Not just pancake mix …

March 16, 2003 |

Opinions vary as to the degree that the Internet is revolutionising travel and hospitality, but all agree that the trend remains in a steep upward curve, continuing to climb and fast.

by Tony Dessauer

The pile of e-newsletters grows every day, so do the opinions and assessments of the way that the hospitality and travel industry is developing, all mixed in with advertisements and ‘insights’ from companies selling their wares, like a giant bowl of pancake mixture.

The culinary proficient reader will be aware that such a mixture contains a lot of air; it helps the pancakes to attain a light and fluffy consistency. Similarly a high proportion of those articles and insights may also contain quite a lot of air, but they won’t be quite as useful in crepes Suzette! Unfair? Possibly, but if you read them, with the intention of gaining knowledge, you may be disappointed to find that the ‘wisdom’ is restricted to four or five lines of meaningful information and the remainder is dedicated to the ‘expertise’ of the Company and how you can’t succeed without them.

Anyway, back to the pile. The trend these days seems to be varied and the content likewise. Opinions vary as to the degree that the Internet is revolutionising travel and hospitality and the level of impact that will be seen, but all agree that the trend remains in a steep upward curve, continuing to climb and fast. An example of this is GetThere.com which published figures recently showing that growth in the 4th quarter of 2002 was 250% ahead of the same period in 2001.

Please remember that GetThere is the Internet booking tool made available to the Corporate ‘bookers’ and ‘stayers’, who may traditionally have chosen the intermediaries using GDS to complete their transactions. And of course the latter part of 2001 was affected by the events of 9/11. Similarly to GetThere, Hotels.com, seen by suppliers to be both the saviour of their business and a devil to their profit, also grew substantially with their gross revenues standing at almost $946 million, an increasing of 76% in 2002 over 2001.

Expedia, inc. another in the same vain as Hotels.com, reports that their merchant model revenues grew in the last quarter of 2002 by 184% year on year. And also similarly to Hotels.com their total revenue for the whole of 2002 grew by 82% over 2001. Merchant model business accounted for over half the fourth quarter revenue in 2002.

Well this is great! Not only are people travelling but they are also taking more trips than last year, and two very large travel businesses are making loads of money, whereas the industry in general seems to be suffering stagnation or decline. It’s just a shame that the money that they are making is at the expense of others, i.e. the Suppliers, who are being hung out to dry. What is more, it is clear that the trends are not only influencing the ‘leisure traveller’. Business trips are also affected, as can be clearly seen by the GetThere.com figures.

Worried? Well if you are not part of Hotels.com, Expedia inc., GetThere.com, or another of the same creed, then you should be very worried indeed. And not just about today but also about tomorrow and the next day and the next and next and so on, because the predictions are that the trends will not change, far from it in fact. The intermediary sites are diluting the business and the relationships with Customers, causing a decline in revenue and an increase in distribution costs.

In addition, there has been a recent re-trenching of hotel businesses, which has led to reduced expenditure in the areas of sales and marketing, operations and head office costs. The main areas affected being human resources and Customer amenities/Service.

The predictions for 2003 are that hotels will experience increased expenses, particularly in staff costs, insurance costs and potentially, utility costs, which it has been suggested will rise between 4% and 10%.

So, if hotels are to increase share and demand, offer the service quality expected of “the Brand�?, cover themselves appropriately for insurance risk, provide light, heat and air-conditioning for their Customers, as well as cook food for them and all the while retaining reasonable profit levels, hotels must take action and fast.

A recent article suggested that hotel business management is the best it has ever been, in that costs are under control in a better more effective way than ever before. Well good for them! But how will that control affect their ability to be competitive? And how will that affect Brands that rely on quality of service to differentiate them from the others?

How will hotels regain the sales and marketing ground lost whilst busy reducing overheads? And thereby maximise the returns owners expect from their assets? A dilemma, if they are to remain profitable. The solutions could be considered to be revolutionary, which may be a problem for a ‘traditional’ business.

Put simply, the issues are Customer Acquisition and once acquired, Customer Retention; getting them and then keeping their interest and repeat custom. Yes and everyone knows this to be the case. The trick is achieving these whilst maintaining the tight control on costs in order to remain effective as a business, plus finding new ways to be one step ahead of the competition for as long as possible, before they catch up.

The solution is CRM, Customer Relationship Management, but not the CRM we have come to turn away from because it is entirely system based, disruptive to the organisation and costs the earth. What follows below serves to highlight the principle, the best practice and the way in which technology can support changes to help the hotel industry focus on better Customer relationships and so combat the profit ‘dilution issue’ that currently prevails.

