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  • HITEC Special: Does EU GDPR Affect U.S. Hospitality Companies?

    By Alvaro Hidalgo. The EU General Data Protection Regulation has set a path towards protecting personal data which many other countries will follow. In a global industry such as hospitality, it should be a primary objective to take the steps towards compliance.

  • What to Expect at HITEC Houston 2018: Elite Education, Exhibits, E20X and More

    HOUSTON: A booming cosmopolitan city that is home to more than 2 million Texans, NASA’s famous Johnson Space Center, and — in just two short months — the world’s largest hospitality exhibition HITEC®.

  • HFTP Report: Hospitality Data Security — Strategy for Data Protection and Regulation Compliance

    This guide from Hospitality Financial and Technology Professionals (HFTP(R)) covers safeguards that can be implemented in hospitality businesses today, tips on how to continuously improve security and data regulation compliance.

  • HFTP GDPR Guidelines: Privacy Policies for Hotels

    This document offers points to consider in the development of a hotel’s privacy policy. In view of the multiple organisational and legal structures under which hotels operate, as well as the complexity of the third party landscape that may be part of the complete guest experience, this document serves as a guideline only.

What hoteliers can do when crises strike

R. A. Rauch & Associates, Inc. ·18 June 2018
The U.S. has been hit with the longest streak of crises--mass shootings, natural disasters and security breaches--in the past decade. Hoteliers need to better prepare and develop plans for not if, but when crises strike.Crisis management will gain importance as active shooter training is added to a hotel's playbook and cybercrime continues to increase dramatically."Run. Hide. Fight" training and a technology expert at each company is now required. It is paramount to our future liability that we train our staff and have procedures in place for all potential crises.As to General Data Protection Regulation (GDPR), this has come up quickly and applies to all hotels, especially those that pursue European travelers. Hotels need traveler consent to store any data related to a European traveler, and it is recommended that we start doing that for all guests.Active shooters and disastersHigh school shootings have occurred far too often. The Santa Fe High School shooting could have been far more traumatic and caused the loss of many more lives if the school hadn't had both security and "active shooter" training in place. The training is now required for all hotels. The FBI, your local police department and Homeland Security have comprehensive materials on this subject that will provide as resources for hoteliers. Being prepared for any terror event or natural disaster is critical to both saving lives and minimizing negative impacts.Rapid hotel evacuation is key to a crisis plan, and all team members must know the evacuation route. Rapid lock down of the hotel or areas of the hotel will limit a shooter's movements. It is vital that hotel staff become acquainted with Homeland Security's detailed guides on this type of training activity. Developing a first-responder pack that includes detailed hotel plans and critical infrastructure would be paramount to a crisis plan as well. Cellphone numbers of all team members must be available to ensure safety and enable crisis communication.The same protocols regarding evacuation should be established for natural disasters. Just recently, a fast-moving lava flow from Hawaii's Kilauea volcano led local officials to close a highway on short notice. They needed to communicate to all travelers that thin strands of glass fibers carried in the wind could injure eyes and lungs. There must be real training and tangible procedures in place as we must never assume all will be calm tomorrow. I just scheduled our 2018 training with our local police departments for our teams, and I encourage all of you to do the same.CybersecurityCompanies should ensure that the property management system is on a different network than public Wi-Fi and that all networking devices have default account passwords changed. All software and operating systems in use must be up to date with the latest patches and versions, and employees must be trained to recognize harmful forms of cyberattacks to ensure the protection of guests.All passwords should be reset when an employee leaves the company. Each front-desk employee should have a unique PMS password as well as a secure computer password. Passwords should not be visible to guests. To ensure the security of computer systems, team members should be trained to lock any front-desk operating systems when they step away from the desk, and to never leave portable devices unattended.Companies need to have internal and external access to IT expert resources 24/7. Protocols should be put in place to prevent hotel staff from using hotel property for personal purposes. Periodic audits of employees and their activities should be enacted to ensure security. This merely touches the basic needs in this area of potential cybercrime.GDPRThe GDPR took effect on 25 May. The impact on almost all U.S. businesses is massive. While this is a European regulation, it will significantly impact the global lodging industry. Further, in the event of a cybersecurity attack or data breach, companies only have 72 hours to report the situation or there are financial consequences.Hotels that actively seek European guests will be required to be compliant with GDPR. This means that hotel guests can insist their data be erased. Sensitive data is personal information about an individual that could be used to discover their identity and gain access to their accounts.GDPR requires us to designate a data protection officer within our organizations. Companies must gauge whether or not any activity outside of the European Union will require communication with a person in the EU after the initial gathering of information. A risk assessment will review the data gathered and allow EU citizens to make updates to their personal data.Put your plans together and go out and have a great summer!
Article by Robert Rauch, CHA

