|By Craig Jacobs, January, 1998
What can an established hotel do when new competition enters the market? How can the hotel prevent staff and client defections? Should it sacrifice profit for market share? Will the property passively accept the beating that is coming and blame it on the economics of supply and demand?
New supply invariably threatens the stability of an established hotel. The older the hotel, the more likely the threat of lost market share and profitability will be realized. Regardless of flag, location or reputation, hotels are vulnerable for the simple reason that trying a new hotel is a safe form of adventure for a frequent traveler. “Ready for a change of pace” is the death knell of the old stand by hotel.
The purpose of this article is to suggest that the difference between getting killed by the new competitor versus engaging in a battle in which you have a fair chance to win may be found in the individual property’s proactive, enlightened management. The outline that follows answers the challenge that an old boss of mine used to delicately put to me: Any idiot can look good when demand is strong. Let’s see how you do when the phones stop ringing.
1. Make a conscientious effort to know and retain your best customers.
If you do not have a well-defined, written set of qualifications for “best client” or a structured method to keep track of customer spending, odds are you do not have an accurate list of your best accounts. Knowing the identities of your best customers is the first step towards keeping them. Successfully retaining customers when new competition enters the market is also a function of the quality of your relationships with them. Many relationships with customers evolve from vendee/vendor into a meaningful commitment in these ways:
Recognition: Nothing makes a more powerful impression on a customer than being greeted by name or thanked by an employee that he has never met before. The ability to communicate the identities of your best clients through the ranks creates a point of difference.
Authenticity: To paraphrase Albert Schweitzer, certain infrequent events reveal the true essence of people, like a lightning flash in a pitch-black sky. A spontaneous situation that calls for empathy, candid honesty, or taking responsibility can enhance a client relationship if handled well or abruptly end a relationship if mishandled. When the unexpected happens and management has the chance to demonstrate good faith to a customer, the payback usually exceeds the investment.
Personal Stakes: When customers contribute ideas and suggestions to improve the operation, they inevitably take a personal interest in the outcome of their ideas. If a valuable customer has a history of active involvement with you, switching to a new hotel will feel like an act of abandonment. An active process that facilitates client input is a defensive measure that protects your best assets, your customers. Conversely, the more you understand your customer’s viewpoint, the more he sacrifices by switching to the competition.
Ability to decide: When a customer needs an answer to a difficult request, he should have access to a person with the authority to give him one at once. Immediate response creates client loyalty; bureaucracy destroys it.
2. Make a conscientious effort to retain your best staff.
The cost of employee turnover is great to both profit and quality. Retaining staff is not an isolated case of compensation, although that is precisely what a new competitor will use to lure them away from you. If management recognizes achievement, shows an active interest in career growth gives responsibility that reflects expertise and provides a professional work environment, money alone will not be persuasive enough to lure away your staff members.
Recognition: The quickest way to get rid of the best staff member is to make him the employee of the year. Nobody wants to admit it, but conventional employee recognition tactics do not work. Reward and recognition programs like “employee of the month” used in most hotels are stale.
Many employees react cynically to them because they sense an absence of sincerity and authenticity. Genuine recognition is a form of empathy. If management really understands the difficulties of the work and expresses genuine appreciation consistently, good employees will respond. Employee recognition is also a daily practice as opposed to a monthly luncheon or an annual awards banquet. Whether a general manager works the floor when a restaurant is slammed, hands out fifty dollar bills after a record breaking month or gives a banquet houseman a day off with pay after a difficult convention, the message resonates that management cares. Demonstrations of gratitude, empathy and respect beat a wooden plaque every time.
Career: If an employee is performing at a level that is clearly different and better than the standard and management wants to retain that employee, it is management’s responsibility to initiate discussions regarding the future with that person. Retaining great customers requires both understanding and fulfillment of their needs. So does retaining great employees. Demonstrating a sustained, proactive interest in the future success of a great employee is an unmatchable advantage over a potential new employer. Showing a sincere interest is often all that is necessary.
Responsibility: Successful people crave responsibility. Giving it to them, however, contradicts the need to control. The risks of mistakes and unexpected results are magnified if authority to make decisions is spread out. By limiting power to a select few, results are predictable. The benefits of limiting control are dwarfed however, by the reality that deprivation of responsibility, authority and latitude disconnects talented employees from their work. Lack of substantial responsibility makes the decision to leave a job to go to a competitor much less complicated. There is nothing at stake to give up by leaving.
Professional Environment: Regardless of a hotel’s sector, segment, brand affiliation, geographic location or size, professional standards matter. The environment can quietly but emphatically suggest that you have to be a pro to belong. When everyone looks immaculate, acts professionally and works toward the same goals, jumping ship to join a competitor becomes anathema. When true outstanding performance is recognized and rewarded all of the time, the employee mindset evolves from “doing the job” to striving for excellence. When people without dedication, commitment or the best skills leave, the powerful implicit message is that you have to be excellent to stay.
3. Solicit new business now.
When demand is strong, sales people spend most of their time fielding inquiries, evaluating leads, and trading function space. The idea of prospecting for new business is absurd from their viewpoint. Why go through the drudgery of making cold calls when they cannot get through the message stacks on their desks from customers that already want to book? Is performance measured by prospecting or sales results?
The unpopular answer is that it is necessary to do both; sales people must promptly return inquiries as well as consistently prospect for new accounts. The reasons include:
4. Commitment to Improvement.
New hotels illuminate the obsolete characteristics of their competitors. Limited service hotels that can offer low rates and brand new facilities will take away customers from a twenty-year old full service hotel in spite of its existing clientele and established reputation. In order to protect market share in the face of new competition, hotels must recreate and re-enforce their image constantly by means of innovation and publicity. Telephone greetings, restaurant menus, billing presentations, uniforms, bathroom amenities, promotional events, leisure and business packages, message taking procedures, front door service standards, coffee service; constant, evident improvement in every detail of the guest experience is the weapon that must be used to do battle with a new competitor. Obviously, big-ticket capital improvements are crucial to compete effectively, too. However, if innovation can become a daily way of life among the hotel staff, service levels, work environment and guest satisfaction all stand to continually improve. Equally important is the effort made to publicly communicate the improvements. The effective combination of press releases, direct mail, advertising, promotions and direct sales must be dedicated not only to creating new customers but also to keeping current customers. One message required to do the latter is an impressive track record of constant innovation.
5. Competitive Intelligence:
The best advise in Godfather II is to be close to your friends, but closer to your enemies. Public, easily accessible information that covers key competitors’ pricing, future sold out dates, group clients, marketing alliances, customer incentive programs, product and service improvements, advertising media placement, marketing collateral materials and news releases is invaluable. A hotel can effectively manage its competitive position by reviewing this body of information regularly and making the appropriate adjustments.
The hotel industry is engrossed in the idea that brand equity and global market share are the instruments of success. From the distant perspective of a hotel management corporate office or the development division of a REIT, it is true. But from the perspective of the battleground where the daily fighting for the end-user takes place, reality takes on a different appearance.
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