To Block or Not to Block? That is Your New Question
By Bonnie Knutson Professor, The School of Hospitality Business/MSU | October 20, 2019
On March 7, 1876, the number 174,465 changed our lives forever. For it was on this date that the U.S. Patent Office issued Patent 174,468 to Alexander Graham Bell covering "the method of, and apparatus for, transmitting vocal or other sounds telegraphically…" In other words, Bell patented what became known as the telephone. Only three days later, on March 10, Bell uttered his famous words, "Mr. Watson. Come here. I want to see you." into a liquid transmitter. Watson, who was in an adjoining room, heard Bell's summons clearly.
The telephone was more than an invention by an unbelievably creative mind. It was a disruptor. And there is a distinct difference between an invention and a disruptor. Harvard Business School Professor Clayton Christensen agrees. In fact, in a Forbes article he says that a disruptor uproots and changes how we think, behave, do business, learn, and go about our day-to-day…[and]…displaces an existing market, industry, or technology and produces something new and more efficient and worthwhile." So impactful was Bell's invention that, at the conclusion of his funeral, "every phone on the continent of North America was silenced in honor of the man who had given to mankind the means for direct communication at a distance." Wow! Now that is a disruptor.
Each of us can probably list inventions that, to us, disrupted how humans do things. Wheel. Compass. Calendar. Clock. Refrigerator. Electric bulb. Airplane. But, to me, the most disruptive inventions are those that change how we communicate with each other. For as one of my favorite professor's always said, Communication is shared meaning.
Cavemen had their photo-writing. The concept of a true written language is thought to have been developed in ancient Mesopotamia around 3400-3300 BC. And although Johannes Gutenberg gets the credit for inventing the printing press, its genesis is considered to have originated in China since the oldest known printed text is a Buddhist book from Dunhuang, China, circa 868 A.D. Then there is Bell's telephone, and the myriad of scientist, programmers, engineers, and visionary thinkers that gave us the Information Highway – i.e. the Internet.
So, what does this brief history lesson have to do with your hotel? A lot. Because there is a disruptive "new sheriff in town" and its name is Blockchain.
Blockchain is one of those business terms that many of us are increasingly hearing, but many of us are still not sure what it is and what it can do for our hotel. Probably its most recognized application is Bitcoin, which we basically know as a digital or virtual form of currency - also called cryptocurrency - that enables instant payment. But how many guests pay their bill with Bitcoin? What about your suppliers? What about your payroll? It just isn't in the lodging wheelhouse yet. It probably will be in the future, but the question is how quickly.
Being a relatively recent concept, Blockchain doesn't yet have a clear and concise definition. A commonly cited one comes from the Harvard Business Review: A Blockchain is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way." Hospitality consultant, Paul West, refers to Blockchain as a distributed ledger network, adding that it has the potential to efficiently solve problems particularly related to data privacy security, and information sharing.
He goes on to further describe it as a data base of encrypted entries where each transaction is tracked as a common record to everyone on the network. I've also seen it called "a new internet for the travel industry." No matter how it is defined, the WITTY (What Is Important to You?) principle comes in to play for every hotelier. In other words, what can Blockchain do for our hotel? Our guests? Our staff? Our investors/owners? Our brand? Our REVPAR? Our profitability?
To me, the key words here are efficiently, verifiable, and permanent.
Simplistically, a Blockchain is comprised of a chain of blocks, each block being comprised of transactions that are grouped together based on some previously defined criteria. Once the transaction is entered in the block, it is time-stamped and cannot be altered. Hence, Blockchain has been seen as "a single source of truth." These blocks can then be linked together and mined for nuggets of valuable data to enhance the operation of your hotel.
While the lodging industry is just beginning to discover the possibilities, there is one that rises to the top. That is, of course, guest loyalty which seems to be driven by loyalty programs.
The other day I was in the car listening to some retro music station when that somewhat haunting song blasted through the speakers: I'm all 'bout that bass, 'bout that bass, 'bout that bass…" I had just come from a family gab-fest where all nine of us were talking about where our travels were taking us next. So, driving down the road, all my mind could do was change the word bass to the word points. Because, for our children and grandchildren, who are all professionals and travel extensively, they are all 'bout the points, 'bout the points, 'bout the points. There isn't any hotelier who doesn't understand the importance of a guest loyalty in his or her brand strategy and works hard to design a successfully loyalty program.
As a sidebar, here are five recent facts 'bout the points:
- On average, each of us belong to 13-14 loyalty programs, but only actively participate in 6-7. I have probably joined about 20 over time between retail, restaurant, coffee shops, hotels, airlines, etc., and only really use four – one credit card, one grocery, one coffee shop, and one airline.
- The two most important reasons consumers join a loyalty program are for a discount on everything they buy and for free "stuff" – which includes the always popular upgrades! One of the first things airline travelers do when they check-in is go to the Upgrade List for their flights to see if they have a chance for moving up. And every front desk manager knows that a big smile is coming when a guest is told he or she is upgraded to a suite.
- Four out of five consumers don't want to be constantly inundated with emails, promotional offers, direct mail, ad infinitum, through their loyalty program. They just want to receive communications that are relevant to them; it is that WITTY principle again. Let's face it, most of this promotional stuff is mass produced and mass distributed. Over time, I've been on three European river cruises; all with the same cruise line. And it seems as if every day I go to my mailbox, I've received a beautiful glossy "brochure" (it is really a magazine) touting its offerings for the next two or three years. Sometimes there are two or three different ones from the same line. They just become clutter and nuisances. Toss! Delete! Recycle!
- Beyond points for purchases, 75% of loyalty program members think they should also be rewarded for "engagement" besides buying – writing a compliment on the brand's website, writing a positive review on such sites as Yelp, or completing a survey. It is called thinking beyond the transaction and makes your guests feel like they are valued and a part of your hotel's community.
- Almost nine out of ten consumers who participate in a rewards program are more loyal to that brand. They shop there more, and they buy there more. If you ever doubt that, just look at Premium loyalty programs like Amazon Prime or Starbucks Stars. They have become cult-like in capturing the online retail market and the coffee-shop experience.
So, what does Blockchain have to do with loyalty programs? A lot. First, the good news is that Loyalty Programs work. They have become an integral part of any hotel's brand strategy and are not going away. The better news is that Blockchain can make your program better and can be a disruptor in how these rewards are redeemed by making them simpler for members to monitor, access, and use their reward points.
Think, for example, how you could add partners to your Blockchain ecosystem, offering members more reward options. And what if these reward points have a monetary value that could be collected, posted, and redeemed in real time? Or even gifted in real time – potentially saving a forgotten birthday or anniversary. Blockchain can also help you personalize communication with your program's members, only sending them messages/offers that hit their hot buttons and won't be immediately tossed, deleted, or recycled.
Application of this revolutionary technology in the hotel industry is far broader than just Loyalty Programs. It is a natural for Supply Chain Management (ask Walmart), reducing commissions to OTAs, increasing Revenue Management, market research, and all-around more efficient and secure operation for your hotel. But that discussion is for another time.
In 2018, $2.1 billion was spend on Blockchain solutions across the world, yet it is still in its infancy. Businesses across virtually every industry are just beginning to explore and understand its potential. No where is this truer than in the travel industry where it has untold possibilities, many of which we haven't even though about. There are still questions to answer and challenges to overcome before it becomes another tool in your hotel. But it will. The Blockchain train is leaving the station. Don't let your hotel be the caboose. Worse yet, don't miss the train.
Your REVPAR will thank you!
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