Next wave of hotel tech puts guest needs, control first

R. A. Rauch & Associates, Inc. ·19 March 2018
Hotel technology will continue to be led by mobile, digital room keys and in-room entertainment, but another emerging technology is blockchain.A continuously growing list of records, which are linked and secured using cryptography, a blockchain is resistant to modification and is an open, distributed ledger that can record transactions such as membership loyalty programs.In regard to pre-stay communications, we have used Flip.to, which makes it easy for guests with reservations to share deals and tell friends about their upcoming stay.Another trend worth watching occurs just after rooms are booked. This began with metasearch giant, Kayak, and has led to a lack of room rate growth as hotels deal with the commodity mindset, where guests feel that they can get a better price if they continue to search. Google is adding a price tracker for hotels with which guests can receive price fluctuation alerts after booking, their apparent goal being to become a first-choice booking service rather than solely a search engine.Once guests arrive, mobile check-in, text and chat take center stage. Mobile check-in has been around for the last few years, but will hit full stride as the technology is refined. If a guest does not utilize mobile check-in by going directly to their room, they will check in at a pod rather than a formal front desk. These pods will be tablet-based kiosks where guests can pick their room directly from their phone and the door lock will be programmed to open only when that mobile device is nearby.Taking this idea into the rooms themselves, some brands have moved away from traditional guestroom phones and opt for in-room tablets controlling every aspect of the room. Ideally, these two sets of technology will merge so guests can control everything directly from their mobile device.Texting guests in response to "in-the-moment" needs, security issues and eliminating language barriers are all technologically feasible. Texting provides ancillary revenue streams (we've beta tested an "eat, play or shop" app that guided guests to local deals). Chat is already global, and chatbots are AI customer service assistants. Services like Zingle offer automation and communication with guests from one central hub.The internet of things (IoT) translates the smart home experience into the hospitality world. Technologies such as sensor-activated thermostats, digital room keys and in-room streaming services are all possible today. Getting the IoT upgraded to the network is coming soon and voice activation will be at the top of the list, enabled both by mobile users and Amazon's Echo or Google's Home.The emergence of artificial intelligence into the guest journey is already here. Hotels like Fairfield Inn & Suites San Diego North/San Marcos have had a Relay robot for almost a year. AI is a fast-moving technology enabling machines to perform tasks that previously only humans could.Robots will continue to impact areas of the guest or associate experience in 2018, a benefit being the data provided as guests utilize the services. In-room technology is vastly different than it was at the turn of the century. Today's guests expect the in-room entertainment experience to be on demand and better than what they have at home. Additionally, customizable technologies such as custom lighting, smart mirrors and in-room tablets allow hotels to tailor to guest preferences before arrival.Data and analytics lead to winning the loyalty game. Data can segment guest profiles to infinite degrees, creating a comprehensive picture of who's staying at our properties. We can track guest habits, interests, preferences, reason for travel, booking date, date of last stay and more. Data and analytics must be mined to measure successes, look for new ways to improve our guest experience and market toward specific demographics. Search engine marketing, optimization and advertising initiatives are crucial to our hotels' success in this digital age.Online travel agencies continue to impact our market share and will likely become involved with more guests and their stays. The Expedia Travel Platform will continue their involvement with meeting planners and most likely disrupt other areas soon. OTAs want to own the guest at every step from pre-stay to post-stay. That means we must use caution in embracing them in areas where we can do it ourselves. Perhaps blockchain will be our savior.Blockchain, which is a clear and incorruptible path from the hotel to the guest, has the ability to create more direct and lower fee transactions. This direct route is a potential disruption to OTAs as they continue to grow and impact our industry. Let's at least get their commissions back down to the 10% we always gladly paid travel agents. Wouldn't that be nice?
Article by Robert Rauch, CHA

