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HSMAI Special Section: Thriving in the Digital Economy - 9 Tips for Hoteliers

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April 04, 2016
HSMAI
Kelly McGuire

It has been an exciting couple of years in the hospitality industry. We are coming from multiple consecutive years of unprecedented high performance. Hotel companies are starting to get a grasp on the opportunities and challenges associated with digital, mobile and social, and furiously innovating in marketing and guest experience initiatives. We are seeing increased investment in revenue management, along with solutions that help hoteliers take advantage of all of the disparate and complex Big Data that has become so common in business today.

Here are 9 suggestions for what the hospitality industry needs to stop doing, start doing and do more of

1. STOP OPERATING IN SILOS. This isn't the first time I’ve said this. I also know I’m not the first person or only person that has said it. Yet, we are still not where we need to be in taking a more holistic view of our business, and aligning decision making around a central business strategy. Hotels must start synchronizing decision making across marketing, revenue management, finance, development and operations. They need to be supported by a collaborative and business-focused IT organization. As always, reporting structures and conflicting incentives are holding us back. We can't let this get in the way of doing the right thing. At this point even grass-roots (AP) initiatives to reach across the aisle will see benefits, and perhaps serve to motivate and justify a broader look at organizational structures.
There are some positive signs. In 2015, Hilton Worldwide pulled together Hilton reservations, customer care, regional marketing, eCommerce and revenue management under Chris Silcock as chief commercial officer. Wyndham Hotel Group recently announced that they will consolidate sales and revenue management under Kathy Maher, SVP, global sales and revenue. You'd better believe that Marriott and Accor are taking their acquisitions as an opportunity to re

Yet, recent news has thrown a bit of uncertainty into the mix. Wall Street appears to have pulled back on its enthusiasm for hotel investments. Recent acquisition activity, including Expedia’s acquisition of Orbitz, Marriott’s of Starwood, and Accor’s of Fairmont, as well as the merger of Commune and Destination Hotels, will have an impact that we can't fully grasp at this time. At the risk of creating a self-fulfilling prophecy, I've even started hearing hoteliers talk about “the end” of the good times, despite most industry forecasts suggesting that growth will continue (albeit at a slower pace) for at least the next few years.
Whether you believe this is the beginning of the end or the continuation of positive conditions, now is the time for hoteliers to shore up operations, plan for the future, and pull themselves into the modern era. Nothing is the same as it was, so we can't afford to act as if it is. 

2. STOP RELYING ON GUT INSTINCT. Analytical systems to manage and gain insight from data have become more accessible to every type of hotel at every level of analytical capability. There's no longer any excuse to rely strictly on guesswork or gut instinct. Hoteliers need to foster a culture of fact-based decision making, or risk falling behind. I'm not suggesting that a revenue management system or a data mining platform can replace an experienced revenue manager or marketer. In fact, it’s quite the opposite. The systems are there to provide decision support. The manager needs to make decisions through the lens of their experience and business acumen, based on what the data tells them. I’ve been encouraged to see more hospitality organizations investing in data and analytics systems and people over the last few years. This must continue.
We need to push the industry and the educational programs that support us to incorporate more STEM education (Science, Technology, Engineering and Math), and we need to make our business more attractive to analytic experts. We have very difficult, very interesting problems to solve with technology, data and analytics (and great travel benefits, too, don’t forget!). The awareness of hospitality analytical opportunities is just not there in the science community. A few well-placed analytics experts can make a huge difference for a hospitality company. Either we need to push those already interested in hospitality toward STEM classes, or we need to make the broader STEM community aware of and interested in our industry as a fruitful career path. I have several PhDs and people with master's in operations research on my team. They've been with the company for years

3. STOP BLAMING THE OTAS FOR EVERYTHING. As the hospitality industry has begun to talk seriously about the problem of rising distribution costs, OTAs continue to take the blame. Now, I agree that rising distribution costs are – and should be – a huge concern for hoteliers. Cindy Estes Green and Mark Lomanno have provided strong evidence that we need to shift this trend or we will be in trouble. It's easy to sit back and simply blame the OTAs. However, hoteliers must keep in mind that we have control over our distribution costs – It's not something the OTAs are doing to us. They have proven their value in generating incremental demand from markets that an individual hotel could never reach on its own. They have a following in the traveling public that's too large for even the big players to ignore. There can be a huge upside to working with distribution partners. You just need to manage the relationship thoughtfully, with an eye toward the pricing strategy and marketing opportunities associated with it. Consider the concessions that Hilton Worldwide recently got in their negotiations with its OTA partners, as announced in its third quarter earnings call. Of course, being a large global company helped, but so did having a strategy, and knowing the role that the OTAs would play in that strategy. It wasn’t just about commissions with Hilton’s three prong strategy, it was about terms too. Instead of blaming and throwing your hands up, build your business strategy considering the opportunities to use the right distribution partners as an integral component. Make the costs you pay worth the opportunities you achieve. This is the most strategic way to keep your distribution costs under control. I think Cindy and Mark would also advocate for being aware of the cost, and taking a strategic approach, as opposed to eliminating such relationships.

