* required

Taking the air out of bnb?

July 31, 2011

Early last week the Wall Street Journal reported that "the billion-dollar start-up club has a new member: Airbnb Inc. (the) San Francisco Internet company, which offers a marketplace for people to book vacations in other people's homes, has raised a $112 million round of financing. The investment values the company at $1.3 billion." The report goes on with a crowing account from the founder about how Airbnb is to "space what eBay is to stuff"  adding "Airbnb could some day be even bigger than eBay, which is currently valued by the market at nearly $44 billion." Maybe.

A little later in the week the company hit what could be more than an air-pocket. The San Francisco Chronicle reports on the story of a EJ, the anonymous woman who blogged that her San Francisco home was burglarized and vandalized by a guest who arranged to stay there through the service Airbnb. In an interview with the paper she denied the canard that she worked for the hotel industry while the paper dismissed another that claimed she does not exist by verifying "through a public records search that matched identifying details she offered with those provided by the SFPD (San Francisco Police Department). The Chronicle also reports that the "SFPD has made an arrest related to the case".

While the internet company's founder's glee at the stratospheric valuation of his company by the market is to be expected, the comparison to eBay is more than a little overwrought and probably downright premature. For starters, eBay attempts to comply with all local and national regulations whether foreign or US. In contrast, it is unclear that Airbnb's operation does not violate New York's illegal hotel law. Secondly, it is not clear that customers are getting the bargain they assume to be the case.   As a commenter in the online version of the Wall Street Journal's article rightly points out "the price per night is equal or higher than a typical hotel room, so what's the point?"  What's more, there is also little if any recourse for customers for disputes arising from differences, real or otherwise, between what was promised and what was offered.

Far more importantly, as the EJ incident highlights, security both for renter and "landord" is virtually non-existent. Were a situation like the infamous DSK case to occur in an unattended room in a potential predator's house, prosecuting the perpetrator in the absence of any of the security measures found in hotels is likely to be significantly harder if not impossible. It is also unclear what liability issues are there for the person renting out the room were a renter to indulge in illegal activity including the sale/and or use of narcotics.  Nor does it help that customer reviews via user generated content in independent sites like Tripadvisor are a non-starter as individual "rooms' are never identified. In the end, it will take more than "caveat emptor" to bring about real customer satisfction much less forestall a repeat of EJ like incidents.


Psychometrics: how not to fit square pegs (employees) in round holes (jobs)

July 23, 2011

Businesses of all stripes spend gobs of money every year in trying to get a read on their consumers using a range of pyschometric tests that seek to assess customer satisfaction, perception and attitudes via psycho-graphic and demographic profiling among others; all with the ultimate goal of improving the bottom line. What does not get nearly as much attention or resources but, nevertheless, is equally important to success is the sizing up of employees, current and potential, with a view to enhancing satisfaction  and productivity.

The July issue of London based Training Journal has a lead article that provides a rubric to work with. Entitled "How to recruit people who fit" the essay urges a fresh look at the way people are hired with a view to reducing the "risk of 'good' staff leaving too soon, or not performing to their optimum". Compounding the "problem" is Gen Y's inability to "sit-out" a job that does not fit resulting in high turnover and training costs along with lower productivity.  The author identifies "hiring in one's likeness;  the immediate need for an individual to fulfil a specific role within the team and the strong temptation to recruit on personality as aspects of the recruitment process that can distract managers from making good hiring decisions".

Training Journal's lead piece goes on to lay out a comprehensive framework for recruitment. Starting with defining an organization's "culture" through its "values, beliefs and behaviors" it then turns to the "key elements that make up the recruitment process". These include "the attraction" or how the company presents itself. That will indicate the cultural norms, whether  on the website, in job adverts or at recruitment fairs. Next up is "competency-based interviewing" an approach that provides the recruiter with fact-based information about skills, knowledge and behaviors of the candidate in  past situations and how it was applied along with technical abilities. Pscyhometric testing or assessments provide a strong basis to gauge a candidate's abilities and how s/he interacts with others.

Training the recruiter is pivotal to achieving much of the above. The manager should understand the firm's "competency framework" or aspects required by the company to be successful in the organisation and have "interview-skills" training. This includes understanding pyschometric tests administered to prospects. Involving line managers in the development of the skills tests that are administered is also essential. No less important is understanding the company's "big picture" or the overall organizational perspective.

 That significant parts of the world's economy remain mired in a jobs recession makes such employee-employer assessements even more relevant. An interesting if extreme example of a patently disconnected and failed hiring process is what prevailed at the newly builit Hilton hotel in Windhoek, Namibia where a raft of complaints alleging unfair firings a mere three months after opening has resulted not only in a disgruntled work force but  a media glare that likely will do nothing to improve the bottom line.  The hotel probably would have had fewer employee issues had it paid heed to well known writer and business communications specialist, Gini Graham Scott's observation "you can't fit a square peg in a round hole. If your boss is like that round hole and you are that square peg, you aren't going to fit in unless you re-shape your edges."




Predicting pricing power: A mug's game?

July 17, 2011

Hotel giant Marriott International's shares slipped 8% when the company came out with a tepid forecast for the rest of the year that lowered the "top end of its 2011 outlook by 2 cents to a range of $1.35 to $1.43 per share." The company's basis for a bleaker than before outlook was stated to be a relative inability to raise "rates on groups traveling to do business." As a non-sequitur (given the downward revision applies to the near term) the company offered that "market tends to recover more slowly after a recession because its rates can be set years in advance". 

Stock analysts aren't much better at anticipating either pricing power or earnings growth as a McKinsey & Company report from Spring 2010 year pointed out that "analysts typically lag behind events in revising their forecasts to reflect new economic conditions." The consulting company's study observed that " when economic growth accelerates, the size of the forecast error declines; when economic growth slows it increases.  So as economic growth cycles go up and down, the actual earnings S&P 500 companies report occasionally coincide with the analysts’ forecasts."

