(GA, Aug. 2017)
Recap by Giovanni Angelini, August 2017
Giovanni Angelini examines the state of the lodging industry in 2017
and explains what hospitality companies can do to ensure long term success
As reported by the World Travel & Tourism Council (WTTC), travel and tourism supports directly and indirectly one in ten jobs on the planet, making it an enormous generator of economic growth and contributing 10 per cent of the world gross domestic product.
The sector generates more than USD 7.6 trillion globally and supports more than 300 million jobs. Travel and tourism has consistently grown faster than the global economy, and, as one of the largest export industries, generates vast amounts of foreign currency.
In the face of terrorism and natural disasters, the travel and tourism sector has shown resilience as people continue to move around the globe. In fact, studies have shown that tourism can positively transform countries and play a vital role in the global quest for a more equal, inclusive and sustainable world.
For our sector to continue to thrive, we must focus on three vital elements: 1) Freedom to travel. 2) Successful business. 3) Responsible practices.
We are in an age of discovery and the information revolution is driving many changes.
One of the challenges of today’s travel and tourism industry is safety and security. Governments and those in the business should work together to tackle the threat of extremism, and not call into question the basic freedoms of people movement and trade, which are essential to our business.
Research conducted by the WTTC shows that countries with a more open and sustainable tourism sector tend to be more peaceful because they shape positive attitudes and engender institutions and structures which create and sustain peaceful societies.
Security, demographics, resource scarcity, water management and corporate ethics are all issues which will influence the way travel & tourism will operate in the future.
Climate change will have a huge impact on the industry. The world is moving very fast to “real time” climate change with changes in global water cycles (our ecosystems are based on water cycles) and the industry must play its part on becoming a low carbon economy and implement responsible practices.
What is the lodging industry?
An industry managed by people providing service to people…
Once viewed as a luxury only affordable by the rich, today travel is seen more as a right, and people will always find time and money to travel for business or pleasure. Hotels (lodging) are one of the most essential parts of this business.
A very competitive industry exposed to external factors such as inflation, politics, natural disasters, terrorism, market cycles and other disruptions, the lodging industry is a capital intensive business which normally does not generate short term returns and is stocked with a myriad of stakeholders.
It is also:
· A labor intensive industry providing personalized services to local and foreign
travellers.
· A people industry with humane elements.
· A perishable business (inventory) as available rooms or restaurant seats not sold at the end of each day are gone forever and cannot be stored.
· A fragmented industry with too many brands and owners.
· A seasonal business (in most cases) making it very difficult to continuously operate at full capacity.
· A business where everyone is copying everyone. (And that’s why a ‘value-based management’ is the best way to achieve success because it is hard to replicate.)
· A global business catering to travellers from all over the world, meaning hotel organisations need to think and act globally. Globalisation will eventually touch all aspects of the hospitality industry.
· A business where training of employees is of paramount importance. Customer satisfaction is highly subjective and it’s practically impossible to please everyone every day. But implementing training to foster commitment to excellence, as well as enforce brand standards, certainly helps.
The hotel business used to be much less complicated but things have changed dramatically. At present there are far too many hotel brands creating confusion in the market and amongst consumers.
An asset light and franchising formula (leases in Europe) has been the preferred method of expansion by most global brands. Indications are that franchising will continue to increase at the expense of management agreements. Economy of scale has become essential for progress at both hotel level and at corporate level.
Anticipating the needs and wants of guests, and providing a rich and rewarding work environment, are and will remain vital to the success of the hotel industry. Can hotels go from functional to lifestyle? And can hotels do a better job of building community and social platforms?
The Customers
What do they want? What is important to them? Convenience or brand?, Price/value or brand?, Recognition or Points? In principle, recognition, value and loyalty are and will remain the fundamentals of doing business in hotels and of responding to customers’ needs. Lately, the hotel business has been dominated by two areas – real estate and distribution/brand – but the critical pieces, including delivering the right product and services to guests, have all too often been overlooked.
Organisations
Is your hotel company (or hotel) organised like the military? Are your executives operating inside boxes and/or silos? What do you have to do to become a Customer Centric Organisation? Remember that customers are not interested in navigating your silos.
