have to wean themselves off of distribution channels outside of their own purview in control. You cannot afford to have anyone sell your property except your reservations staff, your own websites (both chain-wide and property-specific), traditional travel agents, and controlled or time-limited “tactical” sales such as packages and similar.

Do allocate a small controlled inventory to OTA’s and must apply/control rate parity and avoid at all costs that OTA’s sales your hotel below your own best available rate.

In principle, you should manage your inventory through your own revenue team.

There are risks, particularly during periods of low seasonality. The focus here, however, is a distribution strategy that promises brand success for the long-term, regardless of a few short-term hiccups.

Once you are controlling your own inventory allocation, hotels (individual & chains) need to beef up their awareness programs. This means mainstream advertising; and not just couple of ads per year but a true multi-media program that includes television, print, online, etc.

Commoditization is not healthy at all for hotels and hotel leaders/executives have to prevent it as much as possible by meta search marketing, social media management, full control of pricing and inventory, segment’s control/management, PR & business relation with bookers & customers, have a clear competitive edge, etc… You need to stand out and be recognized.

6- EMPLOYEES VOICE, LISTEN TO IT (Source: Extract from Employee Surveys)

Hotel is a labor-intensive industry and employees have to come first in order to succeed.

Every business, including hotel owners/executives, needs to realize that it’s normal for employees to keep things from them. What separates an average leader from a great leader is how you handle the employees’ voice. Here are few important things your employees will not tell you and what to do about them:

Employees’ Facilities Condition & Perception

Don’t expect from your employees to provide good/caring services to customers if the employees’ facilities are not in top shape; employees dining room & quality of food, rest area, lockers, showers, toilets, parking, etc…

What to do about it: ensure that all employees’ facilities are constantly up-graded and better than your competitors.

“I’m not really loyal to your company.” While this may be hard to accept, most employees, rightfully so, will look out for their own best interests.

What to do about it: Get used to it and plan with this fact in mind. Keep checking to ensure that their career goals are aligned with your company’s goals and that they grow. This is the only way to retain any employee.

“You don’t pay me enough.” No matter what they say, employees all want to make more money and aren’t satisfied with their current compensation. Some would switch jobs for just 10 percent more pay.

What to do about it: Pay your best people above market rate to retain them, and fund this by firing the worst people who aren’t getting their jobs done. Remember what’s important to employees; respect & appreciation, fulfillment and more and more flexible working schedule (in addition to compensation)

“I’m jealous of your success.” They say to themselves that they work just as hard as you and should be making as much money.

What to do about it: As your financial success grows, give your best people more responsibilities and compensation. If they want to take the same risk as you, support their decisions to leave and start their own company.

“I don’t like our customers.” As a result, they don’t serve them well. This winds up being a “lose-lose” proposition for customer and company.

What to do about it: Poll employees annually to find out who the best and worst customers are. Plan to get rid of the worst ones that actually cost your company money by stressing out your employees.

“You don’t know what some employees actually do.” They think you’re out of touch and don’t understand what people do all day. You also don’t know who should be fired.

What to do about it: Walk around and find out. Ask who the best performers are. Eventually, you’ll figure out who the worst people are, and when you do, you should let them go ASAP.

“I hate your meetings.” They are tired of how much you like to hear yourself talk.

What to do about it: Shut up and listen more. Let others run meetings according to a predetermined agenda.

“Stop calling me outside of work and expecting an immediate answer.” They think you don’t respect work boundaries and everything is urgent. As a result, they can never turn off work.

What to do about it: Before calling or emailing, think about whether it can wait until tomorrow at work. Remember, if everything is urgent, employees will never be able to see the things that are really important.

“Your latest ‘team building’ exercise was meaningless.” It may make you feel good, but it does nothing for teamwork back at their desks.

What to do about it: Ask employees how they would like to spend more time with their team inside and outside of work then have them plan those activities without you. Implement an active and efficient employee counsel.

