By: Robert Rauch, Principal
1 – 2013 is A Recovery Year
The tourism market has outperformed the economy over the past year. Employment levels continue to be weak and growth in consumer spending lags along with consumer confidence. Europe is on life support and China, while enjoying a strong economy in recent years is showing signs of decline. By and large, by all measurements, travel demand is up. This past year, the hospitality industry has seen growth in both occupancy and average rate. The industry’s occupancy will likely increase by 1 percent, average daily rates will rise by 4 percent and revenue per available room will increase by 5 percent.
Marketing is satisfying the wants and needs of customers and doing it at a profit, according to my hospitality professor at Florida International University, the late C. DeWitt Coffman. The key word this year is profit. After several years of anemic growth, the hospitality industry is poised for success. Every facet of marketing must be deployed.
Michael Porter has always been considered the dean of strategy. His “Porter’s Five Forces” allows a business to analyze it’s position vis a vis a competitive set or “rivalry” with forces from new entrants, buyers, sellers and substitutes. It is worthy of an academic exercise. What are the dynamics of hospitality industry competition? Looking at the airlines, it is obvious that meal quality does not appear to be on the “radar screen” (pardon the pun) of corporate decisions. However, the hotel industry has gone through a major change whereby suite hotels that include breakfast and a light dinner have a competitive advantage. Restaurants have pick-up and delivery via social media and wi-fi is prevalent at coffee houses.
During 2011, Starbucks expanded its mobile payment program to give customers access to the fastest way to pay at more than 9,000 U.S. locations, introduced the Starbucks for Android app, rolled out the Starbucks Card eGift feature, started international expansion and developed the Starbucks Cup Magic app to share augmented reality experiences in its stores and beyond. In 2013, smart phones and tablets will completely dominate the buying market…without a mobile web site, your business is lost.
Social media marketing strategy is a hospitality industry imperative and viable business solution in the digital age. Platforms including Facebook and Twitter allow hotels and restaurants to engage guests and offer a more highly personalized level of customer service than ever before. Plus, these social media profiles are a key element that impacts organic search rankings for your business.
We’ve seen a quantum shift from hospitality as an art to hospitality as a science with the advent of digital marketing. For a Wikipedia definition, digital marketing is the use of digital sources based on electronic signals like Internet, digital display advertising and other digital media such as television and radio. At its heart, digital marketing centers around the Internet which has become a very powerful medium. Some of the trends that we see occurring include online booking, mobile bookings, more sophisticated revenue management, distribution channel management and social media marketing.
In the hospitality industry, knowing your guests-where they are from, how much they spend and when and on what they spend it, can help you formulate marketing strategies and optimize profits. Hospitality companies accumulate large amounts of consumer data that can be organized and integrated in databases and then tapped to guide marketing decisions. The relatively new process known as data mining can be instrumental in extracting meaningful patterns and can assist in building predictive customer-behavior models that aid in decision making.
In his book, “Swim with the Sharks,” Harvey McKay describes 66 attributes of customers you should store on a profile. I’d be happy with just a few points like birthday, lodging and dining preferences and complete contact information. When a guest walks into a restaurant and we say to a guest with peanut allergies, “Mr. X, we have a new item that does not have any peanuts in its preparation,” we have a customer for life.
Speaking of a customer for life, the difference between a one -time guest and a regular in terms of profit cannot be overstated. It costs lots of money to obtain a new guest. We need to keep all of our guests by utilizing a “zero defects” mindset. This model of quality assurance is the subject of another conversation but is a key to developing customer equity.
This is truly the key to developing customer equity. Zero defects still allows for one of the inferior service levels like basic, expected or desired service. Not only must we avoid errors in service, we must provide “wow” customer service to ensure guests consider returning to our hospitality business and just as important, tell people via social media!