Brand
What does your brand stand for and what are its competitive advantages? You absolutely need to take the brand and the culture it represents and create your own formula for financial and brand success. In most cases, the value of a brand is measured by the distribution system that the brand offers, but most important is the actual amount of business generated by the brand’s systems. A major challenge for all hotel brands is remaining competitive in the face of shifting consumer demands while simultaneously maintaining brand values.
Success/Failures
There is nothing wrong with copying good practices, but remember that the people most likely to fail are those who are either trying to replicate or follow trends and paths set out by other hotels. A value-based management that creates emotion and enhances a guest’s experience is a sustainable advantage and the way to go. And you cannot get away from revenue management and an efficient and accurate business forecast.
Technology
Technology is an enabler, not a means to an end – it should help you to analyse all the customer touch points and what customers want now and in the immediate future. You have to ask yourself what customers are looking for and how you can respond to their needs. Technology will continue to change and grow rapidly, and hoteliers have to constantly stay abreast of trends to ensure their hotels meet guest expectations. In hospitality, balancing “technology with humanity” has become a must.
Innovation
Note that innovation is not just about technology; it’s about thinking and doing things differently – to improve efficiency, drive revenues and profits, and create new revenue streams. It’s a case of “life in the fast lane” for both customers and operators because innovation is endless.
Service
Service is the cornerstone of the hotel business and it’s something that hoteliers must not forget. Can you offer authenticity and differentiation? The objective is to give your customers something different but which they want and will pay for. Can you deliver a service that guests can’t get anywhere else. Can you turn traditional customer pain points into pleasure points? Do you believe in human insight? The principle is to always try to get away from being a commodity.
Data
“Data is King,” goes the saying, and it’s true that those who understand big data and how to manage it effectively will be the ones to thrive over the coming years. Hoteliers have an amazing collection of data, which, when stitched together, forms a digital trail of all interactions to take place during a guest’s journey. But do hoteliers effectively make use of all this valuable data?
Standards
Remember that standards are necessary ‘evils,’ but without context they mean nothing. Hotel people need to go above and beyond and let go of practices.
Delegation
Hotels need to provide front-line employees with the tools they need to ensure execution. Embrace evolution and avoid stagnancy.
People
Securing and retaining talent is of serious concern for the lodging industry as there is a severe shortage in the market. A good team of motivated people and professionals with experience in the industry will keep you ahead of the competition. And this will always be the case.
While the industry continues to evolve, the one constant and main point of focus for all hotel companies is the customer. It’s a case of going back to the very basics – “Take good care of your people and they will take good care of your customers.” Can you dispute this strategy?
We are in the people business and people have to come first. It’s as simple as that; there’s no other way.
Training is absolutely crucial from the time an employee joins to the time he/she retires. Without proper training, employees will not be able to perform effectively nor be able to advance in their careers. Training covers all aspects of the business from the company, the culture, attitude, commitment, skills, team work, productivity, cross-training, results etc. Every organisation must allocate adequate training funds and ensure those funds are properly utilised.
OTA’s
Hotel companies opened the door for OTA’s to thrive. OTA’s were pioneers as they were able to figure out a way to make money by charging high commission for real estate they had no vested interest in. OTA’s biggest strengths are money and marketing. They have successfully convinced travellers that they have the best deals, but in most cases this is not true. Can the hotels fight back? It is a contentious battle without a winner. Solution? Create a win-win situation.
Sharing Economy
Their business model is similar to OTA’s in that they don’t own any of the real estate they market and sell. In fact, they have successfully monetised a business that is not entirely new – the renting out of a property (individually owned villas or apartments) to travellers at a very competitive rate. While they face regulatory hurdles, home-sharing companies have successfully inserted themselves as another means of lodging. (Have we come to the point of “If you don’t beat ’em, ‘join ’em?”)
Consolidation
All indications are that consolidation is a natural industry evolution, and the expectation from most is that this will not stop anytime soon. In this new global era of travel does bigger mean better? Economy of scale and strength to negotiate are necessary competitive advantages if hotels want to remain in business.
Robots in Hotels
Robots, by definition, are machine learning algorithms running on purpose-built computer platforms that have been trained to perform tasks that currently require humans to perform. No longer a gimmick, they are coming and coming fast in the industry. There’s no point mentioning the good old days and how we used to operate – it won’t help anyone. We just have to adapt and make the best out of it. What part of hotel work will be fully automated and what parts will be hard for machines to do? And how many jobs will robots take? Ideally robots should be confined to the back of the house but this may not be sufficient.
