LEAN Strategies for the LEAN Season

By Justine P. Castellon

 

(http://labornotes.org)

The excellent performance of the country’s travel and tourism industry has not only brought

prestige to the country but also spurred growth, uncovered opportunities, addressed management challenges, and set future trends for the hotel industry in the Philippines.

 

 

In Metropolitan Manila alone, smaller independent hotels are competing with the daily task of selling rooms along-side franchised brands such as Mandarin, Shangri-La and Holiday Inn. The average room occupancy rate growth has reached 2.9%, according to the January-June 2007 Regional Hotel Occupancy Report, which was recently published by Department of Tourism.

 

 

This increase in the number of visitors has brought with it rising expectations from travelers, fueled by massive tourism promotions and aggressive competition among hotels.  Consolidated marketing and the synergy of chain branding are also threatening the existence of many independent hotels; these independent hotels have to contend with their relative obscurity in the marketplace.  And because their marketing funds are limited, they need to rely on overflow from their larger franchised neighbors.  But, what happens when there is no overflow?  Even the franchised hotels with their structured marketing programs and funding have to deal with the problem of low occupancy rate during lean seasons.

 

Since this downside is inevitable, hotels (both franchise and independent) are giving their best shot by employing these techniques from the hotel management playbook.

 

Develop reservation alliances

While this has been the stronghold of large hotel franchises for many years, the sheer nature of the Internet and the popularity of online third party aggregators are changing the playing field itself. Traditional advertising was diluted by the entry of central reservations offices like Philippine Hotel Reservations Service (PHRS) which help guests pick and choose hotels in destinations of their choice based on price, quality and service offerings. With a listing of more than 400 hotels and resorts all over the Philippines, travelers have wider choices of the best hotels by just clicking their computers.

 

Central reservation offices work similar to travel booking agencies.  The hotels are listed based on the central office website’s search engine which allows traveler to choose by locations, budget and hotel category.  There is also provision for prime spot in the website where they showcase the best hotel deals.  PHRS main online booking page (http://www.philippinehotelreservations.com) consists of hotel search engine, Philippine vacation and travel packages with discount madness and special packages, most requested hotels and the reservation helpline.  Once a traveler click on a certain hotel of choice, a separate window pops up which displays the hotel’s description, room rate, amenities, photos, location and hotel policy.  The traveler may then make reservations by filling up an inquiry form. The PHRS travel consultants will get right back to them within 24 hours to advice about the details of booking. After confirming the reservation, the travel consultant will advise about the payment details of booking. Once the payment has been received, PHRS will send a travel voucher, either by email or fax. In case of last minute bookings, PHRS will send the travel voucher directly to the hotel front desk for pick-up.

 

Since these central reservation offices ensure that guests get the best possible rates offered, independent hotels can now level the playing field versus the franchise-chains by offering a price advantage.  This price war is evident during the lean season to ensure steady growth of room bookings.  The franchises’ self-imposed war against independent hotels was caused, at least in part, by their fear that the much lower room rates of these independent hotels could threaten their reservations base and their very way of life by also eroding brand loyalty.

 

To minimize the impact of a price war, franchise-chains should find the best marketing propositions. One of the newest hotels in the country, Crowne Plaza in Ortigas Center, put more weight on the “essentials of time in doing business” in their marketing communication.  Crown Plaza claims that their hotel is designed to be a perfect working base with upscale amenities, comprehensive business support and top-notch meetings expertise to take care of details – all under one roof.  That way, when business travelers check on with central reservation offices with arrays of choices, they can study offerings based on rates, amenities or comfort.

 

This is similar to the independent hotels – if they can not offer excellent room amenities, they can always emphasize affordable rates as their value propositions.

 

Create Electronic Booking

It would appear that many leisure and business travelers have discovered that some of the best hotel room deals are to be found not through a travel agent or through calling a hotel directly, but on the web.  The Internet is still the most effective and value-packed sales tool ever devised.  Although in using online hotel consolidators to sell hotel reservation like the central reservation offices, Internet users would always find discounted rates and nothing else.

 

As far as the Internet consumer is concerned, these discounted rates are, in effect, the published hotel rates.  The resulting price dilution can seriously affect the contribution margin.  To address this concern, create your own direct hotel online booking.

 

When a traveler is searching for accommodations, he should be able to find hotel website directly through the search engines (Yahoo or Google, etc) and destination portals (www.yourhotel.com).  This is a direct hotel online booking, a hotel website with a 24 hour by 7 day sales force, complete with booking engine, website optimization, website functionality, customer e-mail capture and a strong customer service component.   The website is not just an online brochure.  While it is essential to keep it simple, nice, informative, useful and efficient, this should contain a real-time booking engine. The booking engine should be prominently displayed on the Home Page and become the centerpiece of your hotel website.  All pages within the website should prominently feature the “Online Reservations” or a “Book Now” buttons.

 

Richmonde Hotel  in Ortigas Avenue employed a secure system in its online booking under “Reserve Now” tab. A reservation system displays availability and rates for any two-week period beginning on check-in date. A customer select preferred room type and can even view 2 weeks-worth of availability and rates. He/she can enter the numbers of room per night starting with check-in date. The guest can have an option to review reservation details, before providing his/her credit card information.  Once everything is done, the guest can click on CONFIRM MY RESERVATION at the bottom of the page.

