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Sales & Marketing Disciplines Undergo Changes, Experts Declare
End to Normal, Redefine Rules at HSMAI, NYU Industry
Strategy Conference
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Laurence S. Geller Provides First-hand View of Recovery Efforts in New Orleans
 
            
NEW YORK, NY (Sept. 26, 2005) – Laurence S. Geller, president and CEO of Direct Strategic Hotel Capital, told attendees at the recent Hospitality Sales & Marketing Association International (HSMAI)/NYU Industry Strategy Conference that: “It’s a time for serious urban planning, not for ad hoc rebuilding.  There needs to be some cohesive leader to plan for the smart rebuilding of New Orleans, and it’s also a time for sophisticated marketing.”
 
Geller, whose company owns the Hyatt New Orleans among other hotels, went on to say: “It’s now time for massive money to come into the New Orleans Visitor and Convention Bureau to rebuild both business and leisure travel.  The Bureau needs to seriously build up its staff to manage this. I hope the industry can put aside short-termism and do the right thing.”
 
He predicted: “Leisure business will be back next year, but the conventions are three years off.”  But, he added: “He who lives by the crystal ball ends up eating ground glass” and further suggested it’s not RevPar that we should be watching, but rather “total RevPar, including all the money spent by the guests, which equates to real ROI as opposed to Room RevPar.”
 
The 5th annual event co-sponsored by HSMAI along with the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University, focused on new marketing disciplines as they relate to return on investment (ROI) and customer relationship marketing (CRM).
 
“There is no normal anymore,” said Dr. Laila Rach, Associate Dean, Preston Robert Tisch Center for Hospitality, Tourism and Sports Management at New York University, to lead off the Industry Strategy Conference here, later followed by Richard Harper, vice president of sales and marketing for Mandalay Bay Resort, Las Vegas, who said: “Sales and marketing directors need to define the rules of engagement, empower the staff and get out of the way.”
 
A focus on database management, advertising online versus traditional offline advertising, and crisis management as it related to the recent hurricane catastrophe on the Gulf Coast were other topics of discussion at the one-day event held in New York City.
 
Robert A. Gilbert, CHME, CHA, President and CEO of HSMAI said: “We experienced a jam-packed program where the expertise flowed with ideas including the need for leadership in the sales and marketing arena, the need to clearly define success before proceeding with a program, and the fact that five years ago HSMAI issued a study in conjunction with NYU which said the skill set required for sales and marketing is going to be different and now it is.”
 
Dr. Rach noted: “It’s back to basics.  In order to be successful in direct sales you have to respond to the client.”  She also noted that CRM “is still in its infancy and requires a quality database.”
 
Mark Woodworth, Executive Vice President for PKF Hospitality Research, introduced the results of a survey done in conjunction with HSMAI examining sales and marketing expense trends noting that “the U.S. lodging industry is well on its way back to the top of the cycle for a full recovery on the revenue side of the equation.”
 
However, Woodworth also noted that “revenue outgrew expenses for all hotels in 2004 over 2003 except for full service hotels, and the biggest increase in expenses is labor costs.”
 
Payroll has been the fastest growing expense, according to Woodworth because “you have to pay more, hire more and benefits costs are up.”  He also noted a 72 percent increase in spending on the Internet.
 
The PKF/HSMAI survey indicated that ROI varies widely by initiative with the greatest ROI for person-to-person sales.  On a scale of 1 to 5 the results were as follows:
1. Person-to-person sales                         4.16
2. Hotel Websites                                     3.98
3. Public relations                                     3.60
4. Internet marketing and advertising         3.41
5. E-mail marketing                                   3.15
6. National and corporate advertising        3.00
7. Local advertising                                   3.00
8. Merchandising                                      2.84
9. Direct mail                                            2.62
Rick Garlick, Director of Consulting and Strategic Implementation, Maritz Research, examined trends in customer relationship management asserting that there is a difference between a hotel and a hospitality company, with the latter being the more successful, especially in satisfying its customers.
          
He suggested that the first thing hotels need to do is ask themselves the right questions such as “Who is your customer?,” “What do you want to do for them?,” and “What do you want your hotel to be?”  
            
When you have answered those key questions you “then maximize your marketing and CRM efforts just to those consumers that fit the model.”  He urged: “Every hotel should have a loyalty program.”
 
He also noted that there are always three groups of customers out in the marketplace including:
1. Those that are always completely loyal to your hotel or product
2. Those that are loyal but may use other hotels or products
3. Those that do not buy into your value proposition and use only other hotels or products
Garlick suggests that it is not necessary to spend too much effort on marketing to the number one group that is fiercely loyal as long as you continue to service them.  He also notes that it is a total waste of energy and marketing efforts to try and convince a group of customers that do not buy in on your value proposition.  
 
Therefore, the group that should be cultivated with your CRM efforts is the number two group of customers that like you, but also use others.  “What we are trying to understand is what messages appeal to those customers most.” 
 
Dr. Rach asked Garlick why hotels have all of a sudden discovered that they have beds in their rooms and are now promoting these products to differentiate themselves.
 
Garlick noted that “Everyone is always looking for the next cool thing and it’s all a matter of creating perception of something different.  You want to advertise to the sweet spot of your customer.”
 
He told of a radio station promotion with claims of “less talk and more music.”  The ads created the perception that there was indeed less talk and more music and surveys done a year later indicated that consumers thought this station had less talk and more music despite that this was not necessarily fact.
 
