The Evolution of Hotel Business and the “Old School” Try

Sustainable business, it is a term we all hear used in sales-speak daily. But what is a sustainable hospitality market or business really? The simple answer is, sustainability is all about survival. The advent of even greater technology innovations, such things as experiential marketing, using data to harvest the need and wants of guests and travelers, all these and more possibilities confront hoteliers now. At the end of the day though, hospitality remains essentially unchanged, only the efficiency is greatly enhanced. We took the time last week to engage several of the industry's most experienced managers, in order to gain insight into how business can grow in the coming years, but also into how marginal hotels can ultimately survive.

Nothing New Under the Sun

A colleague of mine shared a stunningly pertinent report with me the other day. This TechCrunch article by Samuel Scott punches gigantic holes in the current state of marketing, and effectively calls for a big reset across the spectrum of business. "Everything the tech world says about marketing is wrong" also teaches an hotelier that digital business has taken a wrong turn where the "future of business" is concerned. I mention the piece here, because it is not just marketers who have taken a wrong turn. Scott rightly focuses on a new generation of marketing executives who were taught to focus on the "buzz", and not the core principles of the profession. Discussing "lazy marketing" techniques, Scott galvanize this truth with:

"The result is that too many tech marketers are basing their work on faulty premises, hurting our profession and
flooding the Internet with spammy "content."

And this is exactly what has happened in hospitality marketing, a major stumbling block for hoteliers wanting to create "sustainable" business for the future. Marketing, like every communication and business discipline, has remained the same over decades. For Scott the "message" is the crucial element of the marketing funnel, and the "means" of conveying a company story are all that has changed. He discusses added channels, in much the same way revenue managers for hotels do, which coincides with hospitality's biggest dilemma today. So the question arises, "How do we get back on the right path". To help answer this, I talked with highly successful executives from several schools of strategy. Their insights support Scott's conclusions, and they also clarify his message.

Thomas Magnuson

The old school is the only school

Thomas Magnuson, co-founder and CEO of Magnuson Hotels grew up helping his dad run a successful hotel business. If there is a superhero of hotelier "Old School" business operating today, this X-Man of independent hotels is hospitality's Wolverine. He'll chuckle at my metaphors here, but then he'll agree that survival in the hotel business is about concrete business that optimizes available resources. Magnuson's profits may come in like a grocery store net profit does, in massive low yield, but he is no stranger to innovative marketing or tools. He offered a good illustration of his strategies and resilience over the phone earlier this week:

"Old school business thinking focuses on fewer highly profitable customers. Magnuson Hotels subscribes to the Amazon style utilizing long tail business intelligence. There can also be high profits and customer satisfaction by serving lower revenue customers at lower cost."

In this we see Magnuson's basic old school strategy, convergent with another old school premise, only "superimposed" onto the digital landscape. Following along, you'll begin to grasp how the most successful hotel business may have jumped through some marketing strategy hyperbole over time, only to stay the course using new channels. In short, nothing has changed.

When the competition gets tougher…

Now, looking at the bigger picture of the current hotel management ecosystem, we see diverse perspectives focused on each hotel niche/market, but we also see a convergence of forward thinking ideas too. Magnuson's long tail strategies are shortly becoming more valid as sustainable. High end operations, the luxury market, and all other segments used to be differentiated sustainability wise, but hold onto your hat. Sustainable hotel business is really more and more about efficiency, and long term strategic thinking, combined with the latest tools for hotel businesses are already differentiating competitors. Once a new, more fluid system of interconnectedness is built, hoteliers will find it much easier to connect with guests via no matter how many disparate channels emerge. As things like demand management and guest profiling become more automated, the once bipolar world of hotel profitability will grow closer and closer together. Big and small data, AI, the IoT, and convergent technologies backed by training will in fact cause more metamorphosis.

Once, the low-end and high-end profit models were light years apart in many ways, but price and conversion aspects, acted upon by new technologies, has narrowed this gap. The Ritz Carlton's of the world are more like Magnuson Star hotels then anyone could have envisioned, at least in the back office. And the same convergence we see there is mirrored in new system capability, with the need for greater flexibility/ease of business intelligence. While Magnuson Hotels is bound to focus on the wider budget focused audience, the same intelligence needed there, it applies to the luxury segment as well. In short, the width of the guest segment will matter less and less. The "quality" and value of guest and hotel data will intersect. To validate this I talked with key industry analyst, Alistair Risk, Managing Director of Buchanan Performance Coaching to validate how important new data tools are for all hoteliers. Here is what Risk had to add:

"Data is all important in the daily activity of a Hotel General Manager these days. The challenge is, there is so much of it that we can get lost in analysis. Using the right data to make the right decisions in our businesses as quickly as possible is critical to our success. Armed with the right information via emerging technologies, with the opportunity to dig deeper and investigate what is highlighted in front of us, we can begin to ask the right questions of our teams and make the best decisions possible."

Risk is "old school" too; but like Magnuson and many others he's not stayed in business ignoring change and innovation. He'd never advise a client to ignore a guest intelligence channel, and he advises some high tech clients in the UK. So, the simply logic of just "business" applies just like it always did. Outside the hype and idiotic marketing salesmanship and all your first rule of sustainable business is to go "old school". The second rule is, don't get left out in the cold by superior competition.

Key takeaway: Know your guest inside out

Technology is only a tool. We began rubbing sticks together to make fire. Now we build complex electronic brains that still do not rival our own capability, which is as of yet unrealized. Expedia presented itself as a new technology; much like the television set did back in the day. But Expedia was less a technology innovation, than a reboot of a communication channel. Today the mountains of data being collected in all our systems seem to represent a technology paradigm, but this is false. While companies like IBM, do tantalize us with the potential for better business, all the innovation amounts to is greater efficiency. So, in order to survive and thrive in the immediate future, hoteliers will have to employ the better mousetraps, but it's the speed and passion of adherence that will differentiate. To sustain hoteliers are going to have to get better at understanding their guests, and their market, but more importantly hotel marketers and sales people are going to need to "be" the guest. Technology will surmount the big data problem, it is inevitable. So this leaves us back at square one, with our "old school" marketing strategies. So, armed with guest preferences, trends, and the spectrum of intelligence, what is the most crucial strategy for guaranteeing survival?

Stefan Tweraser, CEO of Snapshot

To gain some insight here, I spoke with Dr. Stefan Tweraser, CEO of SnapShot GmnH, a leader in hotel data analytics tech. Tweraser, whose core expertise is technology marketing, had this to say about customer driven marketing:

"The single most important ingredient of customer driven marketing, is having a deep understanding of the customer who sees the campaign. The best marketing people spend time living as their audience, and understanding their habits, rituals, routines and lives, so they as to craft messages and placement that make sense for them. Where many fail is in having no concept at all of how the actual audience perceives a campaign."

Now that we've come full circle, it's easy to see that the TechCrunch critique of digital marketing hit the bullseye. Nothing has changed. Technologies always improve, but in today's competitive market the speed and "correctness" of adaptation matter most. Many have lost valuable time and resources because of following "wrong turn" marketing and hype. Not it's time for winners to grasp the long tail of business intelligence for the long haul. In the future, too many wrong turns will lead to an unforgiving certainty, survivability starts now.

Phil Butler
Senior Partner
Pamil Visions PR