New York Hospitality by Vijay Dandapani

Giving away the store?

Virtually every lodging industry conference this year has had the same refrain when it came to discussing the stalling economy - operators urging each other not to discount during the downturn. Without price collusion - which is clearly illegal - it is hard to ensure such an outcome as it behooves operators to offer "bargains" in a bid to fill their rooms with customers who presumably don't live in a time warp and are aware that demand exceeds supply.

The early empirical evidence points precisely such an outcome - yet again. The New York Times reports on a range of hotels in New York offering bargains. The report begins by noting that as "New York City’s economy starts to experience ripple effects from the Wall Street meltdown, visitors to the city might finally be getting the upper hand when it comes to overpriced hotels, overbooked restaurants and over-the-top spas, with prices being slashed and special deals suddenly being offered". The industry's oft-maligned third party websites have been quick to roll out offers to their consumers with sites such as "Orbitz.com offering as much as 20 percent off many New York hotels, including Le Parker Meridien, the Sheraton Manhattan at Times Square and the Westin New York. Quikbook.com, a New York-based hotel discount site, has been featuring periodic sales with rates for as many as 20 Manhattan hotels cut by 15 percent".

Other cities are not far behind. The San Francisco Chronicle reports on a dizzying array of deals at Sin City that according to "rumors increasingly repeated about $400-a-night hotels discounting their rates, on occasion, to as little as $100". Third Party resellers have predictably been active there too with "Hotwire.com published an offer of $119 per night midweek and $159 per night weekend for a five-star suite at the always elegant Venetian Resort-Hotel-Casino, on select dates from now until Jan. 25. Using Hotwire, you can snare the $119 rate on seven days in October, 11 days in November, 14 days in December and nine days in January. You get the $159 rate on at least three weekends in each of those months".

While hotels nationwide are in for a rocky year (or longer) ahead, customers are likely going to see a surfeit of choices.

Big workplace ideas for small businesses

The US Small Business Administration defines a small business as "one that is independently owned and operated and which is not dominant in its field of operation" and most hotels, franchised or not, easily slip under that umbrella definition. While the small business nature of the industry has many positives, finding best practices to combat high turnover among employees is a perennial challenge in the industry in many parts of the world.

The Wall Street Journal runs an annual contest of sorts in conjunction with Winning Workplaces, an Evanston, Ill., nonprofit that helps small and midsize companies create better work environments, to identify 15 small employers that have built exemplary workplaces. As the Journal report notes "it's never been harder to create a great workplace. With all the turbulence in the economy, business owners are spending more time trying to boost sales and cut costs than fretting about the well-being of their employees". That's a description that lends itself quite easily to the hotel industry even in better times and some of the measures taken by the "winners" (none of whom were from the hospitality industry) could just as easily be applied by hotel employers.

The measures vary widely across a number of employee focused areas. They include "100% employee-ownership enabled by an employee stock-ownership plan". Most hoteliers would probably balk at that but a way to consider it is to set vesting based on tenure and set aside a finite ratio for employee ownership as opposed to a majority of shares that a conventional and traditional owner retains so as to not be concerned by control issues. Asset sales can be addressed with a proviso to ensure delivery of 100% of shares in the event the asset is sold. Another company chose to address it by setting aside a fixed ratio of pre-tax profit for employees with no dilution of shares thereby giving a real feel of "ownership" to all employees.

Another area addressed by best practice companies is the annual bonus where it was done as a ratio of one's salary as opposed to the seemingly arbitrary flat bonus. Unfortunately, all too often, many hotels have no bonus policy for its employees.

Employee feedback formed a highly important component of another firm and was done very frequently and in a highly structured manner. When combined with on-site and off-site training it almost always engenders employee loyalty not to mention upward mobility within the company.

Encouraging employee suggestions or changes and rewarding as well as implementing the good ones is an excellent employment practice. A trucking company (traditionally a high turnover business) cited in the Journal article not only had the usual employee of the month and year awards but also quarterly $100, $50 and $25, rewards for suggestions.

Combating nasty and wasteful instincts in a work place was addressed by another company by getting "employees (to) meet for a "scrum" -- a short get-together where they're briefed on company news, do yogalike exercises and then play a quick brain-rousing game that forces them to think on their feet". Monday morning GMs meetings could arguably incorporate some aspects of it particularly the latter.

