CEOs expect technology to drive loyalty, distribution
 
CEOs expect technology to drive loyalty, distribution
05 OCTOBER 2016 8:36 AM

Integrating platforms to provide employees and guests with what they need is an important step to success, according to company leaders who spoke at a hotel consultants’ conference.

SEATTLE—The future of the hotel industry is tied to technology and people, and that future begins with complete systems integration.

Three executives spoke of the common denominators for distribution and loyalty platforms during the recent International Society of Hospitality Consultants annual conference at the historic Fairmont Olympic Hotel.

Kirk Kinsell, president and CEO of Loews Hotels, said the industry as a whole must prepare if it wants to take advantage of the cutting-edge technology sweeping the globe. He marveled at hotel owners who balk at making technology investments—for example, keeping the same outdated server in place for 10 or 15 years—but are at the front of the line when it comes to personal technology.

“That’s not very smart, so you have to kind of get people into the mindset that it is an investment,” Kinsell said. “Where is that investment going to sit in terms of not just looking at a cost, but how do you transform that to benefiting your business?”

Niki Leondakis, Two Roads Hospitality’s CEO of hotels and resorts, said loyalty and technology tie together best when they are in the hands of hotel employees.

“They’re the ones creating the loyalty with the guest—it’s not the building, and it’s not the points; it’s not the programs, it’s the people,” she said. “If we can enable our employees more effectively, that’s where we stand a chance of differentiating and stand a chance of enhancing the guest experience.”

For example, Leondakis recalled the rollout at Commune Hotels & Resorts—which merged with Destination Hotels & Resorts earlier this year to form Two Roads—of SMS technology in 2015 that enabled hotel employees to connect with guests via text messaging. It paid instant dividends, she said.

“The employees now were using a tool that they’re familiar with and that they like to use,” Leondakis said. “We found that the opt-in rate from the customer was over 90%. The customers are choosing to text back, so now we’re finding out things that really we’ve never known. They’ll tell us that there’s a burned-out light bulb in the bathroom. … They will tell us their TV remote is slow to respond. They’ll tell us things that normally they would check out and never even say, so service recovery is now increased.”

Two Roads Hospitality’s Niki Leondakis talks about the importance of employees feeling comfortable with technology platforms during the recent ISHC conference in Seattle. (Photo: Jeff Higley)

The real challenge, however, is finding an integrated platform that allows all systems to communicate, she said.

“What we really need is not this tool working in isolation but working in an integrated way with all of our systems so that we can actually track, and we’re now looking at that,” Leondakis said.

Much of the hourlong session, moderated by Jim Burba of Burba Hotel Network, focused on the importance of getting the distribution landscape pruned and healthy.

Embracing the online marketplace
Greg Mount, president and CEO of Red Lion Hotels Corporation, said it’s never been more important for some companies to embrace the concept of online travel agencies and what they can bring to the table. That mentality led to his company’s August agreement with Expedia and Hotels.com to offer RLHC’s exclusive “Hello Rewards” member-only rates. In exchange, Expedia and Hotels.com agreed to provide direct member sign-up for “Hello Rewards” and access to the email addresses of customers who book there.

“We’re using their platform and their marketing muscle to grow our customer loyalty program,” Mount said. “It’s been significant. In the first two weeks of doing this, we had more loyalty sign-ups than we did in the first six months of the year.”

Priceline and other OTAs have approached Red Lion about matching the deal, Mount said. About 54% of Red Lion’s room business is booked through OTAs, which is why the company treats them as a marketplace.

“Look, the OTAs are spending $6 (billion), $7 billion a year on their marketing. They’re getting a lot of looks as it relates to online consumers who are going out and checking on the website and funneling their decisions down anywhere from 25 to 30 times,” he said. “We can’t ignore that marketplace. We’re not Marriott; we’re not Hilton. We need to look at this, but we need to come up with a way to make sure that we’re getting more for our dollar spending there.”

As a result of the deal with Expedia, 75% of the people who have signed up through the Expedia site have come back and booked directly on Red Lion’s brand site, Mount said.

