Views on the hospitality business and its future (as of 2012)

(Jan 2012)

(Continuous changes)

In 48+ years in the industry, I have seen tremendous changes within the hospitality business. I remember when hotel reservations were done by letters or telegrams and when we used to charge a fee for the black and white TV in the room. Then came the telex that was followed by the facsimile and now the internet, what’s next?….

Now the internet-based travel booking gives customers the ability to book their own itineraries which automatically brings price competition. Hotels have to adapt quickly to the many changes that technology brings. At one time, we were pushing for the highest rate and “up-sell” was the name of the game. Now, with the internet booking, the best rates are what the customers are shopping for and are comparing with other hotels rates. With all this, it is a must for the industry to respond and we must be on top of it at all times.

Understanding and proper management of segment is a must for any hotelier; we must know where the clients come from, why they come to our hotels, when they come and how much they are prepared to pay. We also must understand and control the volume of reservations flowing through different distribution channels. We cannot accept uncontrolled distribution of the branded room’s inventory. There are lots of “fly-by-night” on-line travel agents out there trying to obtain unauthorized inventory and room rates of your hotel and this must be strictly controlled.

Efficient central reservation systems are keys to profitability and can make or break any hotel organization. They must be used as powerful platform for added value. Corporate offices and on-line hotels must be on the same wavelength on this, otherwise we have chaos.

Loyalty programs have become very popular in the past few years. Here is the risk that customers become loyal to the point system and not to the brand; of course, we can’t lose sight that the objective is to have these customers loyal to the brand.

People – People – People   :  “Love our customers and love our employees”. This is a labor intensive industry and people are what make us successful. Hotel employees are the ones that make great hotels. Technology is important but it will take a very long time before a computer can make your bed or cook you a good dinner.

“Hire for attitude and train for skill” is our way of doing business. A stable and motivated team of professionals comes on top of any other priority in the hotel industry.

As employers, it is imperative to provide top of the line training and give our people the chance to achieve their career and personal goals. Of course good compensation and incentives are also major drivers.

In all my years as a hospitality executive, people have always been the top priority and in most cases I’ve had very supporting shareholders in this area. This is when an owner operator model makes a lot of difference:  you automatically pay more attention to what you own and this will result in low employee turnover and savings.

Attracting and retaining good people is becoming more difficult than attracting customers. We constantly need to improve the ways we handle our employees. We need to recognize the diversity and expectation of the modern workforce. Continuous investment in advanced human resources processes is essential.

All this does not come cheap but there is no other way than to invest in people. The industry is going through an unprecedented boom in the development of new hotels and we are going to need a lot of additional people, therefore, must be pro-active in this area and allocate adequate funds, programs, benefits development opportunities, etc.

In house training and self improvement programs are critical and must be the best in class for employees to be proud to attend.

Regular staff opinion surveys “360 Surveys”, the annual and semi-annual evaluations and others are simply part of the company culture and must be done well.

The company culture is to be clear, fully embraced by all employees and continuously preached by the leaders.

Brand or Location?   This question has often been asked by many in this industry. What is more important? Of course the ideal situation would be a combination of both. Location – location – location has been the major criteria for the success of most hotels in the past. However, this situation is slowly changing and with the presence of top brands in most destinations, the location is becoming less important than the brand.

Frequent travelers want recognition and the “comfort zone” of a familiar name and place providing quality, consistency and no negative surprises. One of our challenges is that it is not always easy to define the brand promise and what is the best way to communicated it.

The best and perhaps the only way of delivering the brand promises is through employees who have clear understanding and have accepted the organization’s standards and are delivering them in a pleasant way. Of course all major decisions like investments, renovations, training, advertising and operational activities have to be built around the brand promises. The whole organization must be aligned towards one objective.

With so many hotel brands in the market and in order to prevent confusion among consumers, one has to stand out from the crowd regardless of the location of the property. Different markets require different products: what works in one city / country may not work in another city / country. Therefore, lots of planning is required when we develop or renovate a property and it is a must to stay away from the “cookie-cutter” approach. Of course in order to stand out, we need both the hardware and the software. It’s easy to do the first, much more difficult for the second as the company culture and people come into play.

Unfortunately in this industry, the inventory not sold in one day is gone forever. Sometimes, it is painful; however, we must maintain a consistent pricing philosophy and cannot simply fill up our empty rooms at a very low rate. The brand and the position will suffer in the long run. It’s easy to go down, very very difficult to regain position once lost.

Future of the industry   :  Overall the fundamentals for the hospitality industry are strong now and into the future. The demand for travel and tourism will increase providing opportunity for the industry to grow.

  • Source of business from the traditional developed countries i.e: North America, Japan, Europe will remain. However, we will also see much strong growth from emerging markets especially China, India and to some extent, the Middle East. The industry has to make some adjustments in order to cater to these new markets.
  • There will be dominance by strong hotel brands which are continuing to improve their processes and achieve better consistency in their delivery of experience and will be in the position to demand higher rates.
  • The war for talent will increase and the industry has to find new ways to attract and retain good people. Labor costs will continue to increase.
  • There will be greater investment in technology, particularly in customer relationship processes as a vehicle to influence customer behavior and generate direct sales.
  • Operating cost will continue to increase; therefore, revenue growth and efficiency are essential to offset the costs.
  • Wellness is becoming more and more important for both the business and the leisure traveler. Around 30 years ago, we started providing fitness centers in the hotel that, over time, became health clubs. Now customers expect spa facilities from the five-star / deluxe hotels and if we do not provide these facilities, we are at a disadvantage as compared to other brands. Concern over wellness is expected to increase and hotels have to respond accordingly.
  • The threat of terrorism and security concerns are here to stay and may affect growth from some specific markets, leisure in particular. On a more sensible note, travelers are becoming more resilient to politics, terrorism and natural disasters. However, security is a problem that the industry has to learn to live with and we have to do the best to provide a safe and secure place for the guests and staff.

What do I love the most about the job? 

Besides profitability and continuous growth, I love to develop people and see people achieving their career and professional goals.

I also love to get deeply involved in new hotel projects when it comes to concept, layout, interior design and of course, positioning of the new hotel in the market.

What are my concerns for the industry? 

Terrorism, disasters and situations beyond our control is of concern. Also, too many short term financial deals in terms of hotels’ sales / acquisition that have the objective of making a quick profit with less concern for customers, employees and the long term health of the hospitality business in general.

What I dislike most?

When it comes to dismissing people for below average performance or for cause, especially colleagues in high positions who have been with the company for a long time.

Mistakes that we often make  :  Over-reacting to short term situations / trends instead of staying on course and doing what we do the best, taking care of people, continuing to provide service consistency and strengthening the brand.

What would l tell young people who are joining the industry? 

I tell them that this is a demanding industry and that they have to work hard. They have to understand what we are selling: in this case, spell out that we cater to the personal needs of the human body, meaning sleep and food, of course in a sophisticated and glamorous way, and charge good money for it. Also that the industry requires positive behavior / attitude and at the same time, it is rewarding in terms of learning and exposure to multi-national trends and cultures. Also an important factor is that we are in business to generate profit, either for our employers or for ourselves (if we run our own business). Finally, I would stress to young people the importance of continuous learning and self-improvement.