During the second-day general session at The Lodging Conference, hotel executives discussed challenges and the value of loyalty programs.
PHOENIX—The value and changing role of loyalty was at the top of the minds for some prominent hotel industry executives speaking during Day 2 of The Lodging Conference.
During the “View from the C-suite” general session on Day 2 of The Lodging Conference, executives spoke about the challenges and opportunities they face heading into the fourth quarter of 2016 and how they need to look at a number of factors to gauge their performance through what has been an up-and-down year. They also provided varying perspectives on whether loyalty programs give their companies enough of a return on the investment.
Value of loyalty
G6 Hospitality purposefully doesn’t have a loyalty program, said president and CEO Jim Amorosia, and that decision has been reviewed and challenged on a number of occasions. The costs of the programs are embedded into the cost of rooms, he said, and hotels don’t necessarily gain in terms of what today’s market is.
To build loyalty, G6 focuses on how hotel employees serve guests after they walk on property. Amorosia said it’s about how they show they’re going to make that particular stay beneficial, which can be done with little cost involved.
“I feel you can get the same bang for that investment if you make sure people are appropriately trained to make sure they have every single guest is a walking billboard,” he said.
For Best Western Hotels & Resorts’ segment in particular, it’s important to have superior customer care, president and CEO David Kong said, and loyalty is crucial, especially when fighting with online travel agencies.
“Without loyalty programs, how can we offer rates to compete with OTAs?” he asked.
Two-thirds of management company HHM’s hotels are branded, president and CEO Naveen Kakarla said, and two-thirds of those are in dense urban markets. When looking at the branded hotels, there’s no question their loyalty programs are very powerful. They excel at knowing their customers and driving repeat stays.
HHM also has about 30 independent hotels, 19 of which are lifestyle, Kakarla said. He noted millennial customers are looking for experience, whether it’s business or personal. These hotels benefit from a perks program, and these programs give guests instant gratification with every stay.
“I don’t think loyalty is going anywhere, but I do think what’s valued is changing,” he said.
Kirk Kinsell, president and CEO of Loews Hotels & Resorts, said his company’s loyalty program isn’t focused on accruing points but on making sure every guest is treated as a valued guest. It’s about recognition and personalization, whether it’s through loyalty, a person coming through a meeting or some other channel, he said.
Points-based programs can be expensive, Kinsell said. While they’re highly transparent for brands, they become a currency, and those things don’t always work out in the end.
“We look more for personalization and recognition,” he said.
For Magnuson Hotels, building loyalty doesn’t come from a complicated program, said CEO Thomas Magnuson. It comes from focusing on the basics of whether guests have what they want when they want it and at the right price.
“If you hit those three things, it takes care of itself,” he said.
Assessing the situation
Best Western relies on several indicators to measure how it is performing, Kong said, including receiving information from STR about how the brand performs relative to its comp set. The forecast of a slight increase in revenue per available room paired with a decline in occupancy sets off alarms, he said. (STR is the parent company of Hotel News Now.)
“If you don’t have growth in occupancy, how can you have pricing power?” Kong asked.
Amorosia said one thing he watches is the unemployment rate because so much of the industry is leisure-driven.
“We’re always trying to ascertain if there’s a contraction of amount of disposable income in the economy or an expansion,” he said.
That forecast is always a guess, Amorosia said. If disposable income expands, his company looks to see what it can do to that would have a significant return on investment. If there’s a contraction coming, he said G6 looks at compression of costs, which would have a neutral or negative impact in perception of delivery.
In its new leadership training program, G6 trainees receive a challenge where they imagine they’re head of the company at a time when the horizon is unclear, Amorosia said. They’re tasked with determining how they would maintain the delivery of return they need while maintaining delivery of service to guests.
Business spending has caused a great deal of stress in the hotel industry, Kakarla said. It’s not just group business, he said, but overall spending, such as research and development.
Unemployment is another issue, he said. While the government says new jobs are being created, a number of people are remaining on the sidelines.
Taking on challenges
Adapting in the later stage of the industry cycle requires different behaviors, Kakarla said. It’s critical to prepare for the next few years, such as investments, property-improvement plans and cost-model planning.
For HHM, technology on the ownership side has resulted in a more cost-efficient model, he said.
Disruptive technology is changing how hoteliers do everything, said Lance Shaner, CEO of Shaner Hotels.
“The reality is in 20 years, we’re going to have immense shifts in just the way we do things,” he said. “That’s something you try to get ahead of.”
Kong said his company views challenges as opportunities in many ways, which is illustrated by the company’s move into franchising with SureStay Hotels. Best Western has never entered the economy and lower midscale segments before, he said, but there are 17,000 branded and 12,000 independent hotels there. Moving into economy and lower midscale meant taking advantage of those potential conversions, but that would risk brand equity.
“We turned that challenge into opportunity by making the bold announcement at this conference launching a white-label franchise brand,” he said.