Why 2018 will be great: US hotel industry forecast

R. A. Rauch & Associates, Inc. ·26 February 2018
Oil prices are back up, consumer confidence is solid, interest rates remain low albeit forecast to inch up and the U.S. and global economies seem stronger than last year. Gross domestic product may actually approach 3 percent in 2018, personal income growth is strong and low unemployment together with very strong corporate earnings indicates that both the leisure and corporate traveler have the means to travel and pay for lodging.There will always be naysayers, so what caveats could stall the economy? We are not immune to any global crisis, politics and outside events. Notwithstanding the aforementioned, 2018 should be a very nice year in every area of hospitality.U.S. Lodging IndustryU.S. hotels grew revenue per available room (RevPar) at more than a 2.6 percent clip in 2017. This is down from over 3 percent in 2016 but that was somewhat expected, especially considering political gridlock and the number of fires, hurricanes and active shooter events. Low gas prices fueled some growth in leisure travel. Occupancy levels are at a historic high and average daily rate (ADR) represents all of RevPAR growth. We see no reason that the economy cannot stay afloat and thrive in 2018 and keep ADR growth at a 3 percent level, albeit not enough to keep pace with the cost of labor.New supply is not likely to stop the continuation of positive RevPAR growth for 2018. Banks will begin to put the brakes on lending in time to avoid approving deals that are just too late in the cycle for aggressive underwriting. That means those who are experienced, have solid equity, leading brands or unique ideas, are in great markets and are considered trustworthy and strong borrowers will be able to develop. Increased developer cost of capital, new supply and Airbnb and others in the "sharing economy" are marginally reducing feasibility. Development economics in many markets will not support new construction.While these factors might curb supply growth, the "sharing economy" is not going to have a material impact on demand in most markets and International travel is likely to come back as the strength of the dollar drops modestly. Ergo, it will be something else that stops this growth--a Black Swan event or a global meltdown are not likely to occur but could certainly stop this positive growth. Only time will tell but 2018 looks rock solid.The major forecasting firms, CBRE, PwC and STR are projecting that the U.S. lodging industry will achieve an annual occupancy rate of around 65 percent in 2018. It seems that this will be the year that supply meets demand so there is likely to be flat occupancy levels in 2018. Average rate growth should finish at between 2.5-3 percent, according to the pundits, in line with projected GDP growth. The big challenge might be to reverse some of the trends that hoteliers have been battling relative to high costs of health care, wages and supplies. Further, CBRE has issued a report on reduced labor productivity. Hence, net income may have peaked unless we can successfully reverse these cost trends.Today's labor costs represent nearly 45 percent of hotel costs when we factor in worker's compensation, health care costs and other payroll related expenses so we must hire the best available talent, and they are getting more and more expensive. Distribution costs, due to reliance on OTAs as a direct substitute for poor performance of weak brands and the needs of independent hotels to be relevant, have been increasing, according to Kalibri Labs.What do these cost increases mean to values? Assuming capitalization rates remain the same, a decrease in net income of $125,000 reduces a hotel's value by about $1 million. An average limited-service hotel in the U.S. is approximately 90-100 rooms, with revenues of about $3 million and net income or EBITDA of about $900,000. That $125,000 can hit quickly between OTA commissions, labor, health care costs and related expenses. Enough bad news. On the good news side, new hotel lobbies, technology/robotics and improved food and beverage profits are three of the ten trends we identified for 2018. There are many opportunities to grow revenues.Specific Markets We FollowPhoenixLook for continued job growth as Arizona finished 2017 with over 3 million in the workforce and Metro Phoenix surpassed 2 million workers. With Governor Ducey in control, the pipeline for new businesses and expansions is stronger than I have witnessed since arriving in Arizona in 1978. A "stable and predictable business climate, workforce depth, quality of life and education pipeline are the most-cited reasons CEOs have said Arizona beat other states and markets," according to the Phoenix Business Journal.With minimal new supply growth, (Tempe is an exception but new corporate growth in that submarket has kept pace with new supply) the Metro Phoenix market will have a very strong 2018. While events like NCAA, Super Bowl, etc. are out of the picture in 2018, Spring Training and other events are still here to boost average rate growth by 3 percent with an additional 1 percent in occupancy growth. We expect occupancy, average rate and revenue per available room to finish at 69 percent, $131 and $90 respectively after a solid 68 percent at $127 and $86 in 2017.San DiegoSan Diego should see continued strength from all market segments. Convention Center groups are down but leisure is up and corporate is stable. Supply is increasing in downtown but demand should absorb most of it. 2017 finished at over 77 percent occupancy and $160 average rate for a RevPar of almost $124. 78 percent is reachable in 2018, largely due to the tough finish San Diego had in December due to wildfires. La Jolla and coastal areas did well with over 5 percent ADR growth last year. We expect to see ADR at $165, up 3 percent from 2017.Los AngelesLA finished 2017 at a very respectable 80 percent occupancy, down one point due to the extra occupancy levels picked up due to the Porter Ranch Gas Leak in 2016. Rates were up to over $175 in 2017 from $172 in 2016. Expect solid growth in 2018 with rates rising to the $180 level at stable occupancy. There is new supply coming in, especially downtown. This will begin to have some impact soon.San FranciscoRevPAR could start to benefit from the Moscone Convention Center gradually coming back on line in the second half of 2018. Group mix overall should also improve as the center completes renovations. Citywide room nights for San Francisco are up 20 percent for 2018. We expect occupancy levels to finish at 84 percent at $245, up over $15 or 7 percent from last year and up almost two occupancy points from 82 percent.SummaryDespite the record occupancy levels, average daily rate (ADR) growth continues to challenge hoteliers. Factors such as increased supply, low inflation, the sharing economy and rate transparency make it more difficult to raise rates. Other challenges include the lack of buying opportunities available as sellers are not motivated to sell. But the bottom line is that there is great economic news that trumps any worries right now. To a great 2018!

