In hospitality, the customer is king… but how can hotels ensure their customers feel like royalty when so many online relationships have been claimed by third party sites such as Booking.com? Les Roches Clinical Professor Franc Avila offers some insights into ways that hospitality players can bridge the gap between online and offline services.
So you’ve booked an overnight stay, with dinner, at your preferred hotel. Shortly before you are due to arrive, you receive an email containing your own personalized dinner menu – unique to you and featuring dishes and ingredients that are among your absolute favorites.
That has to make you feel good, right? To feel like the hotel truly values you as a customer?
Your hypothetical hotel can do all this because it has tracked your dining habits on previous visits, so it has a fair idea of what will tickle your taste buds. The chefs can use that information to make up your personal menu. It’s the sort of data-driven personalized service and omnichannel customer relationships which are already familiar in the luxury industry; but much less so in hospitality.
Why is this? Leaving aside any questions around GDPR and other data usage regulations, the main issue is that hotel chains do not “own” a large proportion of their customers, and so they are unable to harvest the level of data that can drive personalization.
“When it comes to digital transformation, the hospitality industry is trying to play catch-up. We are not ‘digital natives’; and we gave the power we had over our brands to third parties in the form of the OTAs (online travel agents),” says Les Roches Clinical Professor Franc Avila.
“We need these customer relationships more than ever; but we don’t have the means to build something, because in many cases we don’t know who the customers actually are. The customers are ‘owned’ by the OTAs, since they are the ones collecting the data. Without it, there is no possibility to upsell or do remarketing. We cannot personalize services… we don’t even know their birthdays in order to surprise them with a little gift on the day.”
Lose the battle, but win the war?
If hospitality operators have lost the opening skirmishes with the OTAs, Franc doesn’t believe it is too late for them to win the “war” for the customer. However, things have to change – and soon.
The chance to play a part in driving this change is one of the major factors that drew Franc back to Les Roches (having first joined the school in 1996) in order to lead the MBA specialization in Hospitality Entrepreneurship and Business Development.
It’s a specialization that plays precisely to the leadership gap the industry must close if it is to recapture those all-important customer relationships, and then feed off the wealth of data they generate.
And while those seeking a more comprehensive digital transformation toolbox may opt for our Master’s in Hospitality Strategy and Digital Transformation, having a specialization such as this also gives MBA students the opportunity to develop a strong foundation in this all-important area.
Franc adds, “I had an email the other day from one of our MBA graduates, and he revealed the kinds of questions hotels are now asking management recruits: how are you going to transform my hotel? How will you create experiences that will make the customers come back? And as a leader, how will you convince others in your team to follow you as you try bold new ideas to move the company forwards? This is exactly what we are trying to instill in our students.”
Bridging the gap
Where the hotel operators have the killer advantage, of course, is the “offline” experience – in other words, the customer’s actual stay. It’s bridging the gap between this and the “online” experience that Franc believes will allow operators to start winning back the primary customer relationship. From there, hotels can rebuild the brand loyalty that has been damaged by the more commodified, price-led marketplace of the OTAs.
“I say to my students that when someone goes to the bank for a loan, the bank manager needs to understand that this is not about the pure financial transaction; the customer is fulfilling a dream to buy a house, or a car. He or she needs to feed that dream; to make it happen,” says Franc.
“The same should be true for hospitality. When people go to a hotel they want to feel appreciated and remembered. Our industry needs to move away from the 20th century perception that the product is king and focus more on the entire experience. How does the customer feel about being there. It’s about listening rather than being the one doing the talking.
“The hotel operator might think of the guest stay as a purely commercial transaction; and after the customer has paid their bill and walked out the relationship is over. But this would be a mistake, because forging a lifelong relationship with the customer could be very valuable indeed.”
By way of illustration, Franc cites research which says that a loyal BMW customer commands a lifetime value of than $500,000 due to income earned from repeat car purchases.
The fightback has begun
The good news for the hospitality industry is that the customer loyalty problem is recognized and the fightback is already under way. Having initially neglected their online offerings, many operators are now using the internet as a genuine shop window, deploying technologies such as virtual reality room walk-throughs, automated chatbots and other devices to draw customers towards direct bookings (often with the promise of an OTA price match or even better deal).
And as they embrace the potential of digital transformation, operators are trying new techniques such as “programmatic personalization”, where customer data feeds algorithms to personalize the stay – in much the same that the online banner advertising we see when visiting websites is often programmed according to our likes and habits.
Hilton has been among the pioneers of this approach with its Connected Room application, which was launched a few years ago and has since benefited from a tie-up with entertainment streaming platform Netflix, enabling guests to access their personal Netflix accounts when staying in a Connected Room.
“The next step is for these algorithms to become even more clever, by using elements of artificial intelligence,” says Franc. “Based on previous stays, the hotel can work out what the customer tends to choose from the menu, and use that knowledge to create a bespoke menu. As well as creating the wow factor, this can also help the kitchen to reduce food waste, because they have a pre-ordered meal to create.
“The same works for rooms – as a hotelier, I know what you’ve booked before; so I can use this information to propose something similar. Soho House is one operator that does this very well for its members.”
Whether they opt for Franc’s entrepreneurship specialization or the alternative focused on revenue and performance management, MBA students will – across their year of intense study – gain a wide spectrum of knowledge which they’ll need to drive data-led customer engagement initiatives. MBA courses feature topics such as digital transformation, digital marketing, service design and delivery, as well as investigating cutting edge technologies such as blockchain in partnership with our Spark global innovation sphere.
“If you don’t know where you are going, you cannot lead others to the destination. So our MBA has to be constantly reinvented if we are to teach what the leaders of tomorrow need in order to determine the future direction of hospitality,” adds Franc.
“The race is on, and the technologies available today and tomorrow have put the industry in a unique position of opportunity. There’s arguably never been a better time to get involved with the business of hospitality if you want to make your mark as a leader and innovator.”
- Check out this blog for more entrepreneurship insights from Franc Avila