Generally hotels tend to prefer either the ‘scatter gun approach’ to marketing and selling to large volume producers, or the loyalty programme approach, whereby only a proportion of the customer base is communicated with on any kind of regular basis. Interestingly though, even with the ‘loyalty’ derived databases, there tends to be little or no information about customer behaviour. These databases are usually a list of names and possibly some brief profile details containing customer preferences, which may become redundant over time if they are not kept up to date.

So what is needed, is a change in mindset throughout ‘the organisation’. If a CRM strategy is to succeed, then everyone in the organisation must know the whole picture and understand why Customers are important and if service delivery is to be consistently good, also believe it.

What is often overlooked, is that Customers are fickle and therefore unpredictable, when choosing where and what they buy. Additionally, reliability and consistency of repeat purchases are hindered by the changing environment we find ourselves in. With the opportunities for wider choices increasing, we should acknowledge our Customer’s behaviour in this context, and mix that together with their ‘history’ to help determine future sales & marketing to them and thereby ensure a greater chance of attracting repeat purchases in the future.

There are numerous places throughout an hotel Company where useful Customer information is assimilated. For example, pre-sale, i.e. a prospect list perhaps, during the sales/marketing process, during the booking process, during the stay, on departure and, although much less frequently at the moment, after departure too.

Just imagine the power that could be unleashed if these pieces of information were kept together in one place, (database), for analysis, reporting and action.

In the web environment, it has become quite easy to measure individual Customer’s behaviour and watch their choices, due mainly to web site activity. The next most logical step is to combine that with the ‘rest’ of the data that is available and complete a set of very useful information that can be used to determine future strategies and sales and marketing.

In an ideal world, instant response to a customers’ interaction with the hotel would be a day-to-day activity. For example, customer calls the hotel, the ‘sales agent’ recognises the customer and invokes the ‘profile’ showing past activity on the web site; which pages were viewed, if a booking was made, what product was chosen and how much was then spent in the hotel. With that to hand, the conversation would become many times more useful to both parties than without it, and additional sales more likely.

The recognition would alone engender a degree of ‘Customer loyalty’. Imagine the power of the ‘sales agent’ in that scenario, especially if the product set available, enabled them to help the Customer choose a mutually appropriate purchase.

Of course the value of the information can be realised across any of the channels that are used to communicate with Customers and vice versa, whether they be in advance and therefore speculative, or when they have already made decision one, i.e. to contact the hotel or visit the web site. For example, customers commonly use the web site to research a product or products, so, knowing the profile information can determine the on-line responses they receive automatically, and depending on the route they took to get to the information, the automatic response could be tailored appropriately.

And what about after the event…. having chosen the product, booked a room and then stayed, surely it makes much sounder business sense to maintain contact with that Customer and develop the business ‘organically’ by making adjustments to meet their changing needs and offering appropriate products, rather than relying on going after new Customers? After all, it costs a good deal more to acquire new Customers than to keep the existing ones! The hotel industry has known this for a long time, why is it taking so long to act on it properly?

Perhaps they haven’t seen the potential return on investment, because if they had, they would soon realise the facts and switch some of their sales and marketing expenditure to accomplish a better return by responding more effectively. Surely a better way to use their resources, and thereby maximise the return on investment?

Obviously, Customer acquisition/retention and Customer Relationship Management are not new concepts. Look around you at the retailers, banks, airlines, etc. What is ‘new’ is how to make it work in a controlled, cost effective manner, rather than an unwieldy overly expensive one, where the solution is only based on technology and in many cases doesn’t realise the return expected.

As we know only too well, the hotel business is different to many of the existing ‘Customer Relationship Management practitioners’, in that ‘service’ has always been the key industry differentiator and can only be really successfully delivered by people who are fully trained and have the resources to do their jobs properly. We now operate in an ever-changing world.

Technology is becoming easier to implement and more affordable. That’s fine, but all too often, good systems are installed and trained in, but the ‘culture’ of the organisation doesn’t take account of the process changes that result from the implementation of the system.

Also, what about the people using the technology? Are they given the resource to make the new ‘set-up’ work to the Companies advantage and continue to do their jobs? It is often the case that a whiz-bang piece of technology is employed to help a department but the people structure doesn’t change and nobody has the time to use it properly. A large number of service and or system operation failures can be attributed to these issues.

Companies have made expensive and embarrassing mistakes that have given CRM and other systems a bad name. The reality is that with care and proper planning, appropriate changes can be made to make them work very well. The result is a better return from the human resources available, a closer to expected return on financial investment and better business….. a Win Win Win for all concerned, Customer, Staff and Company.

You can reach Tony Dessauer at [url=http://www.dessauerdirect.co.uk]http://www.dessauerdirect.co.uk[/url]