New York Hospitality by Vijay Dandapani
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The Loyalty Paradox

March 17, 2015

Airline loyalty programs are being rewritten to provide the most benefits to those who spend the most. Leading the charge in that direction last year was United's Mileage Plus program which explicitly sought to give more rewards for those who spent more money followed by a somewhat complicated update this year that gave more miles for the same fare and flight to those higher up on the mileage totem pole and another set of rules on miles required to climb up that ladder.

Hotels too have been making changes to the rewards programs by making rewards proportional to the average daily rate as happened for Marriott and Starwood recently although Starwood's teaming up with Uber to offer points to those who use the app based ride-hailing while staying at one of their hotels takes some of the sting off of the changes.

However, a Harvard Business Review paper by MIT researcher Michael Schrage has a cautionary note for service companies that look to reward only the fat cats. Entitled "Why Your Customer Loyalty Program Isn't Working" the blog post notes that "the rise of social media platforms such as Yelp, Facebook, Twitter, and TripAdvisor guarantee that customers will get a global say on what loyalty should mean and who “loyal customers” really are. They’re rewriting the economic rules about customer value. Who is truly more valuable to an airline or hotel chain? A profitable repeat customer? Or a two-thirds as profitable customer (emphasis added) whose comments and critiques on Twitter and Yelp influence hundreds of prospects?"

The Harvard paper goes on to ask  "how valuable is a “typical” customer who makes suggestions to a hotel — or retailer or software developer — that can be worth hundreds of thousands in insight? When loyalty can be defined as innovative contributions and influential word-of-mouth as opposed to repeat high-margin business, traditional measures and metrics for loyalty decay into anachronism." That insight perhaps prompted Hilton to radically change their Honors program to offer free WiFi not only to all members but also enable points when booked through sources other than the company, a key differentiatior, thus far, from its competition.

The HBR paper ends by noting an apparent paradox in structuring loyalty programs "loyalty here is as much about ethics as it is business. Loyalty shouldn’t be a data-driven gimmick for capturing customers and market share. It is one of those rare virtues that can be both a means and an end for new value creation in healthy relationships between consumers and companies."  Perhaps airlines and hotels should settle down to the idea that the benefits do not always have to be tangible and immediately realizable.

Robotic customer service and moral dilemmas

March 02, 2015

Robots are making headlines in a variety of industries from transportation to hotels with none perhaps as dramatic as driver-less cars, a phenomenon that appears certain to enter commercial use sooner than later. While much of the news has been focused on the many positives of driver-less cars that range from giving mobility to the elderly to reducing traffic jams based on intelligent technology that re-routes cars very little has been published on the potential pitfalls.

The Financial Times picks up on the foregoing with a report on ethical and moral issues that are being discussed if not anticipated. In a hypothetical example cited "a self-driving car is ferrying its owner to the office. Suddenly, a school bus, traveling in the other direction, veers out of control and into its path. In a split second, the self-driving car must make a seemingly impossible choice: continue driving straight on and risk injuring several children, or swerve and possibly hit one of the cyclists."

The ethical aspects to robots pervading our lives was, however, raised more than a few years ago in a 2011  book titled "Robot Ethics: The Ethical and Social Implications of Robotics" where the authors note that robots are often tasked with the "3Ds" of life: jobs that are are dull, dirty, or dangerous.

Innovators in the hospitality space, however, seem to think that robots are capable of more, far more, including providing service. That at least is the promise of Japan's Hen-na hotel in Nagasaki which put out a press release last month that garnered much international attention.  When the hotel opens later this summer, the (all female) robots at the front office will greet (in four languages) check-in and escort guests to their rooms.  Other equally remarkably human looking robots will function as porters and housekeepers. All the robots are being made by Japanese company Kokoro courtesy of a Japanese government sponsored initiative.

The growth in use of robots in automobiles, entertainment, military and health care is exponential and its entry into hospitality is perhaps only to be expected with the financial premise of Kokoro's robotic hotel being the lure of an employee-less hotel. But what is left out of the Kokoro's press release is the slew of ethical and moral issues that are likely to confront the entire industry.

The issues, as yet unaddressed, include: What does replacing the entire housekeeping staff with robots mean for customer relations?  Can a robotic front desk agent discern when it is okay to make an exception to give a key card or reprogram a lock for a guest who has misplaced his/her card and/or smartphone for entering a guest room? Will a robot bartender shut out a customer with a higher tolerance for wine after 3 glasses assuming that to be the threshold? In the trial-lawyer driven culture of the US the legal consequences of a misstep whether intentional or not has huge implications. And the (negative) implications for employment are perhaps even greater.




Empowering consumers: Social media supplants brand standards

February 13, 2015

For decades the near sole arbiter of standards in hotels and restaurants has the franchisor at a branded location.  Ratings from Mobil (now Forbes Travel) and Michelin served to underscore quality as it was the franchisor who drove business to establishments that adhered to standards laid down at headquarters. 

Although much of the above remains largely true even today that model is continually being tested in the digital age from the two leviathans of user-generated sites: Tripadvisor and Yelp.In the decade plus period since  their establishment businesses have learned that more so than the directives and SOPs from brand central it is the searing and often spontaneous assessment of customers that can make or break most hostelries. 

