(What we learned in 2009 and road path for the future, January 2012)
2009 has been a most difficult year for the hotel and hospitality industry around the world and for most business in general.
It also has been a year of learning, a year that required creativity on attracting business and a year that required much more hard work than previous years.
What we have faced is not only one of the worst economic times of the past 30-40 years, but also a year filled with unpredictable obstacles that have challenged us in every sense. We also have faced the austere traveler who looked at the lowest available deals.
We’ve watched employees leave companies due to downsizing as corporations looked to streamline. We’ve seen business close that couldn’t react fast enough and we have learned to give more for less.
In addition to the economy, we had/have to face with a serious oversupply in many markets, suffered from the impact of political instability in a number of countries and on top of this the H1N1 virus that created some panic, cancellations or delays of international trips, leisure in particular.
In most cases, due to this unusual situation, we’ve built stronger leaders and teams and learned to work more efficiently to drive down costs.
We’ve refined and redesigned processes, and we’ve learned that we took much of what we had for granted, including for some – their jobs.
In some markets we’ve seen a reduction in revenues of 30%-35%, other markets have witnessed the dissolution of a number of transaction. The increasing of merchant fees and outrageous commission (i.e. OTA’s).
In many ways, the time was ripe for change, to address what was needed and for a company and its employees to truly strive and drive new consultative initiative, use innovation to find ways to gain efficiency and streamlined processes and create more aligned team work and also time to get back to basics.
It is said that you really know who your friends are in tough times. Business also know who their best partners are when the going gets rough. This played out repeatedly during 2009, with greater scrutiny for companies, professional alliances, and in some cases also for governments.
People become more aware of whom they wanted to spend their time and money with.
One of the lesson learned is know your value and push forward with good products, standards, services and efficiency, and realize that time is money. Business that wasted resources, purvey poor quality, break promises and deliver mediocre value are a lot smaller or gone as we head into 2010.
The cash flow became the ruling metric in 2009. Good businesses and smart people never really take their eyes of that and find every way possible to create value, creativity, consistency and most important customers support.
Cash flow permitting, 2009 should have been a year to do physical up-grades and renovations and be ready to maximize revenue when demand gets stronger, the smart operators should have done this, some did but some not.
We have also learned that when times are tough and businesses are under tremendous pressure to meet targets and budgets, some people do make bad decisions. Therefore, it is imperative to fully understand our roles and the impact of our decisions, good or bad.
The obvious example of this is “short term gain” vs the “long term pain”. In our industry we allowed some severe price cutting that will definitely affect our performance for several years and this is what is called a bad decision.
Another bad decision taken by hotels and by some airlines in 2009 was the downgrade of customers/members of loyalty programs as this does not go down well during this time as it shows no care for the good customers.
As for 2010 we need to take a step back and review the immediate past and move positively toward the future. Now it’s important to take a closer look at the opportunities that this downturn has presented.
It’s going to be an uphill struggle to achieve a sustained recovery specially on rates but it starts by remaining focused on the long term goals, staying true to our brand/hotels values and most importantly taking advantages of the opportunities before us.
Opportunities in all areas; better database and customer recognition, product and service consistency, taking smart advantage of the technology as the role of the web continues to grow and online exposure has become a must-have for hoteliers who want to connect, engage and influence customers.
In this environment there will not be place for timid marketers. Instead, the spotlight will turn on those prepared to take on the risk of creativity to develop innovations designed to help their hotel company not only to survive, but to evolve to achieve continuous success in the years to come.
The new era will also readdress the balance on customers’ relations. It is common knowledge that it can cost as much as 10 times more to attract new business than it does to retain it but despite this, customer relationship management (CRM) and database are often poorly handled and not given priority, this is another bad mistake.
The travel industry needs its leaders to hold their nerves right now, to identify their organizational vision and empower their people take the risk required to achieve their revenue/profitability goals and start moving the room rates/yields upward as the hotels cannot continue with the present rates.
We all know that people love to travel. It is said that people were nomads before they were anything else and before they had the disposable income for travel therefore we must take advantages of this.