                        

 

Offer free goods to improve value proposition

These incentives, entice more travelers in booking at preferred hotels because of tempting offers in the form of discounts, bundles, free samples, and coupons. These can be offered when travelers book a certain numbers of days.  Some marketers introduce this approach as hyperdifferentiation, This can be described as “the art of reducing the importance of price as the principal determinant of customers’ selection among alternative goods and services.” That is, hyperdifferentiation seeks to encourage customers to select goods and services based on deep delight, delight that provides value sufficient to distinguish one offering from all of its competitors, so that the purchaser is less concerned with price differences between the selected product and the available alternatives.

 

Holiday Inn is famous for its free-on-five promo. For travelers who stay longer than the usual booking gets treat of free 1 day stay or a room upgrade.  Medium size hotel, Eurotel in Sampaguita Theater building, in Cubao is offering free half friend chicken for traveler who check in for 10 hours onwards. Customer delight is not new to Hotel Sogo in Cariedo, Manila, for 12 hours stay, the customer will have a free breakfast for two.  But this is applicable for check in between 4pm-2am Monday to Thursday, the low customer traffic dates.

 

This technique delights the traveler and bases his choices not on price.  Remember, customers based their purchase on trust.  And trust is equal to reliability and delight.

 

Offer loyalty program

As a result of increasing number of hotels focusing on offering the EST (best, cheapest, newest, etc), one should look into the improvement of customer experience in a manner that will increase customer retention (and revenue).  A good hotelier doesn’t stop at having excellent room service and affordable rates to attract customers.  Keeping customers for future bookings will them peace of mind during lean seasons.  Too many hotels suffer from high customer churn – they gain new customers, only to lose them later.  After luring them by lowering room rates and offering freebies, hotels neglect their exit strategy by not giving their guests a reason to come back.  Think of filling a leaking pot with water.   Marketers have already learned that it’s ten times more expensive to attract a new customer than to keep existing customers loyal.

 

Loyalty programs come in different forms.  A bounce-back coupon offering a certain discount when customers book again within a specified period of time, can help ensure that the hotel will be top-of-mind when it comes to choosing accommodations.   A reward card can also be used to track frequency of visits. Since a traveler is aiming for certain rewards due to frequent visits, brand switch can be avoided.

 

PHRS for instance, not just handles reservations for any hotels but conducts overall promotions as well.  The new program for all their loyal customers, “Customer Referral Program” which was launched last December, encourages frequent online visitors to refer clients to book travel and hotel accommodations using PHRS. For every person referred to PHRS can earn points that may be use as a discount on your succeeding bookings at any of 400 + hotels nationwide.

 

A good example of hotel reward loyalty program is the The Richmonde Club 1 Plus, an exclusive bookers’ program entitles customers to a host of exciting rewards and privileges each time they reserve a room or book a banquet event. This promotions is eligible to all corporate clients of The Richmonde Hotel’s Room Sales and Banquet Sales who book within the promo period and accumulate a total revenue of at least PhP10,000 will automatically qualify for the Club 1 Plus program and will be given an application form.  Upon approval of the application, he/she will receive a confirmation letter bearing his/her name, company and Club 1 Plus Membership Number. This membership number should always be given when making reservations at any of the Club 1 Plus Revenue Centers.  The rewards range depending on the accumulated revenue credit, Richmonde Gift Certificates worth PhP800 or Sodexho Pass worth PhP500 for PhP50,000 revenue credits. The bigger the accumulated revenue credits, the more exciting rewards await the members.

 

These techniques from the playbook of hotel management can buy a little time in acquiring the customers during lean season. But hoteliers should never forget that nothing can replace excellent service . . . and it is the most important. Why does a customer need a loyalty program or a great discount on room rates if he is happy with the treatment and service?

 

Whether a customer is satisfied after checking-in depends on the hotel’s performance in relation to the customer’s expectations in terms of room service.  Many companies aim for high satisfaction because customers who are satisfied are much less likely to switch.  High satisfaction creates an emotional bond with your brand, not just a rational preference.

 

Winning and keeping customers happy and satisfied are essential to hotel business. When they seek to understand their people, and customer service representatives understand their role, they will keep customers coming back again and again regardless if it is a lean season or not.

 

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SIDE BAR:

Resource Books for Hotel Management

• Check-In Check-Out : Managing Hotel Operations
  (This book has been a mainstay text for hotel educators, and a reference source for industry professionals, for over 30 years. Frequent revisions by the authors “a father-and-son team” have kept the book current and complete. Both bring a depth of professional and educational experiences to the seventh edition.
  by Gary K. Vallen (Author), Jerome J. Vallen (Author) 

• Hotel And Lodging Management : An Introduction
  (Prepares you to succeed as managers in the hotel and lodging industry, while developing a solid foundation for a long and successful career. This comprehensive resource combines detailed presentations of each department in a hotel or lodging establishment along with a close examination of organizational structure and the interdependent relationship among departments)
  by Alan T. Stutts (Author), James F. Wortman (Author)

 

 

NOTE:  This article was published in the Masigasig Magazine (March 2008)

 

 

Rewarding Your Loyal Customer

By: JUSTINE P. CASTELLON / Consumer Strategist

“it costs five times as much money to find a new customer than it does to get a current customer to come back and buy from you.”