Picking up on the foregoing are some municipalities. A Harvard Business Review blog article points out that "cities are beginning to see the value of using consumer-feedback sites to improve efficiency, provide citizens with important health data, and put pressure on unhygienic restaurants to clean up their acts". While noting that "local governments are not known for being at the forefront of innovation and technology" the article says that the algorithms developed by the authors have been used in "tech-friendly cities such as San Francisco and Raleigh, North Carolina" to demonstrate that digital and social technologies have the power to transform what used to be that most analog of processes, the disclosure and enforcement of public-health regulations".

By embracing social media for enforcement, governments not only serve current and prospective customers better but also cut down government waste. Heretofore, the inspection process was random with compliant and high quality establishments being subjected to the same inspection process as those that are on the wrong side of the issue.  With social-media driven technology, inspectors' time is better spent on likely offenders.

The HBR piece sums up the many benefits.  Per the "Centers for Disease Control, more than 48 million Americans per year become sick from food, and an estimated 75% of the outbreaks came from food prepared by caterers, delis, and restaurants. By partnering with social-media sites to provide digital disclosure, municipal officials can improve these numbers. They can also reduce costs and display information in ways that are easier for citizens to find and absorb".

Privacy and the here and now consumer

January 15, 2015

The Financial Times of January 15th 2015 has an intriguing story with somewhat frightening overtones from a privacy standpoint. The UK broadsheet's article's points to how the Internet of Things may be going too far at least in the opinion of luxury car maker, BMW. The German auto company says that "technology companies and advertisers are putting pressure on carmakers to pass on data collected by connected cars" and highlights the concerns the automotive industry faces as it treads a fine line between performance and privacy.

BMW as well as rivals like Mercedes-Benz feature cars that come with a wireless network that could yield information about location, speed, acceleration and even the occupants of a car including how many adults and children. Marketers from a variety of industries are salivating for a peek at all that data so as to be able to formulate programs to target willing and perhaps even unwilling drivers with information on products and services that likely are relevant to both parties. An example of that, as noted in the FT article, is suggesting, for example, the proximity of a McDonald's outlet if a child is in  (and presumably) hungry. Apart from being tremendously insightful it is arguably insidious at least in privacy terms.

If allowed to proliferate, it could prove a bonanze to the hospitality industry, for example, by suggesting to drivers - after the car has "sensed" driver fatigue - the presence of nearby hostelries. If there is a willing customer driving the car then hotel preferences could be programmed so as to take the car to the nearest compatible lodging accommodation.  There are already several GPS based accommodation sites that offer deals but with the added benefit of having information beyond merely the profile of the customer such as recent travel and even physical state, a new and more precise lodestar could be in the offing.

Somewhat apropos the preceding line reports that Booking Now an app from seeks to capitalize on a recent report which found that nearly 25% of searches on hotels’ mobile sites are for same-day or next-day check-in. Instant gratification (and satisfaction?) could be on the anvil with data from BMW and others.

Corporate Mea Culpas and the Consumer

January 07, 2015

A recent blog piece in the Harvard Business Review points to the merits and modalities of a timely apology. It suggests a (quick) public and written apology is a good start followed by seeking out as many as possible (of those offended) for a private apology. However, for an enduring positive aftermath the article suggests plenty of introspection and inspection to determine whether it was a one-off slip or part of an ongoing or potentially recurring problem.

While HBR's article focuses on regaining respect an equally important if not greater aspect is restoring customer confidence in the firm. Missteps and even blunders are as much a part of life for corporations as it is for humans given that those missteps are consequence of human actions. But just as in ordinary human life the willingness to own-up is a rare commodity which often results in the original sin being compounded by many more leading to a justified consumer perception of an organization being untrustworthy if not deceitful.

An inartful choice of words can sometimes lead to repercussions that can be as bad as a deliberate campaign. An example of the former is the new Microsoft CEO's statement about women being better off if they did not ask for a raise raised a storm leading to a quick retraction and an apology for a poor choice of words. The quick apology allowed Microsoft to move past and does not appear to have hurt the software giant at a meaningful level. 

More on the wilful part of the blunder continuum is UK supermarket chain Sainsbury's outed campaign urging staff to get consumers to spend an extra 50p while shopping. An outraged consumer tweeted a photo of the poster that had been inadvertently put on a shop window. The company's response of contacting the tweeting customer probably did it no good and a weak response of it being only for "internal consumption" did even less for Sainsbury.

The hotel industry has had more than its share but many have not been particularly nimble in offering mea-culpas  with varying reasons. In the early 90's the Las Vegas Hilton was the venue for a grotesque rite-of-passage for naval officers where they groped women sailors. The company fought the multi-million dollar damage award to the plaintiff but at no stage put out a mea-culpa regardless of its role, which court documents point to. Latterly, in an ongoing dispute with customers, the Marriott Corporation is looking to be able to thwart guests at its conference centers for bringing in their own WiFi. When the story broke it appeared as if all areas of Marriott hotels were off-limit to customers' WiFi equipment but after some negative press the company has clarified that it is only for conference areas with a view to preventing hackers.  Regardless, the company is better served by withdrawing its efforts in that area and issuing a "customer is right" statement rather than prolonging what surely is a losing proposition at all levels.

While it is clear that mea-culpas always work there are some who are teflon bound. None more so than the maverick leaders of the taxi-disrupter company, Uber. From rapes to murders to extortionate pricing the company lacks for nothing when it comes to a public-relations disasters but yet nothing seems to stick, at least thus far. Perhaps, the consumers' attraction for the service beats all the negatives but more likely the jury is still out on them.

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  • 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.



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