New York Hospitality by Vijay Dandapani
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Rating customers: feedback or blowback?

June 05, 2015

Earlier this year the New York Times ran a story headlined "Ratings Now Cut Both Ways, So Don't Sass Your Uber Driver" which suggests that the tables are being turned in terms of reviews being the prerogative of the customer. The Times article says that "companies are rating their customers, shunning those who do not make the grade." The ability to create a mutually reinforcing feedback mechanism has been the hallmark of unregulated economy companies like Uber and Airbnb.  But as the Times piece points out, the pioneer in this field was eBay which introduced it over a decade ago only to cut it out a few years later in 2008.  eBay now allows sellers to make only positive comments about buyers. It is unclear what if any benefits there are from its now censored efforts.

If the thinking behind rating the customer is that it may enforce better conduct on the part of those customers who are normally inclined to treat assets outside their home with less than due respect, a spate of stories on things going awry in the misleadingly labeled sharing economy tends to give that notion the lie. The stories also include an orgy in an apartment that resulted in an Airbnb "victim" being rendered persona non grata to landlords and some Uber drivers who ran amok

Perhaps one reason for consumers' aberrant behavior is a subconscious devaluation of the asset by the consumer due to it being more freely accessible. That likely makes them, sometimes consciously, to inflict more than wear and tear on the "shared" item. Regardless, that approach to a customer has not thus far been tried out on a systemic basis in the regulated world of hotels and airlines. One UK based hotel made a ham-handed effort at getting back at customers who posted bad reviews on Tripadvisor by levying a "fine" of £100  only to find themselves rapidly making a refund after they found themselves in the news for all the wrong reasons.

A more sophisticated and subtle essay at rating customers was tried by the Australian luxury boutique group, Art Series hotels, a company "dedicated to Australian contemporary artists".  The company called the endeavor "reverse reviews" and "invited" prospective guests to be reviewed by the hotel if they stayed between April 17th and May 31st of this year. The website termed it as a "social experiment" while noting that it was an attempt at creating a two-way street for the feedback process. More importantly, they said they sought to find out who the "best guests" are. It is, as yet, unclear how far they succeeded in the venture but following the example of the unregulated economy is not likely to produce a better feedback system.  False and misleading reviews on user generated content are an occupational hazard for hotels but increasingly customers are able to tease these out while making their buying decisions.

More relevantly, minor imperfections may actually give the establishment better credibility particularly if attempts are made to remedy them. An industry that has thrived best with a motto that puts the customer, good and bad, first ought not to try and reinvent the wheel despite the threats from the unregulated operators.

 

Brand overload?

May 09, 2015

The digital media site Mashable recently ran a piece entitled " Hotel brands multiply with questionable benefit to travelers".  The website pointed out that the "10 largest hotel chains now offer a combined 113 brands at various price points" of which 31 did not exist a decade ago. The somewhat bewildering array of brand names that ranges from the orthographically challenged Vib and Venu and the somewhat cockily named Moxy but it is as yet unclear, given their recent provenance, that they necessarily will lead to heightened brand loyalty. 

The recently announced Freddie awards where American Airlines and Marriott came out on top seem to reaffirm the dominance of the big brands even if the awards aren't necessarily a complete indicator of consumers preferring brands over independents as the latter don't really enter the fray.

A reaction to potential brand overload is the move towards co-opting independents into a "collection", an attempt that suggests curation and sophistication that brands hope will distance these hostelries from their branded brethren. Curio by Hilton and Tribute Portfolio by Starwood are a couple of examples. The latter company, like Choice Hotels, is seeking to eject "tired" brands like Sheraton and Comfort Inn from their stable.

However are big brands in their apparent moves to genuflect to Gen X and their successors Gen Y or Millenials who are reputed to be brand averse being hasty?  Recent surveys show that post-Millenials also known as Generation Z, a crop of workers born after 1994, are in fact brand loyal and trust big brands more so than others in the demographic continuum. That at least was the conclusion of a JD Powers report commissioned to look at this demographic in the banking sector. The US marketing research giant found that while Gen Z is satisfied with the website and mobile features of big banks they are also satisfied with the in-person experience at big banks principally because of the seamless experience across channels. 

Interestingly, these new consumers bring a range of characteristics that sets them apart even from the preceding generation (Gen Y) starting with communications where Facebook, Snapchat or texting takes primacy over email with the latter being used principally for formal contracts;  voice-mail is beyond ante-diluvian for them. Perhaps a good place to start to ensure the seamless experience these guests are looking for is to ensure that booking engines for hotels and airlines cater to these preferences. 

 

 

Managers: Imperative to a workplace or redundant?

