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The ABCs of CRM--Part 1 of 2

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June 01, 2002
Customer | Relationship Management
Bill Watson - BWatson@ThePrismPartnership.com
MarkHaley- MHaley@ThePrismPartnership.com

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© 2002 Hospitality Upgrade. No reproduction without written permission.

Part 1 of The ABCs of CRM defines customer relationship management for the hotel enterprise and identifies the key strategic elements for any CRM initiative. Part 2 will discuss the various tactical issues in implementing and using a CRM platform in your hotel company. Part 2 will appear in Hospitality Upgrade’s Fall 2002 issue.

Customer relationship management systems, often shortened to CRM, are clearly the hot new technology tool for hotel companies to grow their top lines, increase return patronage and fatten up the bottom line. Sounds like a great idea, except there is nothing new about it and the dependency is on management and philosophy, not on technology. CRM is a way of doing business. Gary Leopold, CEO of Irma S. Mann Strategic Marketing, said, “CRM is nothing more than understanding how we will embrace our customers.” It is about knowing who they are as individuals and having dialogs with them that recognize them as such.

CRM means different things to different companies. Just as customers are unique, companies are unique. James Dunham, general manager, Travel and Transportation for Siebel Systems, said, “Our customers apply CRM tools differently depending on their businesses’ drivers. A property that has optimized occupancy uses CRM differently than one with low occupancy because their needs are different.”

Think of CRM as a way of life rather than a technology. Having said that, today’s technical possibilities are a crucial enabler for doing a much better job of embracing our customers than we ever could have in the past. Structured databases, robust wide area networks and technologically aware hotel guests are all part of the mix that has elevated the art of customer relationship management. The technology allows us to do it better, but without effective leadership in the hotel companies and buy-in from line employees it remains only a good idea.

Strategic Elements of CRM
Our experience and research identifies five crucial elements required for a successful CRM initiative in any service organization. For some companies, additional elements may become equally crucial, but we see these strategic concepts as universal:

1) Guest recognition
2) Data capture and maintenance
3) Channel integration and consistency
4) Ranking and discrimination
5) Two-way personalized dialogs
Let’s examine each of these areas in more detail.

Guest Recognition
Recognition means many things. A smiling face, recalling a preferred room type or a welcome back greeting are all common recognition experiences in the hotel industry. These are all typical recognition interactions between a repeat visitor to a given hotel and a front of house employee endowed with a hospitality work ethic.

When recognizing a customer of the brand more so than of the hotel, the challenges expand geometrically, but so do the opportunities. Many of the multi-brand companies succeed in this area by training reception staff to acknowledge the guest’s participation in the multi-brand frequency program (i.e. I have your frequency program number on your reservation.), but that is only part of the story.

The trick is to get the relevant information in front of the line employees rather than keeping it locked up in an offline analytical database or centralized system not available to hotel personnel. If you want to impact service delivery, the information must be in the hands of line employees.

An essential concept in discussing guest recognition is that of preferences. Capturing, retaining and making effective use of expressed customer preferences is the essence of guest recognition. You are not only acknowledging that the guest has a prior relationship with the enterprise, but you are able to do something useful for the guest with that knowledge.

A corollary conclusion is that in order to manage preferences effectively, you must limit the number of preferences you are willing to track to some number that can be communicated across the enterprise. The GuestWare Enterprise Edition (www.guestware.com) offers an interesting enhancement to this strategy: The platform stores and communicates global or universal preferences for the guest across all hotels in the company (smoking or newspaper preferences, for example). Yet it also supports the capture of local preferences, unique to the individual property, so that a preference of room away from snowmaking appears at the ski resort, but not the center city property. (See related story by Richard Brooks)

Taking this approach to a deeper implementation than most hotels, the Wequassett Inn of Chatham, Mass. (www.wequassettinn.com) sends lifestyle data capture forms out to past guests during the off-season. The responses are added to the guest history records in the resort’s Lodging Touch property management system (www.hotelinfosys.com). Each week the management team reviews the profiles of returning guests prior to arrival and takes action accordingly. Some Wequassett guests actually get items added to the dining room menu specifically for them based on management using the captured data effectively.

Data Capture and Maintenance
In order to present information about a guest’s preferences to a guest service agent, you first have to capture it and scrub it. As time goes on, you also need to maintain it. A crucial consideration in capturing data is to make sure that you have vehicles for data input from all plausible touchpoints with the guest. Property-level personnel must have both a means and an incentive to capture relevant data about a guest’s expressed preferences.