Marriott's recent pessimism may be a sobering counter to analysts' expectations that the industry is out of the woods as well as a recognition of the fact that continued upward revisions of rates will likely drive customers down the price chain into more "affordable" segments of the industry.  But ascertaining or, more accurately, estimating customer intentions is an imperfect art at best and arguably a mug's game as a survey by the UK private jet company PrivateFly suggests that 27% of CEOs indicated that they would increase their travel.

One way of  obtaining better probabilities for pricing outcomes for the near term could be to take a leaf out of a new book from the fashion industry, the use of crowdsourcing to predict what products will be a success or failure before they are even released. It involves the use of a web service, Krush  which enables consumers and brands to interface directly thereby enabling financially better outcomes. Testing what customers could want to pay for a menu of service and facility options in destination markets could lead to better pricing decisions for hospitality companies most of whom currently adopt  algortithms based on a smorgasbord of data much of which is rear-view mirror dependant and subject to the caveat that crowdsourcing and prediction markets work best for the near term, preferably no more than two or three quarters.

Customer for satisfaction: reaching beyond the sky?

July 10, 2011

A recent survey by Atlanta based  Polaris a full service market research company found that "fully one-third of Americans believe customer service is getting worse across all of their purchases. Forty-four percent of American consumers believe customer service is staying the same and less than one-quarter (23%) believe customer service is getting better. Polaris also observed that there were demographic variations with ratios that were different depending upon sex, age and race. More Males (35%) than females (30%)  were likely to believe that customer service is getting worse; Consumers over 50 years of age were more likely to believe that customer service is getting worse (41%) while Caucasian consumers  are more likely than other ethnicities to believe that customer service is getting worse.

The survey's results elicited a wry coment from the company's president that "It is somewhat surprising that, with so many companies struggling for survival, the American consumer is still pessimistic about customer service" and went on to add that "Treating customers well is a low-cost option for increasing sales and loyalty”.Nevertheless, at a minimum. as the survey indicated, customer expectations vary with with demographics. But beyond that is the seemingly unbounded nature of (some) customer expectations as a recent Financial Times article headlined "How to handle difficult customerrequests" explained.

The British broadsheet wrote about how a Virgin Atlantic passenger asked a flight attendant to take her children to the playroom while another asked that the pilot be requested to slow down the flight so that he could get a full eight hours of sleep. In the service industry such breathtakingly audacious if not impudent requests, indeed demands, nowadays are par for the course. But it makes training for customer service associates an even greater challenge. 

As the FT's article notes that "a tongue-in-cheek reply is sometimes the only polite response to such requests, they also raise an interesting question: in a world where we are constantly being told to deliver exactly what the customer wants, what should companies do when the customer’s request is confusing, vague or impossible to fulfil?" The FT article points out "unusual or weird requests pose a problem for most companies as their "regular" frontline staff are not geared to deal with them as they do not fit into a pattern and cannot be into "a straight-jacketed procedure”. The answer, of course, is expert staff who can think on their feet and who have management discretion to back up a variation on what is normally offered by the service provider.  But responding to far fetched requests is not limited to humans. Skyscanner, a flight search site was recently asked to book "flights to Mars in 2020"! The site's programmer's anticipating such outlandish , no pun intended, requests programmed it to respond that  "while they might be available, they would be expensive"!




Over-cooking cookies

July 03, 2011

A committee in the US Senate is conducting hearings on privacy and data security with a view to addressing privacy concerns among all stakeholders. The Senate says that "the hearing will examine how entities collect, maintain, secure, and use personal information in today’s economy and whether consumers are adequately protected under current law (and) will hear from representatives from relevant government agencies as well as business and consumer advocate stakeholders."

The three bills doing the rounds in the Senate are those of Senators Kerry and McCain called Commercial Privacy Bill of Rights; Senators Rockefeller and  Pryor's Data Security and Breach Notification Act  and that of Senator Rockefeller's Do Not Track Online Act. While one senate proponent claimed that "consumers (need) to know what is being done with their information" another, a skeptic, wondered "whether the proposed legislation was a solution in search of a problem.

An instructive exercise while the US Senate seeks to "protect consumers in the modern world" will be an inquiry into the early (lack of) success of the UK's Privacy and Electronic Communications Regulations of 2011 which "provide that certain information must be given to a site's visitors and the user must give his or her consent to the placing of the cookies." The regulations provide that a website operator must not store information or gain access to information stored in the computer or any web-enabled device of a user unless the user "is provided with clear and comprehensive information about the purposes of the storage of, or access to, that information" and "has given his or her consent". 

A recent report indicates a disastrous start to an early adopter of the regulations by the UK's Information Commissioner's office. A freedom of information request (since it is a government agency) reveals that the agency has seen a 90 per cent drop in recorded traffic on its web site after an opt-in cookie policy was implemented. The website has an ominous warning to visitors that says "one of the cookies we use is essential for parts of the site to operate and has already been set. You may delete and block all cookies from this site, but parts of the site will not work. It is entirely unsurprising that a precipitous drop in traffic ensued. It is also unsurprising that reaction amongst some in Europe has been visceral with some calling the cookie rules "stupid".

The EU directive's impact on retailers and service providers like airlines and hotels could be devastating. Most businesses have nearly a year to fully implement the rules but it is not entirely unlikely that a reversal of sorts is sought as businesses and others find it financially unworkable. While there must be an attempt to stanch unscrupulous use of consumers' private data , the US must not follow the EU and UK's kooky attempts at controlling cookies.

My Photo


  • 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.