Hotelintel.co has a permission to publish Giovanni Angelini’s speech at one of a Hotel/Hospitality Industry related conferences during March&April this year. Mr. Angelini presented to the audience ‘10 Poor Practices and Bad Habits‘ that in most cases are typical to hotel organizations and why the industry is not responding as fast as it should to new trends and in particular to digital marketing. Have divided those 10 unhealthy practices into two parts, 5 for the hotel groups corporate offices (1-5) and 5 for the hotels (6-10);
Starting with corporate offices, the bad practices and bad habits that slow-down progress are;
**1.Bureaucracy/Silos and Management Turnover; **This is a labor intensive industry and over the years we have created far too many internal departments and functions ending-up operating in Silos that is disruptive, expensive to maintain and very slow on responding to business needs and in particular to changes. Management turnover within the industry is traditionally high with direct negative impact and succession planning, business continuity and on planning/responding to industry trends and innovations. Hotel groups in general have to get better on attracting, developing and retaining quality talent.
2.Decisions and Alignment ;
Far too many important decisions taken are not synchronized across all functions and of course with poor buy-in and implementation.
In general hotel companies are not fully aligned and far too many “lone rangers” or “prima donna” out there with their own likes, dislikes and ways of working. Very dangerous.
Also far too many executives aren’t in the job long enough to fix big problems, let alone develop and implement new strategic ideas (there are also weak executives who stay on the job for too long…. and nothing happens….). It has been proven that around 5 years in the position (corporate) is the ideal length for top executives/officers.
On top of this there are many owners and asset managers who are making important decisions without full knowledge of the market and of changing trends/times.
Traditionally hotel owners focus their attention to expenses and this is not sustainable as in response to new trends. Owners should be focusing much more on investing on items that facilitate revenue growth, booking process in particular, and not “nice-to-have” items that does not have a direct correlation to income.
Many owners think that once the hotel is built, the investment *is over when actually it’s just begun. That’s when marketing has to begin to build brand-name-image.
Ours is definitely a fragmented industry and not structured at all.
3.Past against Future;
There is too much of looking at the past and not enough of looking at the future. The past is the past and not much that we can do……
But are we making sound business decisions that will affect the company competitiveness in future?
And what new products, technology and services might it make sense to develop? Is there a clear strategy?
4.Use of Data;
In general hotels and hotel companies are not maximizing in full the potentials of Data. First on gathering the data (rooms, F&B, functions, clubs, associations, etc.) then on rewarding the right guests at the right time.
Unifying guest data through better integration of technology platforms will help hotels become more customer’ centric. Cost savings on technology related to customer loyalty/data is very damaging business decisions.
Hotel leaders have to be much smarter in the decision making process, “less on gut instincts” but “much more on facts” and of course better use of data and technology. (Data is king…).
5.Foresee the Future;
Too much of day-to-day and not sufficient time for strategic thinking and “foresee” the future.
A typical mistake is that we base our future plans on financial forecasts and on projections without looking at potential disruptors (like we have seen with the OTA’s, with the sharing economy and others) and we fail to see how the business landscape might change.
We take for granted that REVPAR and profitability will increase year after year. But this is not the case. It is a cycle business and another typical mistake made by most hotel operators and owners is not planning and strategize for those cycles.
If you analyze the situation within your company, you will note similar challenges within those 5 bad habits raised here and definitely there is space for improvement.
As mentioned before, you are not alone on this, most small-medium size hotel groups are facing similar challenges. The industry is not responding as fast as it should in particular on handling digital marketing.
Have to accept that the value of hotel brands may have peaked (amount of choice has an overwhelming effect) as there is a larger and larger
group of travelers who are not loyal at all to brands but are looking at different experiences.
Today’s travelers relay less on their direct relationships with the brands. Instead, the tech-savvy travelers research their trips ahead of time, prefer to book online and often based on online reviews.
Similar situation with the loyalty/reward points? Some alarming indications out there. With the exception of frequent business travelers, customer loyalty is in many cases up for grab.
Extensive research has shown that improving customer experience is one of the most effective ways to build retention, stimulate enrichment and generate advocacy that drives revenue (of course we all know this but do we practice it?)
