The case for innovation in marketing, pricing, loyalty
 
The case for innovation in marketing, pricing, loyalty
05 DECEMBER 2018 9:15 AM

Establishing a baseline for a company’s appetite to innovate is essential for sales-and-marketing and revenue-management teams to continue to strive to meet consumer requirements, according to executives speaking during a Hospitality Innovation Think Tank.

LOS ANGELES—Innovation, meet hotel sales-and-marketing. Hotel revenue management, meet innovation. The intersection of these disciplines is closer than they might appear to be, according to speakers participating in the Hospitality Innovation Think Tank at the recent Phocuswright Conference.

Establishing the definition of “innovation” was key to set the stage for the in-depth discussion that eventually led to new ways to tackle sales-and-marketing and revenue-management challenges facing the hotel industry.

“It’s important not to confuse invention with innovation,” said Jeff Senior, VP of marketing for KSL Resorts. “Innovation is change—positive change … to the degree you are managing a process that effects change in a meaningful way, faster than it would if it were to take place organically.”

All innovation is rooted in empathy, according to the KSL executive.

“If you’re not solving the problem for somebody, then it’s not real innovation and it doesn’t really matter because it’s not going to stick,” Senior said.

Michael Vermillion, VP and GM of travel and hospitality for J.D. Power, said a definition of innovation must revolve around “capability.”

“It’s the ability of an organization to adapt to changing market conditions,” Vermillion said, adding that the conditions could include new technologies and emerging competitors. “The ability to adapt to all those types of things would be within the definition of innovation. For hospitality and marketing … it’s the ability of the organization to adapt to changing consumer tastes and changing consumer expectations.”

Hospitality marketing innovation involves customer relevancy, according to Dorothy Dowling, SVP and chief marketing officer for Best Western Hotels & Resorts.

“It’s about value creation,” Dowling said. “It’s always above that profitability measure because … it really is about solving a customer’s problem, but it is bringing some thought process around creativity and doing it for a profit.”

That often means challenging the norm, which is essential when it comes to innovation, said Kurien Jacob, principal with Highgate Ventures.

“If you can challenge the norm and the normal practice that you’re doing in any business, you can’t take it for granted,” Jacob said. “So change is the only constant and innovation can be product, it can be process, it can be a business model, it can be a marketing division. Any organization that constantly challenges what they’re doing should be looked at as (innovative).”

Putting together those new processes and technologies to come up with a something new is the fundamental tenet of innovation, added Chris Donnellon, global VP of marketing for Marketo.

Despite the best intentions, one major roadblock to innovation is ineffective corporate culture, according to moderator Bob Gilbert, president and CEO of Hospitality Sales & Marketing Association International. The speakers agreed.

“Leadership is very important because there’s a certain risk that comes with innovation,” Donnellon said. “There’s a certain perspective about profitability, and when you innovate, the idea typically involves future profitability. If you’re really lucky you’ll get present profitability out of it, but it takes leadership and it takes vision to understand that.”

Culture and leadership go hand in hand when it comes to innovation, according to Jacob.

“If you don’t have the leadership vision, innovation is likely going to fail,” he said.

Corporate leaders must know that not everything is going to be successful, Vermillion said.

“A key ingredient in a culture of innovation is the permission to fail,” he said. “Innovation is about trying new things, and new things are hard. A lot of times new things don’t work and then they fail.”

Punishing employees for failing when trying new things leads to stagnation and the lack of innovation, according to the J.D. Power executive.

“That said, there are good ways to fail and poor ways to fail,” Vermillion said. “(If you fail), you want to fail fast … so that you don’t have a bunch of zombie initiatives and projects and products walking around. You want to set up an organization to learn from that failure.”

Senior said there are three components of an organization’s culture that embraces innovation:

  • It starts with a talent-based organization that hires more than just talent—people who are empathetic and curious.
  • There needs to be a process to follow so employees understand how to bring ideas to life.
  • The organization must have leadership that provides the right environment.