4. PREPARE FOR THE FUTURE. The hospitality business isn’t getting any easier or any less complex. Consumer behavior is changing rapidly, fueled by new technology, new business models, economic conditions and generational impacts. Technology continues to evolve, creating more automation options, more data sources and more operational complexity. Recent merger and acquisition activity will change the competitive landscape. It's up to each of you to prepare yourselves and your organizations for this change. You need to stay updated in the latest trends in consumer behavior and technology. You need to evaluate a potential technology investment in light of your business strategy, and be able to clearly communicate business needs to IT. If you work in IT, you need to make an effort to understand the market, and align yourself to the organization's business strategy. Attend conferences (some outside of the hotel industry), read articles, look at software demos, ask for proof and interact with your peers. Organizations like HSMAI and others have great educational materials. Most important, however, is to keep asking questions. Don’t take anything at face value. With all the noise out there, it's up to you to cut through the hype and determine what will be most effective in moving you and your organization forward.

5. BECOME MORE PRESCRIPTIVE. As influences on our business grow and change, and more and different data is available to understand that change, it’s not enough to be able to predict what will happen. You must be able to prescribe solutions to achieve desired outcomes. It is great that your revenue management system can tell you that you will get to 90 percent occupancy next month, but what if business goals require you to be at 95 percent? Today, it is not enough to know what will happen, it's all about knowing what to do about it. A prescriptive manager can synthesize a wide variety of inputs, read the market and work with other departments to achieve a business outcome. Once you finally have the tools to access all your data, it can be very easy to get distracted by interesting patterns that ultimately don’t deliver value. If knowing a piece of information won’t change a decision or alter a business outcome it’s not worth the time it takes to calculate it. Start asking the question “So what?” and “What do you plan to do about it?” of your managers and analysts now. This is useful during any economic climate, but think about how powerful it will be if you were already practiced at this kind of business decision making as we move into the inevitable next downturn.

6. START TESTING TO INNOVATE. Recent strong economic conditions have provided the opportunity to invest resources in experimentation and innovation. Now is the time to try out some new techniques, new programs, new strategies and new technologies. Even if you don’t have the budget for a huge technology investment or massive program change, you can use what you have to do a bit of experimenting. Innovation for the sake of innovation isn't the point. To innovate successfully, you must have a sound testing mechanism that can demonstrate the benefits. Analytic hospitality executives are probably familiar with the concept of A/B testing. With this method, random groups of real consumers are shown one of two alternative treatments and statistical tests determine which treatment is most effective in driving the desired outcome. It can be as simple as testing which image increases conversion or which email title generates the most openings. Every hotel company should learn this technique. It's so easy to deploy in the digital environment, you'd be crazy not to.

7. COLLABORATE. We need to foster a more collaborative environment across the hotel – at the corporate and property level. Even if your company hasn't yet aligned organization structure or incentives, you can still build informal cross-functional teams and start working through broader strategic initiatives together. As hotel companies take on more complex initiatives like personalization (described in a previous blog), it will become more crucial to get input and buy-in from across the organization. Take the time to learn about goals, metrics and operating procedures across the organization, and get used to gathering input and gaining consensus.

8. AUTOMATE. There's simply no reason anymore for analysts to spend large portions of their time on data gathering and cleansing, or for managers to have to wait days to access operating reports. These routine analyses should be automated through business intelligence and analytic applications. You should have an automated revenue management system, a reputation management system, a business intelligence application and an automated marketing system, so the organization can focus on interpretation and prescriptive decision making. When analysts and IT aren't stuck on routine tasks, they have more time for more strategic or ad hoc analyses. Make a point to invest in some technology that will automate routine tasks, providing the right information to the decision makers in the formats they need to take action.

These are broad strokes suggestions, but they have very powerful implications on how you think of your business.  I encourage you to take some time with your teams to think through the specifics for your business.  On a personal note, as I approached 2016, with a new job and a new team, I found this format of asking what we need to stop doing, start doing and do more of very useful for starting conversations with my team, for understanding the business drivers and for building a strategy to move forward.

Kelly McGuire is the vice president, advanced analytics for Wyndham Destination Network.
 
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