Developing a business strategy is admirable but executing the strategy is the key.
Based on this, I thought I would try to simplify the essence of strategy for today’s hospitality leaders. One simple strategy is to differentiate our operations via intangible assets. As examples, customer relationship management or innovative products and services can provide differentiation from our competitors.
Kaplan and Norton, authors of the Balanced Scorecard, believe there are four basic strategic themes:
- Build the franchise: In the case of hoteliers or restaurateurs, this applies to the individual franchisee or independent operator as well as the brand managers. Optimize that brand name!
- Increase customer value: Today's savvy customers may pay to stay in a luxury hotel, but they will require value for that dollar.
- Achieve operational excellence: Satisfactory service is not good enough with today's fickle consumer — great service is now required. Provide “unanticipated” or “wow” service.
- Be a good corporate citizen: This may include superior employment practices or maintaining a strong sustainability culture and comes back in the way of increased revenues, better employees and more repeat business.
Philip Kotler, considered one of the deans of strategy, wrote in his textbook, "Marketing Management," that not all brand differences are meaningful or worthwhile. This makes me think of the DoubleTree cookie — who would have thought that a simple cookie would be effective at being the primary differentiation for a brand! Kotler looked at positioning this way:
- Attribute positioning, or number of years in business, “cool” factor.
- Benefit positioning, such as a fantasy experience at various theme parks.
- Use positioning, for example an airport lounge or massage for a traveler on the go.
- User positioning, such as Magic Mountain as a theme park for "thrill-seekers."
- Competitor positioning, or in other words, we have robots and technology that communicate for seamless, quality service.
- Product category positioning, for instance the use of the word resort hotel can create an image of a full-service lodging environment.
- Quality or price positioning, such as a best value claim.
For hotels, I like to rank location, brand, food and beverage, meeting space, amenity package, ambience, cleanliness, design, website and use of social media. I like to apply certain "weighting" of the results depending on the market wants and needs. When the differences in attributes are apparent, then one may select certain differences to promote via communications strategy.
Each product type has a different "ramp-up" period. A limited-service hotel will hit full stride faster than a full-service hotel in like or similar circumstances. Different circumstances, such as a recession or a weak market due to oversupply, will have an impact as will the appearance of too many products under the same brand or marketing umbrella. Each stage in the product life cycle — such as introduction, growth, maturity and decline — has a different strategy requirement according to Kotler.
Dynamics of competition
The hotel industry has gone through a major change whereby extended-stay hotels have a competitive advantage. Suites, free breakfast, kitchens and relatively modest prices can penetrate the market at well over 110% of market-average revenue per available room. What other strategies can we employ? Team up with golf courses, rental car firms, spas, tennis clubs or wellness organizations. Packaging of our products broadens appeal to our guests.
Operational enhancement initiatives and cost containment strategies are critical. These efforts may include short-term measures, such as staff or schedule reductions. Long-term solutions such as revenue management, inventory control, purchasing systems and improved service standards are always helpful in profit improvement initiatives. But what about artificial intelligence and robotics?
If executed well, strategy and effective use of AI and robotics can provide for strong market share in the hospitality industry. AI can provide real-time market knowledge to assist in revenue management. Robotics can provide a “wow” factor and can assist in keeping housekeepers happy, because they do not have to vacuum. These amenities are required in today's competitive environment and all of us can improve by executing a well-thought-out plan and adding in technology.
Robert Rauch, CHA, has been an owner-operator of hotels for several decades and is founding chairman of Brick Hospitality, owner of R. A. Rauch & Associates, Inc.
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