Staying Profitable: It Takes a Village or Two
By Anand Medepalli Vice President of Industry Strategy, JDA Software | July 21, 2013
It is no secret that the recent economic downturn has had a disastrous impact on the hospitality industry. Traveling volumes fell significantly, and despite promotional measures and cost-cutting exercises, hotel occupancy and profitability took a nosedive. But fast-forward to present day, and the economy is recovering, corporate travel budgets are back, and consumer optimism has resulted in an uptick in leisure travel as well. Smith Travel Research, Inc. had recently reported that in the first quarter of 2013, the industry showed remarkable improvements in the three key performance indicators: occupancy, average daily rate and revenue per available room, all of which are inching toward 2007's peak numbers.
While this is a good sign, hoteliers find themselves dealing with a changed customer. Today's consumer is an all-connected, tech savvy and digitally engaged one. The readily available information on rates and products online coupled with social media has made the customer "always in the know" and extremely discerning. Disruptive technologies like mobility and social media have created an exponential change in their behavior, forcing hotels to continuously innovate to stay ahead of the game.
The challenge for the industry now is to meet this new consumer's demands while staying profitable by building on the recent gains. The question is how?
Always Put the Customer First
Social media has been one of the key drivers in bringing guest experience to the forefront for hotels, and this means that customer satisfaction has a direct economic impact on hotels. While price may bring a customer in, it is ultimately the combination of price plus experience that will build loyalty, which, according to a recent Deloitte study, is hard to come by. It is obvious that hotels must improve their performance of housekeeping, reception, food and beverage, and price to meet the basic needs of customer satisfaction. But to clearly differentiate themselves, hotels have to go much beyond that.
This starts with understanding very clearly the hotel customer's needs and determining strategies for meeting those needs accordingly. For instance, should a hotel know at the time of booking that there should be a bottle of wine waiting for the guest when he checks in, based on past behavior? What if hotels, much like airlines, have agreements in place with even their competitors to ensure a customer's request for a room never goes unfulfilled, even when they are full? Yes, the hotel may have lost the opportunity to sell its own room for this one visit, but perhaps it has won the loyalty of the customer forever?