Important Hospitality Leadership Skills in 2018

R. A. Rauch & Associates, Inc. ·12 January 2018
I recently posted my top 10 trends in 2018. These include technology, lobby design, local food sourcing and more. Clearly, as leaders, we must be aware of trends in our industry. After all, many of us do not have someone to ask, "what's going on out there?" And it can be lonely at the top!I usually need a trigger to pen something like this-my favorite work subjects are typically technology changes, economic forecasts, strategy, marketing or management. But I had a great trigger, a wonderful vacation that served to rejuvenate my thinking, improve my mindset and hone my workouts.It also allowed me to read three novels and three non-fiction, leadership books. It served to provide a foundation for my 2018 and I hope you gain at least one insight in my attempt to help your outlook on 2018 as well. If you do not gain any new information, at the minimum, please stop for a moment and appreciate what we have. We are blessed to be part of a noble profession that allows our guests to travel comfortably and our team members to make a living.I started vacation with the book, Thrive by Arianna Huffington. She had a great passage that read, "when you are rested and focused, what's coming next appears to slow down, allowing us to manage it with calm and confidence." After all that occurred in 2017, I felt that passage was particularly appropriate for hospitality leaders. We have lived through crises, many of them life threatening this past year.As I sat on a panel at the American Hotel & Lodging Association conference in New York this past November, I realized how talented and prepared many of my colleagues are. But according to Laurence Gonzalez in his book Deep Survival: Who lives, who dies and why? "only 10 percent of us stay calm and focused during a crisis. The other 90 percent will panic." Based on this, I am committed to providing leadership and resources to our team in this critical area in 2018.One way for me to do that will be to remain mindful and appreciative of every single day! I noticed this past year was marked with far too many moments of stress, moments where I became more of a work machine than a mentoring or coaching resource. As leaders, it is our duty and privilege to serve our team members in these capacities.In addition to planning a more restful and focused approach to life, I plan more strategic delegation to key, up and coming leaders, more "no" answers to requests on my time where my presence may not make a material difference and a laser focus on a successful 2018 for our team members (lots of mentoring, coaching, leading), guests, capital partners and owners.I'm saving the other leadership books I finished last month for deeper discussions down the road, including the use of meditation. But I did read a great piece called "The Business of Being Well," written by Local Measure, a customer management solutions platform. It featured some hotel industry senior leaders (Chris Nassetta, Hilton and Keith Barr, IHG) and was very well done. In it, the big three wellness categories jumped out--fitness, nutrition and sleep. Coupled with mindfulness, I believe wellness can get all of us back on track if we derailed a bit in 2017.President Harry S. Truman once said, "not all readers are leaders but all leaders are readers." May all of you read and lead in 2018 and enjoy a very happy, healthy and prosperous New Year!
Article by Robert A. Rauch