“If you have those three things, my sense is you’ve got an organization that is poised to innovate, grow and be profitable,” Senior said.

Pricing strategy innovation
Innovation in the hotel space often involves product-price positioning, according to Jacob. Today’s revenue-management innovation includes dynamic pricing based on demand and customer demographics.

“That’s the area in which we feel is going to be a true innovation; testing the ability of variable pricing across different markets based on willingness to pay,” he said. “The correlation between willingness to pay and actual demand is where new-age revenue management is going.”

Embracing channels that lead customers to a hotel company’s distribution platform is essential innovation for hoteliers in today’s environment, Dowling said.

“I’m always one to believe that customers don’t start on our channel very often, so you have to be on every channel and you have to understand how to optimize every channel,” she said. “That means you have to lean into your partners, understand where they’re going, enjoying that and be part of their solution.”

Jacob said another innovation that Highgate executives think will happen is that central reservation systems are going to become decentralized. He cited Google’s accelerated mobile pages project, which according to its website “enables the creation of websites and ads that are consistently fast, beautiful and high-performing across devices and distribution platforms.”

“You’re basically (inside) the Google framework itself, and you’re seeing all the results,” Jacob said. “This tells you that in the future, why would we need to actually go, click here and book now, go on another page and book now? Just be where the customer is. Right there, wherever it is.

“What I think is going to happen is it’s going to really disrupt (distribution) by moving into a distributed reservation and being present where the customers are, and being able to transact right at that spot.”

Loyalty innovation is slow
Another area of innovation is the hotel sales-and-marketing space revolves around loyalty programs, according to the panelists.

“When Marriott first introduced points (to the hotel industry) in the '80s, that was innovation,” Senior said. “But the fact that everybody’s doing the exact same thing three decades later suggests there’s been a lack of innovation.”

Panelists said some of the innovation focuses on providing loyalty programs that address the experiences customers are looking for, but Dowling said the real innovation is coming where guests want it most—the redemption of points for free nights.

“Experiences are a minute fraction in terms of redemption that customers actually put their hands up for,” Dowling said. “I’m a very pragmatic marketer in terms of driving to the customer-solution side, and my belief is such that people want free. Everyone has weddings, everyone has kids’ soccer tournaments, everyone has things that might get in the way, and they have to spend on countless things (during those occasions). Using points for free nights is still the currency choice that most are going with.”

However, the situation could very well change, she said.

“That may be the future, but we’ve been talking about this for three or four years and all of us went down the path of investing fairly heavily in marketing and evolving and having redemption offers versus experiences—and that point is not yet there,” Dowling said.

When that time does arrive, it’s going to be a boon for hotel marketers and analysts, according to Jacob.

“It’s very unique—it’s going in that direction,” he said. “Based on the way people like to choose their products, you can start identifying what kind of customers you’re getting. How many people actually (redeem), how many people want Uber credits or something else … it starts creating a whole new currency.”

The key for hotels is to not take the path airlines have taken and make the redemption process too complex, according to Vermillion. Airline loyalty club members participating in J.D. Power’s most recent airline study told the company that the inability to understand how to earn miles or points and redeem them is too hard—and that leads to dissatisfied consumers.

Senior said there’s hope for the hotel industry in that regard.

“The fact that all the big hotel companies are out there still trying to get it right, and yet we still keep hearing from our travelers that points aren’t it … it tells me that somebody, somewhere is going to innovate and solve that problem,” he said.

It boils down to the loyalty programs being a big driver of engagement, share of wallet and repeat business from consumers, Dowling said.

“We have to continue to innovate,” she said. “We have to listen to our customers.”

Introducing things such as points that don’t expire and the elimination of blackout dates have made hotel programs more consumer-friendly than airline programs, Dowling said.

“We want to make it easy for people to (use points) because we know that propels engagement,” Dowling said.

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