Scrubbing data means standardizing the address and other crucial fields to ensure mailability. Standardized data is crucial to support effective householding (the process of matching similar records into a single customer master record or into creating a new master). A related requirement is NCOA matching, periodically passing records through the National Change of Address database, to identify people that have moved and told the postal service, but not you. (And you always wondered how that pesky CD club keeps finding you…)

A number of software vendors offer licensed or hosted solutions to data hygiene challenges. Some are shrink-wrapped and some are large-scale mainframe applications. Group 1 Software (www.g1.com), well-established in the gaming segment of the industry, offers a broad range of data quality and CRM tools to optimize the mailability of every record in your system.

Finally, guest profiles and preferences change over time. A complete CRM strategy needs a vehicle for updating the profile accessible to both the guest and to staff.

Channel Integration and Consistency
Many of today’s consumers prefer to conduct transactions over the Internet. As long as the Web-based front-end systems are integrated into the other systems (PMS and CRS for example), this is a good thing for the hotel enterprise. Some travelers would prefer to speak to a live reservations agent, whether at the property or in the central reservations office.

The key thing for the hotel company is to ensure that the guest receives the same recognition and differential treatment no matter what channel they prefer to use to interact with the firm. Just as we strive to offer consistent rate and availability from all channels, we must strive for consistent guest recognition from all channels.

Likewise, as we work for channel integration in guest recognition, so must we reach for it in service delivery. Integrating many of the various hotel management functions at the database level is one strategy that has been attempted by several industry stalwarts, notably MICROS-Fidelio (www.micros.com) and Springer-Miller Systems (www.springermiller.com). A new entrant to the market includes Enablez (www.enablez.com), a Toronto-based provider of an integrated property-level platform extending to spa management and ski lift ticketing as well as the more typical PMS/POS functions.

Another approach is to utilize best-of-breed applications with robust interfaces. Manhattan East Suite Hotels’ (www.mesuite.com) MAGIC (Marketing And Guest Information Center) effectively links the CRS, PMS, CRM database and the Web site. This integration delivers a single, integrated view of the customer and his needs across all 10 hotels and all customer touchpoints. (Read “Making MAGIC in Manhattan,” Hospitality Upgrade, Spring 2000.)

Ranking and Discrimination
Some customers are worth more to your business than others and you need to invest more of your scarce resources in the most valuable customers, and less in the others. This strategy is perhaps the most difficult element of CRM for hoteliers to accept, but it is absolutely essential. While the grand tradition of hospitality is to value every guest and deliver outstanding service to all of them, in practice it simply isn’t possible.

Furthermore, there are certainly toxic customers that are simply bad for your business and you want to make sure they don’t come back. Ask any casino about their blacklist policies…certainly a legitimate form of CRM in action.

There are any number of ranking methods available to the industry, among them frequency program production, recency/frequency/money (RFM) scores or simply number of room nights. Siebel’s Dunham said, “Whatever scoring metric makes the most sense for your organization, you must include a multi-channel strategy to advise the agent on the right product bundle at the right price to that high- or low-value guest at the right moment in order to cross-sell or upsell them. That is one way a complete CRM strategy drives top-line revenue.”

Part of your CRM strategy needs to be a means of ranking your guests to identify the most valuable and then servicing them differentially. By extension, you also want to identify low-value customers who are potentially better customers, and offer them enhanced services as well.

Two-way Personalized Dialogs
This area is perhaps the most exciting and potentially rich CRM strategy active today. Rather than relying on mass-market advertising or segmented newsletters to members of a frequency program, this element pursues personalized communications with customers as individuals, with content specifically about the customer’s interests and preferences.

Most of these communications include a tangible and specific call to action, encouraging the customer to do something with the communication, thus establishing a two-way dialog. These dialogs serve both to reinforce the connection between the firm and the customer and to provide opportunities for more information and sales with the customer.

Next issue: Part 2 of The ABCs of CRM will discuss the tactical side of CRM implementations, including the roles of the PMS and of external CRM platforms, loyalty programs, integration to operations and effective change management.

Bill Watson is the managing partner of The Prism Partnership, LLC, and Mark Haley is a partner. Prism is a consulting practice servicing the global hospitality and travel industries based in Boston. You can contact the authors by phone (617) 236-4297 or e-mail BWatson@ThePrismPartnership.com or MHaley@ThePrismPartnership.com.

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