Now, what are the “5 bad habits and poor practices” at hotel level? (Again, this is in general and not for specific hotel groups);
Where Hotel General Managers can improve?
**6.Staff and Guests Satisfaction; **Do accept that Staff satisfaction always comes first…….and we all know the reason. But are we really listen to the staff to ensure that they are fully motivated and supporting you on responding to new trends/innovations, planning for the future and provide guest experiences?
The annual and biannual staff survey done by a 3rd party is not sufficient. Need more of those and clearly assess what is the situation. Also unfortunately, more than 50% of all hotels within the industry have inadequate staff facilities. We all know how important is this.
Staff are the ones who make great and successful hotels, not the chandeliers nor the expensive carpets and definitely not the investors…….
A very bad practice is cutting on the *staff training budget *and related expenses; this is clearly stupidity and irresponsibility to me.
As for the Guest satisfaction, reputation management has become so important to potential new customers and it is a must for GM’s to look at this on daily basis, address the issues and provide a professional answer, not a scripted message. GM’s should not delegate this.
7.RGI and Market Share;
To me, those are the most important measurements to assess the leadership and the performance of the hotel and of the brand in the market. There is no better measurement.
Are revenue managers and general managers aiming for the same targets? A misalignment here can cost the hotel valuable revenue.
How you score in this area? Are you the leader or the no.5 out of 5? This is so important to the image and success of your brand and hotel.
Where is the problem and why cannot get better scores? Normally it comes from 3 areas; Leadership, Guest Experiences, and the Condition of the Physical Product. Again simple to measure.
For a stabilized hotel (normally it takes 3 years of operation for a new hotel to stabilize) achieving a score of 100 in RGI is simply doing the job.
8.Marketing Plan and Forecasting;
Does your annual marketing plan includes strategies and plan of actions for the future? Do you include innovations and new trends in the plan?
And how often you refer to the strategies and action plans as stated in the marketing plan during the year? And how often you update the marketing plan?
Management must also accept to spend much more time on the forecasting process as compared with the P&L reviews.
P&L reviews addresses the past but a proper forecast on revenue and on expenses will definitely guide the team to be proactive on setting specific targets and actions for the following few months.
What you have to do in order to book more profitable business? Do reflect this in your forecast and do take actions on time. Markets and trends are moving/changing very fast.
Achieving/Exceeding the approved annual budget is the “binding contract” between the General Manager and the Company. How good you are on managing the cash flow?
**9.Pride and Sense of Belonging;
**Are you or are you not committed to the company you are working for? If you are not, don’t waste your time nor the company time…..
But if you are committed and want to progress, you are expected to be proud and support in full all company’s initiatives and programs. Without your commitment it is practically impossible for the hotel/company to properly respond to trends and changes. To be open to changes and to innovations is an attitude.
**10.Consistency and Brand Image; **It has been proven over and over that customers expects consistency from the hotel brand that they select to stay in.Brands are built upon services and standards. Most hotel companies have developed all necessary standards, systems, services, products, controls and security but there is so much *inconsistency on the delivery process *and practically impossible for any hotels/companies to properly respond to market changes if there is inconsistency within the organization/hotels on the delivery.
A brand without marketing support is merely an interesting logo or creative diddle. Building an efficient support plan for a brand is costly but necessary and activities must be properly planned and communicated through emotionally charged ideas.
Few important and *stimulating questions *that you can ask yourself and use as guide to address some of the key topics and functions required in this business;
- Where do hotel organizations makes money? At hotels or at corporate? (at the hotels of course… and what Corporate does to support? Or only control…?)
- What has been the cost increase of acquiring a customer over the past 5 years vs the increase of REVPAR over same period? Is this sustainable?
- Marketing dollars: Are you relaying on “hope marketing”?… or you have all the metrics in place to measure returns on what you spend? And are you measuring the right things?
- How easy is to book a room in your website and how you compare with your competitors and with the OTA’s?
- SEO: Your website is your “shop front” and your “face”. Can you measure the efficiency of your search engine optimisation?
- Is hotel business becoming a commodity? And can you measure it? (FYI, a very simplistic measurement is that if over 50% of your room bookings are not directly controlled by you, you are a commodity.) What brands have to-do to prevent becoming commodity? This is important and it has to be addressed.