“Ease up on the pressure. It’s not helping me get more done.” This is not to say you’re an intentional bully, but you put too much pressure on people to get things done

at work. You may even unknowingly irritate them in a public work setting.

What to do about it: Set aggressive but achievable objectives and monitor results. Encourage/guide/advice and do not talk about poor employee performance in public except in the most extreme circumstances.

“Stop taking all the credit for yourself.” They work hard and seldom get credit for the company’s success.

What to do about it: Remember that it’s your company, so you don’t need accolades, just profits. Always give away credit to others inside the company. This should be done regularly.

Be understanding and allow room for mistakes.

Be patient.

7- VALUES OR “ANTIQUATED” CHARGES/FEES?

Avoid at all costs to upset the stay of any guests with hidden-non published charges. Remember to provide value to your patrons and not bad experiences, be transparent with all your charges/rates/fees, no “gouging”….

WiFi / Internet Access (Basics)

This is perhaps the most annoying charge for all/most guests in particular for the younger generations, X & Y and many make decision where to stay on the availability/quality of connectivity and on free WiFi service (perhaps the location of the property and the connectivity are the two most important factors of selecting an hotel)

Parking

In principle, parking should be free and if this is not possible at least provide a substantial price reduction. Parking should be a service to in-house/registered guests.

Cost of mini bar items and laundry services (Common sense)

In general those prices are far too high (unreasonable). As an example, it is a fact that in most 4-5 star hotels, it is cheaper to purchase a new pair of socks than to have it washed by the hotel. Common sense has to prevail on setting mini bar and laundry prices & always consider the customers reaction to those prices. Remember to provide value.

Other irritating charges (No hidden fees)

In-room coffee/tea
Local telephone calls
Amount of mark-up on long distance/international telephone calls
Room service delivery
Receiving in-room delivery
The cost of in-room water bottles
Cancellation fees
Access to swimming pool/s, fitness center, beach/towels, recreation/children room should be free
Local newspapers/news

Note: Even the perception of extra fees can upset some guests.

Late Checkout is a Right, Not a Privilege

The average check-out is in many cases 12 pm and this may be too early. Check-out time of 1-2 pm. may be more appropriate so guests can have a leisurely breakfast, conduct business, or lunch, shower, and sufficient time to pack up, without paying extra or feeling like they’re racing the clock.

Traveling can be stressful enough as it is. Do consider flights pattern/timing in particular for international/long-haul travelers and respond accordingly by providing storage for luggage and place to wash/refresh.

Room size should not be a mystery

Some hotel brands list the square footage of their rooms on their websites, but you’d be surprised by how many hotels don’t publicize this information or, even worse, don’t have it at all. Wouldn’t you want to know if the junior suite you intended to book was only 35 sq. m. the same size as many hotels’ standard room categories?

8- THE CHANGING ROLE OF THE HOTEL’S CEO

Successful CEO’s are the ones who can lead an organization, put a plan in place, get everyone rowing in the same direction, that can communicate well and get attention, respect and continuously improve performance/financial position of the organization.

Understanding the basics of hotel business and some direct management experiences remains very important. However, today’s hotel brand’s CEOs (particularly listed companies) have to also embrace in full the financial aspect in particular securing funds for the business and of course generate the expected ROI.

Today’s hotel CEO’s have to be concerned with key financial issues/vehicles, franchising/HMA’s law, global expansion, source of business, how to attract the right employees, the right business, retain customers and improve market shares. A person that has a strong discipline to constantly improve himself and the company at the same time. A person that enhances his/her leadership skills. Being street smart, hard work and common sense are some of the basics but also important as the understanding and driving the global financial affairs. (Leaders not managers)

The ones that can build a strong & aligned team can provide vehicle for his/her executives to grow, a CEO that can delegate and get the very best from each colleague and of course get the ultimate expected results. (Hotel is a labor-intensive industry and a successful CEO has to understand and respond to it)

In addition to finance matter, handling of Board, Directors & Shareholders and having a strong team, the CEO must also understand where the business comes from what the company offers better than the competition, new trends & customers’ expectations, new source of business, innovation & technology and ensure that all hotels in the group provides good value to its customers.

