New York Hospitality by Vijay Dandapani
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The lure of family business: more customer (and employee) friendly?

September 26, 2014

That family businesses endure longer often stretching into successive generations is received wisdom. But are they also more welcoming to customers, employees and even innovation?  With regard to the last of those, a recent Insead (Europe's leading business school) paper has a somewhat surprising conclusion with regard to innovation. Despite a known reluctance to take on additional debt or other external financing measures fearing the dilution of control, attributes which are thought to hinder innovation, family firms put out more patents than similiarly situated non-family firms.  Among the reasons for their lead in new ideas is a longer time horizon, better governance structure and better availability of traditional capital sources as lenders tend to trust family businesses more so than others.

The outcome for employees, at least during adverse times such as the great recession, also appears to favor those who work for family businesses as they are less inclined to lay off personnel than their more corporate counterparts. That was the conclusion of a couple of Michigan based universities who say that family owned businesses place a premium on being loyal to their workers with some owners claiming that even "during times of belt-tightening the last thing they want to do is let employees go".  Their apparently altruistic behaviour includes reducing distributions to themselves with as many as 58 percent of those surveyed saying that  family members would take a pay cut before the business could consider reducing the workforce.

The foregoing  suggests a more receptive environment for better products and services and therefore a better magnet for customers; particularly more loyal  customers. An academic study in the Journal of Retailing and Consumer Studies points to a mixed bag with the authors noting that "consumers evaluate family businesses better in terms of service, frontline employee benevolence, and problem-solving orientation, and worse in terms of selection and price/value. Results further indicate higher consumer trust in family business management policies and practices, frontline employee trust, and satisfaction but no differences in loyalty. The study goes on to show differential effects in how image elements influence customer loyalty directly as well as indirectly through trust and satisfaction.

In sum, on the customer acquisition and retention front family businesses have been slow to bring out their considerable strengths particularly on the social equity front. That the latter can be a magnet was proven by Hilton in its social media stance that embraced opponents of California's Proposition 8. No hotel chain in the US that is family-owned (and there are a few that are out there) puts its family ownership at the heart of its value proposition than Drury Hotels which proudly states "family ownership makes Drury Hotels distinctly different and assures you of quality and consistency every time you stay". Given their long running success it is a message that other similarly situated firms ought to emulate.

Machine learning and customer attitudes

September 12, 2014

A recent issue of the McKinsey Quarterly touches upon a couple of oft-repeated but still little understood topics: combining big data to get bigger marketing and  bringing artificial intelligence to better understand customers. The former points out how "technology (alone) is not enough;  what’s needed is a practical approach for creating a workable partnership" between the CMOs and CIOs and, in particular, for marketing departments to know what to look for. 

Per the Quarterly, fusing the two areas is perhaps best achieved by creating areas of excellence that span both departments with an emphasis on  transparency with "scorecards" on progress. The establishment of "translators" who can bridge potential gaps in understanding between somewhat divergent specialties. That may call for retaining a "business-information officer" whose role includes translating business strategy on an enterprise-wide basis resulting in a more "effective use of big data and other technologies" thereby setting apart winners from losers.

The other article in the Quarterly's  goes on to herald the coming of the "second" machine age when machines "overcome the limitation of mental power" as opposed to the first machine age when the limitations of muscle power was overcome.  Pointing out that "machine-learning algorithms are actually as good as or better than humans" at many things that are thought of as uniquely human capabilities, the article notes the exponential rather than geometric growth that it brings about as data and computational capability grow exponentially. Further, the results of "previous machine-learning exercises can be fed back into the algorithms resulting in each layer becoming a foundation for the next layer of machine learning with the whole thing scaling in a multiplicative way".

The foregoing when applied to customer behavior data can result in clear pointers as retailer Pier 1 Imports did when they  used advanced predictive data analytics and machine learning to fullfill their goal of   understanding their customers and serve them better with a more personalized experience across all interactions and touch points within their brand.

It is not clear that Gallup  used machine learning to gauge hotel customers' needs  but the polling company earlier this week came up with the results of a survey across all segments of the hotel industry and found that what customers want depends to a considerable degree on the segment with a few elements like value price, reputation, room quality and location spanning all segments. A notable if somewhat obvious finding was that "engaged" customers provide a "financial premium".

Unfortunately, a mere 20% of hotel guests were "fully" engaged with those belonging to higher-priced hotels' being more engaged.  The ability for hotels on the lower end of the price scale to engage customers may not necessarily be limited as more often than not it merely requires offering services such as "nicer" television for which they are prepared to pay. That seems like an opportunity to improve profitablity at more than one level.

The skinny on discount sites: when discounts can sometimes equal a premium

August 28, 2014

Summer travel which is reaching its Labor Day climax continues to bring on a spate of articles on how to get better deals on airlines, hotels and other travel products and services with tech apps leading the charge. Techcrunch has a report on the latest entrant Roomlia which promises to "provide the fastest hotel booking on mobile" while "taking on" established player Hotel Tonight.

Techcrunch notes that Roomlia "offers discounted hotel rooms up to seven days in advance with only a few clicks to complete booking. Unlike Expedia and its counterparts, Roomlia links you directly with your chosen hotel the moment you book, as opposed to negotiating rates and payments through the hotel site and the hotel itself." The seven day horizon is a key distinction that could enable the newbie to muscle its way into a market that Hotel Tonight has virtually owned since its launch some three years ago as both business and leisure travelers who are not quite comfortable with the idea of landing up in a city without a confirmed hotel booking are likely to prefer it.