We are in a perishable business and what you have to do to sell the last room in the inventory or the last restaurant seat every single day?
- – Do executives know/measure how much business (percentage of total) is booked via their own systems? Web, loyalty program, sales offices, voice reservation etc…. Are hotels and owners aware of this?
- – Do you really know why customers book your hotel? Rate, location, reviews, reputation/brand? And what is the volume of your repeat business? Gaining or losing repeat business? This is extremely important.
- – What is your actual room revenue vs the potential revenue at 100% of your rate of the day and at 100% occupancy? Can you measure it? (This is an interesting measurement of your performance/efficiency.)
- – Self-assessment: Do you consider yourself a leader or a manager? Can you measure it? And are you able/qualified to innovate and grow the business? Do you take risks?
- – Do you manage your hotel/company?… or the hotel/company manages you?… Do you manage by cost cuttings or manage by revenue?
- – Do you embrace the “work-life balance” or… “Life-work priority”? (health-family-work)
- – Do you “kick and shout” or… “kick and kiss”? Note that evolving trends also applies for your team-talent.
- – Is your team aligned and agile in embracing changes/innovations and driving for results/success?
- – What is your annual employees’ turnover? 10% is a healthy turnover but over 20% it gets expensive and disruptive to business.
- – Where do you see our industry in 5 years? And what you have to do to progress? Do you foresee the future? Or you believe that you can predict it?
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 brands? What will be the costs of maintaining brands “fresh and relevant”?
Technological innovations, new competitors, products substitutes, shift in consumer behavior, evolving social and political changes will continue to shake up our business/world.
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…
- – ROI; with all what is happening within the markets and with the constant increases on basic operating costs/expenses, the new investments/projects will have difficulties on generating an acceptable ROI.
- – Hotels of the future have to be much more efficient/compact and developed based on market needs not on “ego or on likes and dislikes”.
- – The “Owner & Operator” formula used by many Asian hotel groups has been financially successful in the past but situation has changed and the asset light formula has proven very profitable for many operators and for the value of the shares (listed hotel groups).
- – Asset heavy hotel groups who normally have a full management structure in place, are in a good position to maximize revenue and profitability from both the owned hotels and from the managed/franchised/leased hotels. An ideal GOR and GOP mix would be 40%-50% from owned asset and rest from managed hotels. This is a much healthier mix that is preferred by the financial analysts who can influence on the value of the company shares.
- – In addition of begin a labor intensive industry, hotels requires lot of capital locked in the form of fixed charges and fixed assets plus capital for periodical up-grades and renovations in order to complete.
- – It is clear that poorly capitalized and poorly managed hotel groups will not survive. Also clear that consolidation among brands is here to stay, “eat or begin eaten”. Who will be forced to merge? And who will be forced to sale? “Economy of scale” will play a major role.
On closing, please remember that;
We are experiencing unprecedented changes in the way business has to be conducted in order to prosper. But we are *far too slow *on responding.
- Embrace evolution, avoid stagnancy and make innovation a “culture” of driving performance and create sustainable competitive advantage in rapidly changing markets, and customer’s expectation.
In to-days world, people (young generation in particular) want to ride on the best technology available in almost all sphere of life and hotel is one such arena where most of us want to be treated with the coolest technology available from the booking process to check out.
And here something for all of us to better understand what we are facing in this digital era;
- – The largest accommodation provider owns no real estate (Airbnb)
- – World’s largest OTA’s owns no hotel assets (Expedia, Priceline, Ctrip
- – World’s largest taxi company owns no taxis (Uber)
- – Largest software vendors don’t write the Apps (Apple & Google)
- – Most popular media owner creates no content (Facebook)
- – Largest phones companies own no telco infra (Skype, WeChat)
- – World’s most valuable retailer has no inventory (Alibaba)
- – World’s largest movie house owns no cinemas (Netflix)
Fastest growing banks have no accrual money (SocietyOne)
In our business, the highest ROI and profitability is generated by dynamic and agile hotel brands who have minimal investments (or no investments) in physical assets/hotels.
And what’s next?
What about robot-staffed hotels? This technology is on the way… it has to be addressed