How Hospitality Evolved from an Art into a Science

Our beloved industry has been evolving for more than three decades. The combined impact of demographic changes and new technologies are the main catalysts for this transformation. The Internet gives consumers the opportunity to think of hotels as a commodity. Hotels had been lowering prices to gain a competitive advantage immediately after the 2008 crisis and until around 2015. From then on, with Revenue Management trends, the drive to raise prices became fashionable, as long as the cash cow kept producing. The many changes taking place today are positive proof that this industry is no longer limited to being an "art." We have officially moved into a "high tech, high touch" world. Driven by revenue management, it now includes distribution channel management, social media marketing, Big Data and, of course, Artificial Intelligence.

First Came Rates

Revenue Management is the set of techniques used to determine which booking requests to accept and which to reject in order to optimise revenue. Revenue management principles originated in the airline industry in the 1970s, but the concepts are equally applicable to hotels, restaurants, attractions and leisure venues. Campsites and other businesses, such as golf clubs, are still lagging behind. Perhaps tour operating has something—or a lot—to do with it. Hotel brands, led by Marriott and Hilton in the 1980s and 1990s, created a wide variety of new brands. By the 21st century, every major hotel company had a vertical brand portfolio, from budget hotels to full-service properties. I experienced—or rather, suffered—this firsthand when I worked for InterContinental Hotels in California during that period. Online travel agencies (OTAs) began selling hotel products at deep discounts, which led brands to negotiate rates with OTAs. Today, it is time for the industry to set prices based on perceived value, rather than simply on prices relative to a competitor. But understanding true demand in a market is quite scientific.

Understanding Your Customers’ Behaviour and Decision-Making Process

The vast amount of demographic and social information available about today’s travellers requires analytical skills and creativity in order to respond appropriately to the market. Consumers’ product choices are influenced by a model of the consumer decision-making process. There are two risks hotel executives must overcome in order to achieve market success:

1. Performance risk: the possibility that the product will not satisfy the consumer
2. Financial risk: the monetary loss resulting from a poor decision

With regard to performance risk, loyalty to a chain is an important factor in consumers’ product choices. Hotels allow guests to accumulate points that can be redeemed for stays and service upgrades. The consumer’s perception of the hotel company and what it stands for is fundamental to the company’s success. Product quality must be exceptional, service must be at a "wow" level, and there must be a compelling value proposition for the consumer to choose your business. With regard to financial risk, lost market share is difficult to recover. Managing attrition may be the most important marketing strategy in today’s market. Consistent service and staff attitude make a significant difference to competitive advantage across all market segments. Hotels that can train and motivate their team members will have a much greater chance of winning repeat business. I will explore attrition management further later in this article.

Examples of Success Formulas

Knowing the millennial traveller, understanding that international travellers represent the fastest-growing market in terms of accommodation demand, and leading your team with strategies that incorporate current trends are the recipe for success. There are several key trends that must be monitored and considered. These include reputation management, innovative technology and the sharing economy. Airbnb has become a real player in the accommodation demand mix.

The Science of Marketing

Marketing is required both to acquire and retain guests. And, believe it or not, only a true quality revolution gives you a competitive advantage, because, as mentioned above, brand loyalty is very limited in today’s millennial-dominated hotel market. Since hospitality businesses do not hold customers captive, the only way we can prevent "attrition" is by continually outperforming the competition. Real-time marketing and a continuous supply of content dominate the industry. While it would be unwise to dismiss the impact of traditional marketing, real-time marketing must be carried out regularly and incorporate customer-generated content, especially through social media. This must be a crucial component of the marketing mix. Social media video campaigns, when done correctly, have proven successful for hoteliers seeking to drive guest engagement. Millennials have become the fastest-growing customer segment within the hotel industry. Hotel bars and restaurants are wide open, with blended work, play and food-and-beverage spaces designed with this guest in mind. Millennials also have no problem speaking up. If what they are looking for is not handled to their liking, they will turn to Twitter, Facebook, Instagram or TripAdvisor to voice their complaints. Furthermore, millennials do not display the same brand loyalty as their parents. This opens the door to independents and makes it even more difficult to get that guest to return. Customer service must include enabling guests to be self-sufficient. For example, if a guest wants to find information using their phone, providing an app or mobile website that accommodates that need will appeal to many. The rise of this digital traveller requires the hotel industry to balance the expectation of personalisation with the need to remain independent. Customer service must also be genuine and provide excellent, high-quality recommendations from a truly attentive team member. "WOW" customer service is the only way to ensure repeat business. Encouraging the most profitable bookings is essential, as higher revenue results from strong increases in occupancy levels, average rates and revenue per available room (RevPAR). This may suggest greater profits, but rising distribution costs, along with other operating costs such as energy and wages, can prevent profit growth. While revenue mainly comes from RevPAR growth, there are additional ways to increase both revenue and net income. One way to improve net income is to rely less on online travel agencies (OTAs). This is no secret. By directing guests to direct channels, the savings are significant. Distribution costs are soaring, and the number of players entering the market to compete with OTAs is growing rapidly (think Google, Facebook, Instagram, TripAdvisor and more). Make sure you have a strategy in place to win repeat business from every guest... and get them to book direct next time. Technology, mobile check-in and seamless connectivity across platforms and devices are no longer the future; they are the present. Today, mobile apps are used for everything from a digital concierge to access to Big Data. Geolocation can make it easier to sell guests something that is literally right in front of them.

Where to Go from Here

The transition from art to science in hospitality has caught many people by surprise and, unfortunately, these are the people being left behind. It is crucial to understand the hospitality industry as it is today, because if you continue to focus solely on the art, you will miss the opportunity to capture more business and increase your profitability. Remember, we are here to help you