Challenge for Hospitality
Business leaders must be free to act and respond to the market with greater speed. We must reduce the loss of talent through burnout or frustration, consider new ideas of improving both team productivity and management of talent, and develop new service levels that engage customers that are embracing hospitality. We must prepare the executives for this new world.
Managing Changes
In today’s business environment, customer preferences are constantly shifting and prices, policies, people, employees, products and competitors can literally change overnight. The loyalty of customers and/or associates is becoming questionable. Change is a reality. What we know yesterday no longer applies today.
Hospitality organisations need people who can adapt quickly, not those who are resistant to change. People who can envision and anticipate change are preferable and will help you stay ahead of the competition.
Mistrust (Cultivating Trust)
Do we live in an era of mistrust? Do you trust your boss? And do you trust your co-workers? What is the state of engagement? Have you created a fun place to work? And have you created a team? Is the organisation promoting a culture? Does it empower its employees to respond promptly to customer problems and requests? Or are people frustrated by complicated systems and policies that are actually not customer friendly?
It goes without saying that in this very competitive environment, trust is a critical issue. Organisations need their best people more than ever to be engaged and productive. People need to know where they stand. They need to know if they are doing a good job or not, and also how they can improve. In the end, trust and engagement breed success.
The General Manager
Can you be the type leader everyone loves – including your staff, your customers and your shareholders (but probably not so much by your competitors)? It helps if you have a clear vision, effectively make decisions, put your employees first, and show appreciation for their efforts. You should also always hold yourself and others accountable, show you’re dedicated but have a good work-life balance, and never micro-manage.
Habits of a successful Hotel General Manager
A good listener and an effective communicator, a successful hotel GM should identify and develop their employees’ strengths, lead a horizontal-based organisation, set clear and precise horizons, learn how and when to congratulate, celebrate successes, and reinforce positive attitudes.
A successful hotel GM is focused on success and market leadership. They accept responsibility for top-line revenue and are involved in every aspect of generating business. They know the top producing clients and are accurate forecasters and visionaries.
Statements to avoid: I am the boss; that’s not my fault; I’ll do it myself; I know that, I’ve thought of everything; failure is not an option; that’s not the way we do it here; I want results, not relationships; I don’t care if it’s unethical – if it’s not illegal, do it; don’t bring me any bad news or surprises; you’re lucky to have a job here…
Future
More important than technology, the future is, and has always been, about people, relationships and emotion. Hospitality is all about emotion, and this is what we need to focus on. We must develop creative solutions that manage the technology of the modern world to create even greater experiences which will allow the industry to prosper.
Organisation culture
Is there clarity on what it is? Has it been cascaded down to all? Has it been accepted by all? And how do you measure it – People Satisfaction, Customer satisfaction, Business results? What do you do if there is no acceptance?
Creation of opportunities
Creating new opportunities related to increased revenue and customer satisfaction is a top priority for a successful organisation. You should have clear value strategies that encapsulate the direction of the company and the desired results.
Entering a new market? Growing brand presence? Creating a more efficient organisation and implementing new systems? Boosting employee satisfaction for lower turnover?
Competition
Competition should be viewed as healthy because it constantly motivates people to excel, driving the quality necessary to stand-out and laying the foundations for long term success. Put simply: Competition is the best motivator.
Competitive advantage
Clarity about this is fundamental. Why do customers choose your hotel/brand? Is your SWOT analysis continuously updated, and what do you do with it? Every organisation must have a competitive advantage and actively measure improvements.
Priorities
We are all humans with different needs and aspirations and we all need to set our priorities in life. Putting the job first never works out well in the long term. Health-Family-Job (in this order) is a much more balanced priority for success.
If your health is poor, you will be no good to yourself nor to the organisation. If you have family problems, your overall behaviour and performance will suffer. Success will only come and stay when the first two priorities are taken care of.
Every organisation expects you to perform, produce results and work hard, and good health will allow you to successfully manage stress, emotions, and worries, as well as your attitude towards yourself and others. Take good care of your health because your company expects it and your family demands it. Do not steal this from yourself and from your family.