Others on the do-not-pay-full-price who continue to be on the ascend are YAPTA featured  over six years ago on this blog. The Wall Street Journal's Middle Seat column of August 28th 2014 has a headline "Yapta Alerts You to a Cheaper Airfare in Time to Rebook Your Flight" and notes how "one corporate travel executive saved about $12,000 on a business-class fare to Shanghai, above, from Tampa, Fla., using the Yapta fare-searching tool". Interestingly, the article brings up how some cities are more price inelastic than others as research shows "some cities are a lot more volatile for airline prices than others. Tickets leaving from San Francisco were the most volatile of 15 major airports for business travel, Yapta found, and departures from New York's LaGuardia Airport were the least volatile."  LaGuardia's proximity to Manhattan evidently leave both airlines and the airport authority unbending when it comes to pricing.

The surge in travel intermediary websites that purport to give consumers the upper hand in pricing does not always ensure the consumer comes up trumps.  The UK's Daily Mail notes how some long standing "discount" websites like Cheapoair, eDreams and Ebookers actually end up charging the customer more than what is available on airlines' websites. In one example cited customers paid a whopping 60% more for the same fare on the same day on the airline's (easyjet in this instance) site.

For sheer quirkines few can beat the discount offered by Sounkyo Mount View Hotel in Kamikawa, Hokkaido.  The hotel has recently been offering a 500 yen discount to customers who have either no hair at all or sport buzz cuts.  The Mount View does offer a business rationale for the discount saying that hirsuite customers cause more work for housekeeping by clogging bathroom drains as well as a more thorough cleaning of beds and carpets.

Robotic service

August 13, 2014

Starwood served up a tech storm when its Cupertino, CA Aloft hotel announced it was  "testing a robotic bellhop" inartfully described by the New York Times as a "human-friendly sibling of the Terminator".  The robot is essentially  "a wheeled service vehicle designed to shuttle items from the hotel lobby desk to guest rooms".  

Starwood was quick to tout its introduction as more of an efficiency tool than one that would cost human jobs. Perhaps but  a key point Starwood may be missing is that machines can complete some jobs currently being performed by humans but cannot really provide service, at least of the kind one expects in branded and/or boutique hotels. 

At first glance Botlr appears more to lean more towards the mechanical part of its portmanteau handle with very little if any to its butler aspect although Starwood expects to "see this as an enhancement to our customer service".  Whether that turns out to be the case or not will be known before long but there are parallel service related businesses where robots and automation has turned out to be a mixed bag notwithstanding the non-sequitur offered by some of Botlr's proponents about reverting to an age without tractors. Customers can sometimes end up being chary of automation/robots as has been the case especially when system failures that are inevitable result in false room entries and other security mishaps.  

Another robot aimed at bolstering customers service that has garnered attention but with as yet indeterminate benefits is a roving robot installed at Edmonton airport. Not only does it move to address passengers but it can not only give directions and actually take  them where they need to go! Further, they potentially can interact in 30 different languages!

 Thus far the cost of the robot remains unrevealed and likely runs into the tens of thousands although Moore's law likely will bring it down particularly if it picks up traction with large orders resulting in mechanical siblings often accompanying elevator cabins along with guests, offering a heretofore unknown   take on customer experiences .

 

 

Smartphone check-ins: Not quite an Aladin's lamp

August 01, 2014

Smartphone check-ins seem destined to be as commonplace as frette sheets on hotel beds. Earlier this week Hilton announced that guests will not only be able to book rooms and check-in and check-out but also choose their rooms via their smartphone. Given the exponential growth of the "head-down tribe", smartphone users who walk, talk and even sleep with their head down and eyes fixated on their devices, it seems like a natural if not a brilliant idea. 

Beyond using the smartphone as room-key, an option many hoteliers across segments are fast embracing with the relatively cheap RFID technology that enables it, Hilton is looking at addressing an age old customer peeve: not being able to see what they are getting till they are onsite at which point a combination of travel weariness and clever selling by front desk associates often results in their plonking their bags down on whatever is given to them. 

The potential for cross and upselling is of course tremendous. While many have already incorporated such features into their app on smartphones it is sports arenas like the Barclays Center in New York that have truly been successful in upselling to customers by advancing the notion of these sales pitches as being "upgrades".   

The race for technology is not without its pitfalls and a headlong rush to embrace smartphones as Aladin's lamps runs the risk of unwelcome customers purloining guests' data by hacking in to the devices. Apart from causing public relations headaches of the kind that continue to plague the industry from data-breaches, it is potentially capable of even more dire consequences. Smartphone vulnerabilities are among the key topics in the forthcoming Black Hat confererence in Las Vegas which begins on August 2nd, 2014.

The Wall Street Journal reports that "Four Georgia Institute of Technology students are scheduled to unveil new ways to take over Apple"s latest iPhone!" One of the speakers, 28 year old "Mathew Solnik says he can take over a smartphone from 30 feet away without alerting the user or the phone company."  Apart from stealing data including money via apps from financial institutions, the potential to not only disrupt hotel operations but also for miscreants to gain access guest areas.  Then again, these may well be teething problems that hoteliers need to prepare for as on balance the technological promise is tremendous.

 

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ABOUT ME

  • President of Apple Core Hotels, a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city.

    Member of the board of Directors - Hotel Association of New York.


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  • The views expressed in this blog are my own and not that of any company, association or organization.

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