Mr. Waddell

Guest Service / Customer Experience Mgmt

Forward-Looking Marketing: Becoming the Oracle of Delphi

By Michael Waddell, Managing Director, INTEGRITYOne Partners

The links between hospitality marketing promotions and guest satisfaction are often tenuous, leading to strained discussions between marketers and hospitality property and executive managers. Marketers focus on top-line results, sometimes to the detriment of guest relationships, while managers might be more skeptical about pursuing potential revenue spikes that could reduce guest satisfaction. And despite well-intentioned ingenuity, marketing programs don't always deliver as expected.

This is the quandary. Promotions are often a great way to fill otherwise empty rooms, introduce new guests to a property, and/or diminish seasonal and even weekly periods of reduced occupancy. On the other hand, promotions are not always successful, that is, they can cost more than the additional revenue they ultimately generate no matter how many rooms they fill. And even when successful, promotions can have a negative impact on guest satisfaction over the long term by changing guests' expectations. For example, offering free weekend breakfasts to fill in-town rooms with the summer drop in business travel could create the expectation that free breakfast should always be served on weekends. Unfulfilled expectations such as this can lower guest satisfaction over time.

But what if, like the oracle of Delphi, a hospitality company could look into the future, predicting which marketing programs would yield the best results while not decreasing guest satisfaction. The oracle would likely receive gratitude in the form of improved metrics, satisfied guests, and happy senior managers or owners.

The truth is, ensuring greater success of marketing promotions and maintaining guest satisfaction levels can both be achieved by maintaining an ongoing guest satisfaction program [see recent article "Taking 'Welcome' to the Next Level: Guest Experience Requires Solid Measurement and Reporting Structure") and using this program to guide planned marketing promotions toward positive revenue and guest satisfaction results.

Understanding the Metrics

Hotels continuously look for ways to make operations and revenue management more effective and less costly. They do this by working to drive occupancy up, increase revenue per available room (RevPAR), and drive the yield index ratio up (revenue share/supply share). In addition, they look for programs that drive interest and the intent to repurchase or return.

Traditionally, operations, revenue management, and guest satisfaction are separate systems that operate independently. But there is a way to integrate them initially to link information in multiple systems to correlate their data and then break the link and utilize the correlations found to predict future operations (including support of marketing promotions) from guest satisfaction alone.

Basic guest satisfaction and accounting parameters such as RevPAR and yield index are operated and evaluated independently. Hence, there has always been a chasm between these two areas. Bridge the chasm and you can more effectively look into the future.

Becoming the Oracle of Delphi

By implementing a given promotion and evaluating its efficacy with comprehensive guest satisfaction follow-up (which is generally done by adding ancillary questions to address specific needs), market researchers can strongly correlate the results of that program within the disparate customer segments. In other words, if you truly know your guest's likes and dislikes then add something new to the mix, the difference between guest satisfaction over time and guest satisfaction coincident with the promotion gives you a good sense of that promotion's value in your guest's eyes.

This method does require the risk of affecting satisfaction among the relatively small number of guests at the test property or properties during the test period, but this is a small risk compared to launching an untested program across all properties and affecting all guests.

Central to this method is the ability to identify discrete guest segments, e.g., weekend leisure or weeknight business travelers, discrete choice variables such as room rate, and independent promotion variables such as a free breakfast, one free night with four paid nights, or a discount given in partnership with a certain credit card. The relationship between segment and choice variables provides for the estimation of demand elasticity-the responsiveness of a given segment to a given choice. To round out the research puzzle pieces, the outcome measured is the actual production in terms of room nights and revenue. Testing and measuring these against the independent variables and the constant dependent variable of intent to repurchase allows a hotel to know exactly who will be most likely to respond to what kind of promotion without creating the risk of a drop in guest satisfaction.

Armed with this knowledge, measuring the demand elasticity of the individual segments also calls for developing a list of fences and rules (parameters) so that promotions target the guests that stand to benefit the most from new programs/promotions and also stand to generate the most revenue and profit from those same promotions. As always, financial goals must be balanced with those related to long-term guest satisfaction.

Through the use of these strong correlations and new measurements of demand elasticity, hotels no longer must test operations through operations with all of the inherent costs and risks. Rather, they can now predict the future actions of their customer base through a guest satisfaction system based on past behavior to predict future behavior.

Here's the Catch

The business issues underlying this entire process include whether the hotel is committed to maintaining a solid ongoing guest satisfaction research program, whether it has or can acquire the capabilities to execute such a program, whether it can adapt those capabilities to strategically "tip in" questions related to promotions, whether it has the operational or financial capacity to test promotions before the fact, and more.

But if a hotel has a way to collect and analyze solid guest satisfaction data, it probably has the wherewithal to modify it for this purpose. So the issue becomes one of the time and discipline required to allow guest satisfaction data to test and predict the efficacy of planned marketing programs before they are implemented. Is this difficult? If it were easy, it wouldn't be so rare.

Michael Waddell, a Managing Partner with INTEGRITYOne Partners, has more than 20 years experience in business, technology, and the Hospitality & Leisure industry. Mr. Waddell's technology background along with his familiarity with and affinity for hospitality allow him to conceive unprecedented solutions for critical hospitality business issues. He leads the firm's efforts to develop tools that bridge costly disconnections between technology and operations. Mr. Waddell can be contacted at michael.waddell@ionep.com Extended Bio...

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