A successful CEO must have the ability to be resilient in the face of difficult circumstances. Respond positively to unwanted pressure and to continuous changes/improvements. Learn from mistakes, inspire others, practice flexibility but also consistency and a positive sense of humor. (Profitability comes from the hotels)

Note: Lately, lots of questions are being asked on whom can make a better CEO;

A)Traditional hoteliers who have made their way up the ranks within the industry? or

B) Experienced individuals with financial/legal/real estate background?

Not an easy answer but the logic tells us that regardless of the background a successful CEO must have all the above. One thing is clear; CEO’s who micromanage, procrastinate and don’t take timely decisions will fail.

9- INDUSTRY RELATED FACTS & FIGURES

Travel & Tourism, Global Impact (Source: WTTC)

2012, over one billion international tourist arrivals
Total contribution to global GDP: 9.1%
Total contribution to global employment: 8.7%
Second largest employer in the world after the government
One in every 12 jobs in the world is generated by Travel & Tourism

Most popular destinations (Global Travellers) (Survey from 12,631 travellers from 25 countries in 2012)

United States 17% preference
United Kingdom 12% ” “
France 12% ” “
China 12% ” “
Hong Kong 10% ” “
Thailand 10% ” “
Singapore 10% ” “

Who are the Big Spenders in Travel? (Source: Skift) – Average spending per trip (2012)

Saudi tourists USD 6,600 per trip
Australians ” ” 4,118 ” “
Chinese ” ” 3,824 ” “
Average global ” ” 2,390 ” “

The Age/s-Generations in Travel

Matures (white hair) 67+
Boomers 44-66
Gen “X” 34-47
Millennium or Gen “Y” 18-33

New Hotels under Development/Pipeline as of July 2013 (Source: STR)

Asia/Pacific 1,831 hotels with 393,350 rooms (China 147,721 rooms)
Europe 813 hotels with 133,797 rooms
Middle East & Africa 480 hotels with 118,535 rooms

Special Economic Groups

G8 (Top 8 industrialized countries)
G20 (Top 20 industrialized countries)
BRICS (Brazil, Russia, India, China, South Africa)
APEC (Asia Pacific Economic Cooperation)
SADC (South African Development Community)
OECD (Organization for Economic Co-operation and Development)
CIS (Commonwealth of Independent States)
NAFTA (North American Free Trade Agreement)

Chinese becomes the world’s biggest travel spenders (Source: CORTI)

In 2012, China as overtaken the USA and Germany as the world’s biggest spenders on travel
Amount spent by Chinese travelers on international travel is USD102 billion, an increase of over 40% in 2011
83.2 million of outbound travels in 2012, an increase of 20% over 2011
It is expected that 100 million outbound travels will be reached in 2014 or 2015
Top 10 destinations interested in travelling to in next 12 months (Survey of 3,000 Chinese international travelers) Australia 33%,France 33%,New Zealand 27%,USA 26%,Switzerland 25%,Singapore 23%,Hong Kong 21%,Taiwan 20%,UK 19%, Canada 13%
62% of Chinese travelers prefer to travel independently
27% use social media to help them to make decisions on destinations
Biggest difficulties experienced by travelers; language and food

Growth of the Asian Middle Class

In 2012 there where half billion middle-class Asians
In 5 years, it is projected to be 1.75 billion, most of them will travel domestically and a high percentage will travel internationally. Impact to hotels?

Asia Pacific – YTD June 2013 RevPAR change (Source: STR Global)

Australia: +3.9%

China: -6.6%

Hong Kong: -2.2%

India: -4.7%

Indonesia: +7.9%

Japan: +10.8%

Malaysia: +4.8%

Maldives: +16.0%

Philippines: +0.6%

Singapore: -2.1%

S. Korea: -9.9%

Taiwan: +6.1%

Thailand: +16.6%

Vietnam: +6.8%

Total (Down -3.5% vs 2012)