A – FROM YEOH SIEW HOON (ORGANIZER)
How not to be a sitting duck, “Reboot” at WIT Hospitality
In between evening walks, painting and writing, I’ve been preparing the content for our first WIT Hospitality conference in Hong Kong on March 22.
It’s our first hospitality-focused event and we really want to do a deep dive into the issues that are facing hoteliers and that are holding them from fully embracing digital. It’s a subject close to my heart and one I spend much time mulling over and trying to understand.
So lots of conversations over coffee and email exchanges and in fact, in late January, I facilitated the first WIT Hospitality Thinktank in Singapore, attended by about 20 industry leaders and experts, and a summary report from that half-day brainstorm is being prepared in time for Hong Kong – it contains recommendations and identifies opportunities for the industry at this most fluid
It was a good exercise in sharpening my thoughts for the Hong Kong event.
Yesterday, I exchanged ideas with Giovanni Angelini, chairman of Angelini Hospitality. He’s one of the key mentors in my life – a hotelier I respect by mostly a great human being I have deep affection for. I’ve known him since he moved to Asia and seen him rise to leadership roles at Westin and Shangri-La, and now he works in advisory capacity to hotel groups in the region.
He sent me a document he’s been working on, it’s like a reflection of his thoughts on the industry, one sentence piqued my interest.
It said, “Hotels are like sovereign territories, with their own rules, regulations, terminology, behaviors, handling of people, service etc. They are, in fact, bizarre places where you can also find diversion, mystery and suspense.
“Money never sleeps and neither do hotels.”
I like that. The hotelier’s job is to let his guests sleep in peace while he lies awake at night, thinking of RevPAR and clean marble floors.
Then he goes on to question if hospitality is “a sitting duck industry”? he argues that “changes, innovation and digital disruption are everywhere but the hotel industry is not responding as fast as it should” and it is losing ground.
“The duck (hotel) has to get much smarter, become ‘invisible or hide from the shooters/sharks’ if he wants to survive. The industry will be facing much skinnier ducks, the weak ones will be swallowed.”
Based on this, I asked him if he would speak to the topic of “How to reboot and not be a sitting duck” and so now he’s busy preparing for his talk for our event. He’s also given us permission to share a section of this report with delegates.
Angelini, with his vast experience especially in dealing with hotel owners, will bring a healthy dose of realism to our discussions and, at the same time, share what is possible despite the challenges he knows first-hand facing the industry.
B – GIOVANNI ANGELINI SPEECH; Hong Kong Mar. 22, 2016
Thanks for inviting me to share some of my experience and hope that what I have to say is useful and of interest.
A Sitting Duck Industry?
Changes, innovations and digital disruption everywhere but the hotel industry is not responding as fast as it should and it loses ground. Look at the success of OTA’s, Airbnb, Uber, TripAdvisor and going forward…What Apple and Google have in store for us?...What will be the next big change for the industry? And how to prepare for it/respond? And how to control the ever increasing costs of retaining and of acquiring
a guest?...At present the hotel industry is too exposed and facing difficulties on responding. Who is shooting at the duck?
The future will be different from today. Everybody knows that. But how it will be different? Will the high reservation fees weakening the value of the hotel brand? What will be the costs of maintaining brands “fresh and relevant”? And will there be ROI? Do future customers care about hotel brands or only about price/rate? The duck (hotel) has to get much smarter, become “invisible/hide from the shooters/sharks” if he wants to survive. The industry will be facing much skinner ducks…The weak ones will be swallowed…
After over 52 years in this industry I may be a "dinosaur" to most of you and of course I may not be up to speed with the latest technology but would like to share how I have been measuring success in hotels.
On assessing hotels, I focus on 6 basics:
- On Staff and Customer Satisfaction, (note that staff comes first and this is basic).
- On Segmentation Mix and Geographical Mix,
- On RGI and Market Shares,
- On Management of Rooms Segmentations and Accuracy of Forecasting, (have a say....)
- On EBITDA and Cash Flow,
- And of course on ROI and Asset Appreciation.
Hotel work used to be an "Art" with lot of interesting creativity but now it looks like that the same work is moving toward becoming a "Science" and as we all know, hoteliers are faced with so much innovation and digital disruptors.
Even worse....has the hotel business become a commodity? I hate to admit it but if not already there, there are some alarming signals........
- Digital marketing, real time marketing, social media, new disruptors, mobile payments, reputation management, cloud technology, complicated loyalty programs, new demographics, new sources of business, etc..
- And, on top of all this;
The shortage of qualified talent and unrealistic owners with complicated financial obligations we are experiencing unprecedented changes in the way business has to be conducted in order to complete.
- But we have to remind ourselves that the fundamentals of the hotel business and of what we sell has not changed much.
- The basic hotel products and services like a good night sleep and a good meal for a good value are here to stay. We sell sleep and we sell food, it sounds so simple but sometimes we make it so difficult and complicated.
- What has dramatically changed is the way the bookings are done and the alarming costs increases of acquiring a customer.
- The industry is faced with some serious challenges; on the one hand, the cost of securing a guest is increasing very fast and on the other hand, customers are much less loyal to hotels and to brands...... we are hit from both sides.......
- We live in a global connected world; ours is a global business and have to respond to the constant shifts in consumer behavior and to the constant changes of the likes and dislikes of our guests wherever they come from.