“That tells you that the consumer is actually out there on the web looking for the best deal, funneling down their decision and then buying,” he said.

Leondakis said agreements with OTAs are a good idea as long as hotel companies see an uptick in follow-up bookings by the people who register. Kinsell agreed.

“At the end of the day, you want to take that particular customer across that channel at that night and that rate, and all those things have to play,” he said.

Kinsell echoed the marketplace mentality but said the proposition is a bit different for hotel chains that focus on group business, such as Loews.

“Generally you’re trying to convert them into a loyal customer and maybe into a targeted customer,” Kinsell said. “In our case, most of the Expedia customers are not loyal—they are fickle, and they are value-based. They’re looking for a deal, and that’s not always the customer we want on our platforms.”

Leondakis said that if the OTA portion of the business mix is “12% or 14% or somewhere in that range, it’s a good thing.”

“Used strategically, the OTAs can be your friend,” she said. “It can’t be a reactive dumping of inventory because you didn’t have a better plan for how you’re going to fill your rooms.”

Loyalty comes with a price tag
Building that loyalty, however, comes at a price, Leondakis said. She spent 19 years of her career with Kimpton Hotels & Resorts, which had an estimated 1.6 million loyalty club members when she left the company to join Commune Hotels & Resorts in 2012.

“They [Kimpton loyalty club members] paid the highest rate. … It was the cheapest booking, source of booking. … And they spent in restaurants and bars, and they were fiercely loyal,” Leondakis said. “So we thought it was a good thing, but there was a cost to running those programs.”

After arriving at Commune, Leondakis made it a top priority to launch a loyalty program. However, during the time it took to formulate a suitable option, something interesting happened, she said.

“Our head of revenue management is sharing our market share results and looking at our data and going ‘Wow, our portfolio has gained 8% market share this year, and we’re well over 100% penetration,’” she said. “So why am I going to launch a loyalty program and spend all that money and have the owners pay all that money? So we shelved it and to this date are not going to launch that.”

The ultimate plan is to develop a recognition program that folds in Destination’s loyalty program, Leondakis said.

“The customer who is coming to our hotels, who’s choosing to stay at a lifestyle hotel, is looking for an alternative experience, so it’s really not about miles and points for them,” Leondakis said. “Some kind of recognition, we know, is meaningful to them—to recognize their loyalty. Doing that through an enhanced experience is what we’re talking about.”

She said Two Roads hasn’t ruled out launching a pay-to-play model, in which members can belong to a recognition program that’s full of surprises—ranging from food-and-wine experiences to exclusive visits to Asian temples or riding an elephant at sunrise.

“Creating an experience through membership to this club with other like-minded people, you get a sense of community and connection that people crave today, and experiences,” Leondakis said. “We think that would have much more value than just getting miles or points and some kind of rewards system that costs the owner a lot of money.”

Kinsell said loyalty programs tend to satisfy people with addictive personalities, so recognition and personalization programs are more applicable across the board.

“What we don’t appreciate about the loyalty programs today is … the transparency that’s in the marketplace of people who follow those programs and who write about those programs … Any time you make a change to them, it gets voiced,” Kinsell said. “Then everyone becomes upset, and they see the currency go down. Why do you need to have an unhappy owner and now an unhappy member to the loyalty program?”

Red Lion’s “Hello Rewards” program is about surprises and personalization rather than points, Mount said.

“(There are) 7 billion loyalty members in the world—3 billion of those are in the U.S. … So that means every household on average belongs to 30 loyalty programs, which basically says that they’re not loyal,” Mount said. “We cut two-thirds of our cost out by eliminating that points-based program.”

Much of the loyalty conversation revolves around expensive, rapidly changing technology—something owners often don’t want to deal with, the panelists said.

“For us in our industry, we need to start thinking more broadly about what we represent to the customer—not just selling hotel rooms, but we’re selling entire travel experiences,” Leondakis said. “We need to get better at selling those experiences. The way people travel today is they use their handheld device to do everything. It’s not so much about the concierge anymore.”

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