Despite the difficult times of 2009, I feel there is still a certain degree of complacency in the industry and some are still tethered to old school thought and processes.
I think it is the fresh thinking of the newer generation that can bridge those gaps and bring the old school thinkers around to the benefits of emerging technologies and new ways of doing business, marketing in particular.
Set new priorities, aggressive but achievable targets, concentrate on must-have rather than nice-to-have in both revenue and expenses and you will enjoy better times ahead.
We all are talking about how fast the world is changing, how we have to cope with those changes specially the revolution of the technology, how travel patterns change, how distribution works, etc… The world is much faster and we must respond.
With all what happened in 2009, it is anticipated that by now most of the operating expenses have been addressed, processes improved, efficiency and technology in place therefore the focus of the management is/must be maximization of revenue and brand consistency.
Among others, hotels have to look at search engine optimization to increase their online presence including on-line advertising.
In general, the industry is suffering shortage of good marketers and this presents a problem for many specially for the small groups and for the unbranded properties, solution?
The General Manager has to drive or be directly involved on marketing the property. It is said that the General Manager is the best Director of Marketing of the hotel.
Must for the hotel industry to get used and wisely implements the latest trends in the market and learn the new ways to marking and sale the inventory at premium.
Here is a “guiding” list of tasks/trends for success;
- Take extra care of your brand and avoid weakening it
- Be a stronger entrepreneur and take calculated risks
- Full understanding and manage the market segmentations
- Understand who is booking us, why, source, and process
- Pricing and inventory management, on daily/hourly if necessary
- Historical date on demand and booking patterns
- Demand forecast and displacement analysis
- Pricing consistency
- Dynamic pricing
- Best rate (value) guarantee
- Rate parity
- Rate integrity
- Lead time pricing
- Market mix and geographical switches/changes
- Distribution and channels management
- Cost of distribution and commission
- “Online” the emerging trend to stay
- Online advertising & promotion and innovations on hotel marketing
- Partnerships with the OTA’s and with selected airline programs
- Always retain control of own hotel inventory
- Sale on the way the customer wants to buy, make it easy
- Setting-up of goals/targets and effective measurements (aggressive but achievable)
- Continuous investment into the company website, consistency, efficiency, content, and make it easy and to book.
- Aware of the impact of experiences posted online i.e. trip advisor and respond
- Try as much as possible to convert bookings from the 3rd party website into own hotel website and manage 3rd party web-site.
- Importance of YouTube, Facebook, mobile devices and others
- Creativity with packaging and value opportunities
- Create partnerships with objective of a win-win situation
- Importance of benchmarking
- Clean database
- Recognition program & customer satisfaction survey by 3rd party
- Innovations in revenue management
- Handling of hotel fee’s that must “die”
Most hotels have the reputation and the tendency of responding slow to those new trends and this must be improved. Have to learn to anticipate situations, do better forecasts and go all way out to retain a customer and what it takes to create and maintain loyalty.
Revenue management has become one of the most important functions in the hotel and must be supported from the top.
We must do better job researching what the consumer wants, building trust, and always offer good value and for business to grow must continuously attract new business specially in 2010.
If you don’t have the right people you will have problem therefore put a good team of people above anything else. And do take care of them.
I have a lot of respect for companies who try hard to make ends meet and keep all their staff during difficult time, and I have no respect at all for companies who laid off employees to reduce cost and be seeing reacting, on a superficial way, at the expenses of the employees (another mistake).
Most hotels are built for the long term and must remember that crisis comes and go and it is very important to learn from each crisis and avoid same mistakes in the future.
In 2010 we should expect a gradual improvement over 2009 however we must be on top of every opportunities and learn to “manage by revenue”. Much more than what we have done in the past.
Some basic management topics;
- Brand differentiation in the market
- Be a customer centric
- Full understand what we sell and do it well
- No such thing as a typical guest any more
- Understand quality, authority, luxury without opulence, and not flashy
- Personalization of products & services and deliver what customer wants
- Continuous improvements, innovations & best use of technology
- Avoid uncomplicated facilities; switches, controls, directions, etc.
- It’s a people business, need engaged collaborators
- Long term vs short term approach, hotels are long term