- It is also a business where everyone is copying everyone.....and this is a fact.....but a "VALUE BASED MANAGEMENT" is hard to copy and this is what hotel organizations should be.
- In general the industry is far too slow on anticipating and on responding to changes in particular technology and digital marketing specially by the small and medium size hotel companies. This is a major weakness.
Would like to share 5 POOR PRACTICES and BAD HABITS that in most cases are typical to hotel organizations and that I believe are fundamental for success or failure;
1- BUREACRACY and SILOS; As a labor intensive industry we have created far too many internal departments and functions at both Corporate and at Hotel levels ending up operating in Silos that is in many instances disruptive, expensive and slow on responding to market's needs.
2- DECISIONS; need of synchronizing the decision making process much more across all functions within the organization and deliver with a clear common objective. With the high labor turnover, Alignment is not easy to achieve in this industry.
3- DATA; In general hotels are not maximizing on the potential of using data. Leaders have to be much smarter in the decision taking process, less on "gut instincts" but much more on facts and use of data.
4- FORECAST; There is too much of looking at the past and not enough at the future. Past is past....and not so much that we can do.......... but are we making sound business decisions that will affect the company competitiveness in future?.......... And what new products and services might it make sense to develop?
5- FORESEE IN THE FUTURE; Too much of day to day and not sufficient time for strategic thinking and foresee the future. A case of micro vs macro..........
A typical mistake is that we base our future plans on financial forecasts and on projections without looking at potential disruptors and on how the business landscape might change.
I believe that the industry can do a much better job on addressing those 5 practices.
- By looking at what's happened the past 10-15 years, it is clear that we definitely didn't think enough about what could be different in the future and we got caught with our "pants down" when the so called "disruptors" arrived.
- I refer to this as "HAVE BECOME A SITTING DUCK INDUSTRY" easy to shoot at and take advantage of.
- Developers have spent huge amounts on creating great hotels and facilities and then we let 3rd party, without much capital investment, make enormous amount of money out of us, simply idiocity..........
- In my book, selling our hotel rooms is our job........
- Of course we cannot forget that ours is a perishable industry, meaning one unsold room or one unsold restaurant seat is gone forever and here where we have to get creative, make the best out of technology and of 3rd party.
HANDLING OF OWNERS
Important for all of us professionals to understand owners expectations and how to develop a good owners relation and most important "owner confidence".
- Ours is a fragmented industry with so many owners out there and each one has its own expectation (including its own likes and dislikes) and important for us to understand what are those expectations;
- First and most important, we have to accept that it is an industry that must generate profits and ROI for the owners and at times being the best hotel in town is not sufficient if not generating the bottom line.
- In most cases we measure ourselves on RevPar but we have to accept that about 80% of owners in this part of the world do not pay much attention to the RevPar, they pay much more attention to the occupancy and want to see their hotels full at all times.
- Plus at first sign of some slowdown, owners are very fast on pushing management to cut rates with the hope of achieving higher occupancy. This is a fact of life. Have to accept that at time owners are unrealistic and in some cases are disruptive.
- RevPar up, that's good, but does it flow to the bottom line? or most of it goes into commission, on cost of acquiring customers, on labor cost and on IT costs? do remember that for an owner the "cash flow through" is very important.
- When it comes to technology, I have seen so much of owners money been wasted on useless software, systems and others. In most cases, the hotel executives could have done a much better job on assessing what is presented to the owners.
- Owners expect that you know how to evaluate a technology investment from a business perspective, that you do an in-depth survey and justify the investment.
- It is also a fact that when presented with a new expenses on technology, in most cases owners are getting very skeptical and very often the first reaction is simply a NO......
- Owners want to be clear on the purpose of the investment, it is a nice to have? or it really improves performance like;
Will it increase revenue and how? Can you justify?
Will it reduces costs (remember that when it comes to costs, owners are specialist........)
Will it make easier for guests to select the hotel and book?
Will it increase efficiency and productivity?
Will it help the accuracy of the forecasting process?
Will it increase customer’s relationship and satisfaction?
Are you able to convince employees to use it? (Very important)
What's are the alternatives? Never go to an owner with only one choice.
Owners have become very skeptical as every time there is a new executive on board he/she wants to make changes and invests money on new technology.
Then after 2-3 years that particular executive leaves/resigns from the hotel and the new person on board starts all-over again and the owner says "here another one that wants to spend my money".......
ON THE BIG PICTURE:
- We know that the future will be different but what are we doing and are we planning for it?
- Where do we see our industry in 5 years?
- And what the "ducks" (hotels) have to do in order to survive?
- Difficult to foresee, the political, the economical, the societal and the technology changes that will impact the hotel industry.
- We can assume that our customers and consumers are adapting to technology much faster than the hotels and no other way than for hotels to catch-up and lead in technology, not only respond.
- Data will continue to play a major role for decision making process.
- Recognition and personal interaction with guests, remains a major expectation and will not change.
- Asia will be the major source of outbound travel in the world.
- Labor cost will continue to increase so will the usage of robots in many of the hotel's basic services.
- Either you adapt to the disruptive innovation or you will be replaced by a more suitable entity.
On closing, a friendly reminder to embrace evolution, avoid stagnancy and make innovation a culture of doing business.