Other morale boosting methods include finding fun and communal ways for employees to be involved; internal and leadership development programs; hosting annual soccer games, athletic contests and recreational trips; and enabling administrative staffers to take on challenging projects that "forge a fulfilling career path (with)in the organization".

Turning service failure into success

The Wall Street Journal (subscription required) has an excellent article on CRM (customer relationship management) written by academics from the Thunderbird School of Global Management, AZ and the Warwick Business School, England entitled "Making the most of customer complaints".

While noting that customer dissatisfaction is a near certain factor of any service business the authors suggest that what sets apart is the response of businesses to what they term as "service failures". In their view "customers are constantly judging companies for service failures large and small. They judge the company first on how it handles the problem, then on its willingness to make sure similar problems don't happen in the future. And they are far less forgiving when it comes to the latter" Fixing the problem is referred to by them as "service recovery" and that "has (an) enormous impact on customer satisfaction, repeat business, and, ultimately, profits and growth".

Unfortunately, the authors found that in most firms "customer service sort(s) out the immediate problem, offer(s) an apology or some compensation, and then assume all is well". Unfortunately, that merely is a palliative according to the article and does nothing to cure the problem. What they would rather see is businesses do is to look "at service recovery as a mission that involves three stakeholders: customers who want their complaints resolved; managers in charge of the process of addressing those concerns; and the frontline employees who deal with the customers. All three need to be integrated into addressing and fixing service problems". And according to them fewer than "8% of 60 organizations in their study did this well".

The study notes that customers who lodge a complaint view "fairness" as their biggest concern and they have greater tolerance for service failures than for poor service recovery particularly if the company fails them twice.

With regard to managers, the chief aim should be to ensure service failures don't recur. "Learning from failures is more important than simply fixing problems". Somewhat unsurprisingly the authors found that "many customers don't want a payoff. They simply want to have their problem fixed and to be reassured that it won't happen to other people in the future".

Frontline employees have the "greatest job satisfaction when they believe they can give customers what they expect". These employees "have the difficult task of dealing with customers who hold them responsible even when the failures in question are completely out of their control. The attitudes of customer-service workers, positive and negative, spill over onto customers. Yet companies do surprisingly little to support them". That could be said to be particularly true of almost all airlines but also some hotel companies. One suggestion the authors have is to "Give customer-service staff as much freedom as your business strategy allows". As an example, the study cites the Ritz-Carlton hotel company's policy that "authorizes personnel at the front desks of its hotels to credit unhappy customers up to $2,000 without asking a supervisor's approval".

Another suggestion is to "Collect as much data as you can, and share it widely". They urge companies to "gather more feedback about poor service, record it and make it accessible". The study does not mention it but, perhaps, making the data available to potential customers could also be a signal to them that the company takes these concerns seriously and is on the "mend continually".

The business of deceit

The Wall Street Journal has done a survey of almost 20,000 people in 19 countries -- 16 European countries, plus Russia, Turkey and the U.S to see "whether cheating had become more common and whether it was a major problem". While the survey covered a range of issues including taxes, business, academics, sports and romantic relationships its findings as it pertains to business in diverse countries is of interest.

The report notes, unsurprisingly that "different cultures have different definitions of cheating: A merchant haggling over a carpet in a Turkish bazaar might offend a Dutch banker's sense of business propriety. A student who uses material from a Web site for an essay might be punished at one school but not another". Also expectedly, Italy takes a beating when it comes to when it comes to cheating in business deals with survey respondents naming it as "the country that cheats the most in business. Italians themselves (40%) also said they were the worst nationality when it comes to honesty in business".

The travel and hotel business has more than its share of purveyors of deceit both in marketing as well as outright dishonesty. The most common complaint for deceptive practices among hotels involves the use of "surcharges" that usually are not disclosed during the booking process. These range from absurdly high "resort fees" in resorts to the tried and tested trick: mark ups on phone charges.

But for sheer brazenness on the travel front there are examples like Tickets2Cheap.com who according to the Australian police "asks customers to pay for the tickets through cash remittance agencies. Once the money is paid, the fraudsters purchase the tickets using stolen credit cards which are often cancelled by the time the purchaser is ready to travel!" Seems like "Caveat Emptor" or Buyer Beware ought to be the operative phrase for customers in most such situations.

