The purpose of this example is to show how thousands of small financial transactions (resulting from thousands of individual purchase decisions) generate top-line rooms revenue, a major contributor to a hotel's profitability and value. Cognizant of this fact, effective managers realize they can maximize the financial potential of their asset by consistently providing a positive experience to a high percentage of these thousands of customers, thereby inducing future demand. Consistently high levels of customer satisfaction will naturally result in customer loyalty and repeat business. This demand will put ongoing pressure on the hotel's room inventory, resulting in strong occupancy levels, and will allow management to continue to increase rates.
To achieve the objective of providing a consistently highly satisfactory experience to it thousands of customers management must maintain effective mechanisms to monitor and measure the level of satisfaction by evaluating customer data and opinions from a meaningful sample of its thousands of customers. This data collection and evaluation will identify operational shortcomings that require refinement and provide management with invaluable customer opinions regarding their operations.
It is common knowledge in most industries (including the hotel industry) that the cost and effort to retain an existing customer is far less than the cost and effort required to identify a new one. It is therefore logical that management should focus a great deal of time, money, and effort on the collection and interpretation of meaningful data regarding the hotel's customer base. Yet, as an industry we often fall short when it comes to obtaining and evaluating an adequate sampling of vital customer data.
A full-service hotel generally spends approximately 7% of total revenue to fund sales and marketing initiatives designed to attract new customers, but usually makes a far smaller commitment of human and financial capital to consistently obtain sufficient amounts of data needed to evaluate the satisfaction of the hotel's existing customer base. By directing financial and human capital toward the goal of gleaning meaningful information regarding existing customers, and continually refining the operation to address issues identified during this process, a hotel can significantly increase its level of repeat business, thereby inducing future room demand.
Managers should ask themselves what procedures are in place in their operations to continually measure the level of satisfaction of a statistically meaningful sample of their customers. The vast majority of managers polled use guest comment cards and mystery shopping programs as two principal means of evaluating the performance of their hotels. Yet, on average about 1% to 2% of the traveling public uses a comment card and this 1% to 2% customer sampling generally identifies those customers who are extremely satisfied with their experience or extremely dissatisfied with their experience, but provides little information regarding operational refinements and enhancements that when initiated, could possibly tilt their loyalty to the hotel's favor. This small percentage of data is insufficient to thoroughly evaluate customer satisfaction levels. Mystery shopping programs that look at the operation through the eyes of one person perhaps once every month or two also provide far too limited data to measure how the operation is being perceived by its thousands of customers 24 hours a day, seven days a week. Stated succinctly by the Gallup Management Journal in the winter 2001 issue, "an alternative to mystery shopping is to elicit feedback from a statistically significant sample of real customers. For the amount of money spent on most mystery shopping programs, a more robust, reliable customer service system could be developed. An organization could use Websites or toll-free numbers to conduct customer surveys that would produce vastly more and higher-quality data."
Comment cards and shopping services have their place in the information-gathering process, but these programs should be augmented by additional methods that result in the compilation of greater amounts of customer opinion and satisfaction data. Nothing can take the place of one-on-one conversations with as many customers as possible and management should make these conversations a priority. Formal on-site polling by outside firms that specialize in customer feedback and opinions is also useful. While in-person customer interviews conducted on-site may be costly, this method is extremely valuable because such interviews yield real-time insights into customers' likes, dislikes and intention to visit the hotel again. Managers can also use the latest in technology to access what is going on in their customers' minds by providing an e-mail address to communicate directly with management.
Effective managers aggressively pursue voluminous amounts of customer data though a variety of sources to maximize the long-term financial potential of every customer who walks in the front door. Armed with reliable data, managers can move forward with confidence when making financially impactful decisions regarding service levels, amenities and rate movement. Obtaining and monitoring valuable customer data from a high percentage of customers will produce long-term financial benefits for those managers who make guest opinions their top priority.
Mark Lynn is president of the Asset Management and Operational Advisory Services Division of HVS International. Mr. Lynn has been involved in the development and management of more than 90 hotels with an aggregate asset value in excess of $1.8 billion. He holds a BSBA from Xavier University in Cincinnati, Ohio.