April 23, 2015

Two respected research organizations, one from industry and the other from academia offer seemingly contradictory prescriptions for the workplace.

Gallup, the global consulting company, recently ran a piece on its website that entitled "Managers Account for 70% of Variance in Employee Engagement". It is a workplace truism that is probably widely known but far less widely acknowledged.  The article states that "Great managers consistently engage their teams to achieve outstanding performance. They create environments where employees take responsibility for their own -- and their team's -- engagement and build workplaces that are engines of productivity and profitability."  If the stats for employee engagement are at an abysmally low 30% in the US they are at even more appallingly low 13% worldwide.

Gallup's research over the years has found that "Performance fluctuates widely and unnecessarily in most companies, in no small part from the lack of consistency in how people are managed" and the way out of that is to find "great managers" who will serve to "raises employee engagement levels consistently across every business unit" resulting in better metrics across the board. Gallup recommends that companies invest in processes such as predictive analytics like talent audits and talent assessments that go towards finding a great manager,

Running almost counter to the foregoing narrative, the venerable Harvard Business Review's blog has a new age take on the role of  managers suggesting that they could be on the endangered species list. In a somewhat inartfully titled piece "Here's How Managers Can Be Replaced By Software" Devin Fidler, who heads the Workable Futures Initiative at the California based Institute for the Future points out how researchers there for the past several years "have been studying the forces now shaping the future of work, and wondering whether high-level management could be automated". They have came up with a "virtual management system that automates complex work by dividing it into small individual tasks". Further, they have completed pilot programs with their software for" assignments in sales, quality assurance, and even hiring" and claim it is sophisticated enough to use it for Amazon’s Mechanical Turk micro-work platform". 

The author of the HBR piece suggests, without irony, that these solutions could "enhance work environments, increase employment opportunities, and provide new kinds of worker flexibility, to the benefit of all". The owners of the The Henn-na Hotel in Japan created a worldwide splash, not all positive, with their decision  to "employ" robots and obviate the need for front desk staff. A hotel or other organization without managers could quickly fatten the bottom line further but whether it is to "the benefit of all" will be debated a lot longer.

Reimagining loyalty programs

April 06, 2015

A post in last month in Consultant-News.com featured a Capgemini Consulting global report which found that loyalty programs "are failing to engage digital consumers". Entitled “Fixing the Cracks: Reinventing Loyalty Programs for the Digital Age" the Capgemini report finds that participation rates in loyalty programs are often low with 89% of social media opinions on loyalty programs being negative.

The consulting giant surveyed the loyalty programs of 160 global companies across seven sectors including Retail, Banking, Consumer Products, Telecom, Airlines, Hotel Chains and Consumer Electronics and went on to conduct a scan of 40,000 consumer conversations on social media to gauge customer sentiment towards loyalty programs.

The research revealed that most loyalty programs follow a basic transactional philosophy where rewards are based on purchase. Only a small minority of programs recognize and reward consumers for engaging and interacting with the brand in other meaningful ways. Furthermore, most loyalty programs lack personalization and fail to offer cross-channel redemption services. The negative social media sentiment on loyalty programs stemmed mainly from the lack of reward relevance, rigid reward structures, user experience issues with online channels, and poor customer service quality levels.

The Study's key findings include:

  • Just 11% of loyalty programs offer personalized rewards based on a customer’s purchase history or location data
  • 79% of loyalty programs use the mobile channel, and yet only 24% allow redemption through it
  • 97% of loyalty programs are based primarily on purchases made by consumers

Furthermore, a mere 16% of the programs reward customers for activities, such as taking online surveys, rating and reviewing establishments or referring friends to the program. Only 14% employ gamification mechanisms to reward customers. An example of the latter can be found in Starbucks use of enhanced Foursquare badges for those who check-in and frequently at a store including the awarding of discounts based on "status".  Unsurprisingly, as many as 53% of consumers admitted to abandoning at least one of the many loyalty programs they had signed on to in the preceding 12 months.

For hotels, the news was not as bad as in other industries like retail with 41% of hotel companies rewarding consumers for a range of behaviors that reflected active engagement on the part of the companies but airlines were even further ahead of the curve with 57% of them engaging customers. Hotels were really ahead of most others when it came to the percentage of unfavorable customer opinions on social media with 72% of sentiment on the wrong side of the continuum as compared to sectors like retail and telecom where it approached 100%.  Nevertheless, with an unprecedented and unregulated assault on the hotel model by hospitality poseurs like Airbnb hotels ought to bring that ratio down to well below the 50 mark by ramping up on engagement on the loyalty front.  

 

 

 

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.

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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.


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