Marketing - getting past new consumer filters

The Wall Street Journal's European edition has an article written by Mr. Simon Clift, Global Chief Marketing Officer for personal care at Unilever, entitled "Brave New World" which notes how consumers today "live in an age in which we increasingly can choose when, how and where we receive commercial messages". That trend is being helped by the rapidly changing format used by consumers for entertainment and even work where there is a marked desire to " interact with companies rather than have them talk at us -- whether the discussion is about brand design or understanding a brand's point of view on the world". Increasingly, "consumers are switching off -- either mentally or physically -- from the ads they see". That obviously poses a challenge for marketers regardless of the medium used but in particular for television where the 30-second ad slot is increasingly under threat.

Mr. Clift notes that "a recent survey of marketers revealed that their No. 1 challenge is integrating their various communications -- print, television and online". Hospitality companies face that problem constantly not only in terms of synchronizing the content, look and feel of their message but in also ensuring uniformity of pricing while also ensuring that the message is tailored to the audience. But just as audiences for TV channels vary widely based on programming content the audience (and demographics) online varies vastly with the content. Online Poker is, for example, a ripe format for the younger male set who are given to risks and "the perfect place for a brand that targets men who take risks".

Communication (in advertising) that generates dialog is evidently the way to get your ad to stand out as word of mouth advertising is "increasingly influential: 90% of consumers regularly or occasionally give or seek advice from others about products or services". (This website has commented previously on the significant benefits accruing from word of mouth advertising). Getting guests to talk about a hotel chain's attributes is what pivots the boutique concept and attempts to get past the consumer filters but with an abundance if not, surfeit of designer hotels flooding the markets it is going to take more than conventional chic to stimulate conversation.

Happiness co-efficient?

The Financial Times (subscription needed) has an interesting article entitled "In the pursuit of happiness" that questions what has long been received wisdom - that happy employees make for happy customers - an axiom that has divine status in the hospitality industry. Rosa Chun, a professor of business ethics and corporates social responsibility at the Manchester Business School (UK) interviewed 10,000 people (half were customer-facing staff, half were customers) at 13 UK retail organisations in financial services, food retailing, telecommunications and insurance (interestingly she did not include the hospitality industry in her sample set) and asked "how satisfied they were, whether they would recommend a friend to work for the company or buy its products, and so on".

The FT article notes how "Some business units revealed a positive correlation between happy staff and happy customers. But there were others where staff were happy but customers unhappy, or where customers were happy but staff were not. "Most managers believe the link because they have read some books," Prof Chun says. "But when you dig into their actual experience, they have very little evidence." And then goes on to comment on how "Companies have invested vast amounts of time and money over the past decade on the assumption that it is true. Team-buildingexercises, employee empowerment initiatives, "live-the-brand" campaigns, culture change programmes and perks such asat-work massage or ping-pong tables - has all this effort and expense been squandered? . The cause-and-effect relationship between employee loyalty, productivity and customer satisfaction "was never as strong as we hoped", adds his co-author and fellow HBS professor James Heskett."

The research appears to stand on its end the old notion that employee satsifaction led to employee loyalty and then up the chain to customer satisfaction and loyalty - a nice linear relationship that fitted well with most managers across service industries.

All of the above appears to have hastened if not intensified the search for the link between employee and customer satisfaction with new research centered on how "Successful companies focus with "laser precision" on the staff behaviours that customers want and give their employees a sense of "ownership" (as distinct from satisfaction, loyalty, commitment or engagement) so they can demonstrate "latitude within limits" when dealing with customers". In other words, organizations are focussing on the process that leads to satisfaction of customers rather than merely making employees happy with a view to osmotically having that transmitted to the customer.

Some of the "new" findings may not be entirely new to the hospitality industry. The industry has, for long, focussed on guest needs as a basis for the CRM and then tailoring training programs for employees to optimize that - the issue always was how to make the employee gain the most of that and derive enjoyment while carrying out that process. Anticipating guest needs and communcating it to employees thereby, taking away the (nasty) surprise element surely brings about happy employees. At any rate, hotel companies too ought to take a look at the relationship to see whether there indeed is a link between a happy cow and high quality milk.