Over the years, a variety of marketing approaches have been used to extract and evaluate customer information in an effort to understand and replicate what keeps customers happy and loyal. So businesses have adopted the tactics of recognition and reward to identify, maintain and increase the yield from their best customers . . . loyalty program. And it is designed to increase the lifetime value of current customers through a long-term interactive relationship. Why do businesses do this? Because when you’re in a commodity trade, you need to offer customers a reason to choose you and stick with your product or service. They need something that helps to break the tie in their head. Choosing between two or more nearly indistinguishable products or services is always hard. It’s like finding a needle in haystack, unless yours is the golden needle that shines amidst the bunch of hays. By running loyalty programs that not only increase overall usage but also offer elements of exclusivity and personalization, you reinforce market behaviors, buying patterns and relationships. While this valued in the marketing arsenal, start-up companies or smaller business are either frightened or their eyes glaze over the idea of customer loyalty program because they think it’s either too expensive or too complicated to implement. And many still find it difficult to set up a strategy that will make life easier for them and better for their customers. But always bear in mind that it is cheaper to retain old customers than acquire new ones, because it costs five times as much money to find a new customer than it does to get a current customer to come back and do business with you. Create a simple yet effective loyalty program. It doesn’t have to be complex. A simple, graded points system is all it takes. Check National Bookstore’s Laking National or Mercury Drugstore’s Suki Card. One of their key tenets are the management and the contact points. Any small business wishing to start a customer loyalty initiative needs first to identify important customer. Use whatever tools, and data-mining techniques to locate your repeat, regular customers. Equally vital is to know your profit margins. Don’t offer discounts until you know the impact on your bottom line. Then follow the key features that provide the framework and the kick-start to those who wanted to create a process that is both positive and profitable.

1. Analyze and capture customer information. Identify customer types and purchases accordingly. Start to what the marketplace is telling you – what your loyal customer wants, how they buy and what motivates them. This data will help you in designing the ideal loyalty program that meets your objectives, targets , and delivers a return on investment.
2. Track customer behavior. By grouping customer’s types you will be able to know where your business comes from and sell to them more effectively. This will also allow you to react and respond differently and with intention to each group.
3. Develop a customer contact plan. Creating such plan provides you with a broader view and allows you to see where your activity time is being spent. Identify areas of commonality and where leverage can be gained.
4. Raise customer expectations. The best programs build excitement by letting customers know exactly what rewards they can expect and how to earn them.
5. Manage points and redemption. Invest in technology to automate customer purchases and rewards. These will allow you to easily monitor what keeps them (customer) coming back to you. No retention solution would be complete without continuous and insightful monitoring and tracking of your most valued customers’ usage patterns, purchasing behaviors and redemption rates.
6. Communicate. Launch your loyalty program and communicate its value to your target customers. This includes developing and distributing introductory kits, membership cards online and offline registration, sign-up events direct marketing, and internal staff training.
7. Evaluate. Does program bring in more foot traffic to your store or inquiries on your services? Is the conversion rate higher? Do you still have the same customer despite the heavy competition? Is the profit margin exhibit better performance? If yes, then your program is successfully managed and implemented.

And here’s the best part of your loyalty program: the data you collect can also help you improve your customer acquisition results. Just take what you learn about your best customers and tailor your marketing approach to address prospects with similar characteristics. A loyalty program which is properly designed, promoted and personalized – is a powerful and cost-effective way to complete the sales cycle, retain profitable customers and accelerate your market share. But as efforts are steered toward retention rather than acquisition, particular attention is being paid to cultivating high-value customers. But never forget the balance of customer management by putting similar effort in the acquisition of new customers. TYPES OF LOYALTY PROGRAM
While there is no “all-in one” type of program in loyalty marketing. There are four basic types of loyalty programs to choose from.

1. Rewards program – Rewarding loyal customers with awards unrelated to your product/service.
2. Appreciation program - Rewarding loyal customers with more of your own product/service.
3. Rebate program - Rewarding loyal customers incrementally according to their purchase activity.
4. Affinity program – Building a lifetime value relationship with a customer based on mutual interests and not on the use of rewards.

PREREQUISITES OF LOYALTY PROGRAM
Creating a program is a great idea but there are things to think about before you decide to build one. For starters, it requires the following three items:

1. Members - you must have a targeted, well-defined group of members who have similar values and interests.
2. Loyalty Currency – the rewards points that members earn over time. Extending this currency beyond the boundaries for which it was initially intended increases the relevance of the program to its members, enhancing members’ opportunity to earn points through more locations.
3. Marketing - you need a vehicle to communicate your program enhancements to members. Using a combination of advertising, direct mail and online channels to reach existing and prospective members is not free, so be prepared to make that necessary investment.