He noted, “What people want for their loyalty is to be treated special and feel that they have an entitlement to being pampered.  They are saying ‘if you don’t treat me special I am going to take my business and go elsewhere.’”
 
The key to a good CRM program is a good database.  “Without a good database, it is not possible for a hotel or company to communicate with the potential guests.  The more I know about you the customer, the more I can provide you with special services and treatment,” added Garlick.
 
Bringing the CRM into the sales and marketing arena, Garlick noted that the entire hotel staff needs to buy in on the brand messaging with ownership from the top down.  The marketing message then becomes a brand promise and can be successful if carried through.  He noted for example, “the challenge for Wyndham by Request is that it is not being met consistently and executed by all Wyndham hotels.”
 
Dr. Rach agreed: “You have to become an evangelist for CRM and get the front line to embrace it.”
 
Maureen O’Hanlon, senior consultant, Prism Partners and HSMAI Chair, took the CRM discussion to the next level with a panel of experts examining the ROI in Customer Relationship Management.
 
Jill Noblett, vice president of Loyalty and Direct Marketing for Cendant, noted that they have just recently linked all the brands that Cendant purchased over the years under one loyalty program and the company has “seen a huge shift in the loyalty program customers reserving on line.  We can now measure more accurately business year over year.”

Sean Taggert, executive director Marketing Services for Fairmont Hotels, said: “Data collection is very important from the reservation system and the stay reports.  How much guests are spending on F&B, spas, golf, etc. can help us refine our targets.”
 
Menka Uttamchandani, director, Business Intelligence, Affinia Hospitality, noted that “for everything we do we set up a control group and measure the difference between groups.” 
 
Taggert added: “It is important that CRM be a companywide buy-in to be successful and marketing has to take more of a role with the internal communication to make this happen.”
 
Ed Weiner, president and CEO of Media First International, a leading buyer for large travel industry marketing and advertising companies, discussed purchasing shifts between traditional print and electronic media pointing out that “traditional advertising grew 5 to 7 percent while online advertising is growing at a rate of 15 percent, but dollars haven’t shifted, rather more money has joined the pot.”
 
Weiner urged attendees to “look at your online message more frequently.  Don’t be satisfied that you have a great creative ad and run it forever.  That doesn’t work online.”
 
He noted that companies such as Dell Computers change their online message depending on the call volume.  “It’s really yield management using advertising and marketing campaigns to impact yield,” Weiner said.
 
He also warned about defining success by “how much did I spend and what will I get back” because “it’s more than a dollar value, there is a residual effect.  However, if you don’t define what your success is, you can’t end up being satisfied.”
 
Online advertising is a delivery device that is instant, said Weiner, adding: “In the old days you had bingo cards and now you have click throughs.”
 
He left the audience with this profound statement about marketing and advertising:  “If it doesn’t scare you it’s not innovative.”
 
HSMAI’s Bob Gilbert followed this session with a panel discussion on the ROI of advertising.
 
Trip Schneck, president, TIG Global, urged attendees to “explore incrementality and what the flow through is and how profitable is this customer that’s coming from online marketing.”  With the addition of online marketing “you have a medium that produces measurable ROI.”
 
R. Lynn Burkholder, director of marketing for Hershey Resorts, said: “Direct response can be measured and we find that our customers are still reading newspapers, watching television and opening their mail, but doing it differently.”
 
Andy Assante, vice president, National Accounts for Expedia, agreed with the other panelists when he said, “You have to be everywhere” and pointed out that Expedia advertises in traditional media.
 
Burkholder said her company looks at the revenues to cost ratio to determine success of every campaign.  “What did we spend versus what’s the total return from guest spending?  What are they doing while they are staying with us?”
 
Fran Brasseux, executive vice president of HSMAI, then interviewed two vice presidents of sales to find the answer to the question: Is Direct Sales Dead?
 
Rose Genovese, vice president of sales and marketing, Affinia Hospitality, said: “No, we need to balance a lot of things including revenue management.  We do prospecting differently.  We do research on the Internet.  However, I foster more face-to-face meetings and telephone conversations.  We need to have more personal contact because things get done better with personal contact.”
 
Richard Harper, vice president of sales and marketing, Mandalay Bay Resort, Las Vegas, said: “The way sales were done in the past is dead and we need to reinvent the sales program.  We’re going to focus more on direct sales relationships.”
 
One of the things that Harper said is that “we start relationships by simply responding.  That first meeting is going to dictate the way the relationship goes.”
 
In answer to the challenges facing sales and marketing executives, Harper said, “talent is the most significant challenge for the future.”  Genovese agreed saying: “this is the time to train talent, adding: “This is our opportunity to warm up the bench and develop business for the future.”
 
HSMAI is an organization of sales and marketing professionals representing all segments of the hospitality industry.  With a strong focus on education, HSMAI has become the industry champion in identifying and communicating trends in the hospitality industry, and bringing together customers and members at 15 annual events.  Founded in 1927, HSMAI is an individual membership organization comprising nearly 7,000 members worldwide, with 38 chapters in the Americas region.

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Contact:
Hospitality Sales & Marketing Association International
8201 Greensboro Drive, Suite 300
McLean, VA 22102
phone 703-610-9024
www.hsmai.org
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Also See: Shifts in Consumer Behavior Impacting Both Business and Leisure Travel; Wrap-up of Trends from the HSMAI/NYU Industry Strategy Conference / September 2004
Details of the HSMAI / NYU Strategy Session in New York; Solutions to Move the Industry Forward Include Back to Fundamentals, Value-added Promotions, Unified Voice to Combat Downturn in Travel / October 2001


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