Hospitality Trends 2018 - What's Happening in Hospitality

R. A. Rauch & Associates, Inc. · 8 December 2017
Hotel lobbies become the center of the hotel universe akin to those found in communal work spaces such as WeWork - millennials and those with "millennial miindsets" have been the center of attention of all the brands and independents alike; open spaces with lots to do.Technology, led by mobile, digital keys and in-room entertainment gets a big upgrade and blockchain, which is a clear and incorruptable path from the hotel to the guest has the ability to create more direct and lower fee transactions. This direct route is a potential disruption to OTAs and that is a possible game-changer.Food and beverage revenues become critical, restaurants become simple and healthy with a focus on locally sourced suppliers. Perhaps more importantly, profits may return to hotel restaurants!The internet of things (IoT) becomes a thing by translating the smart home experience into the hospitality world. Technologies such as sensor-activated thermostats, digital room keys and in-room streaming services are all possible today.Voice activation. Amazon Echo and Apple's Siri are consumer versions of this technology. Getting the Internet of Things upgraded to the network is coming soon and voice activation will be at the top of the list.Robotics hits full stride and Artificial Intelligence is enabling the hotel industry to do incredible things. From creating hyper personalized guest experiences to identifying unrecognized revenue opportunities, this is happening now. We are already planning to hire our second robot!Virtual Reality (VR) is no longer just a gimmick. It can and will be used in some form frequently in 2018. Coupled with augmented reality, (AR) (think Pokemon Go phenomenon) VR and AR will develop rapidly this next year. It is already widely used to sell adventure travel.Crisis management and cyber security will gain in importance as the addition of Active Shooter training is added to a hotel's playbook and cyber crime continues to increase dramatically.Data and analytics lead to winning the loyalty game as data can segment guest profiles to infinite degrees, creating a comprehensive picture of who's staying at our properties. We can track guest habits, interests and preferences as well as reason for travel, booking date, date of last stay and much more.Bleisure - Bleisure looks like it's becoming more common with millennials - having a plan to "extend the stay" after people book corporate stays is working all over.At this time of year, it is also appropriate to offer all of our friends, colleagues, friendly competitors and the entire industry a happy, healthy holiday season and a Happy New Year! Have a Merry Christmas, Happy Hanukkah or just a season of joy! To a great 2018!Bob

Best Management Practices for Less Experienced or "Mom and Pop" Owners

R. A. Rauch & Associates, Inc. · 1 November 2017
There are best practices for every facet of the hotel industry and there are many ways to approach improvement of your hotel management short of hiring a company to manage your hotel. If you have decided that you need a management company due to inexperience or desire to retire or semi-retire, there are three things you should look for:Common values and culture: When looking for a hotel management company, it's important to look for a company that is aligned with your own values and company culture. Having common beliefs about how your hotel should be operated and your guests taken care of will help you be on the same page as your management company. Management style should also be considered when looking at different management companies. Does the management company require onerous paperwork from managers, thus making it difficult to be the face of the hotel? Perhaps you prefer a company that encourages "management by walking around" rather than having managers sitting behind a desk all day. There are various styles and it is important to understand the style you are comfortable with that will ultimately provide the healthiest of both relationship and returns.Innovative technology utilized within the day-to-day operations should be a focus when searching for a management company today. The art of hospitality is now becoming the art and science of hospitality. Staying aware of and implementing technology that will help your property increase revenue, operating profits and net income is crucial. Technology should not be implemented for technology's sake but it should aid your hotel in staying ahead of the competition and meeting your guest's expectations while protecting the value of the asset at all times.If, on the other hand, you feel you do not want or need a management company, one thing that a "mom and pop" owner can do is hire a management consultant firm for specific tasks. These might include accounting, marketing, human resources, training and more. Further, a consultant can advise you on when to sell and how to position your hotel for sale; they can review brands, soft-brands or approaches to managing as an independent and much more.How do you know if you need support in today's more scientific environment?There are three simple tests. The first is revenue--are you able to develop a business plan for 2018 that shifts market share from OTAs to a direct channel and are you completely aware of all business that is in your market area and how to fight for it via digital marketing and sales? The second is operations--do you have comprehensive operating procedures for front desk, housekeeping, engineering, safety and security, food and beverage, sales and marketing (that includes your web site) and analytics that tell you what is going on in each area? The third is accounting--do you have P&Ls that reflect variances, are completed in a timely manner and are set up with the Uniform System of Accounting for hotels and are you able to put together a 2018 budget utilizing all available data?There are answers to every question in hospitality and we are here to help! I will be at the Lodging Conference in Phoenix this week and the American Hotel & Lodging Conference in New York later this month. To a great November, tax reform and the holidays!
Article by Robert A. Rauch

Competitive Advantage 2018 - The World Has Changed

R. A. Rauch & Associates, Inc. · 6 October 2017
Airbnb has become a powerful force in the hotel industry and as a reaction, municipalities are attempting to legislate its potential. But the truth is, down the road a bit, Airbnb will likely become an online travel agency (OTA). Why? Because they can charge lots more than three percent and will eventually become tired of dealing with "one-off" hosts and myriad cities.As we see it, this sharing economy is a new reality that hoteliers are still grasping to embrace. Is Airbnb a complement to hotels or is it a threat to the traditional hotel model? If I am correct and they become an OTA, that would serve the industry well as they would not really compete and help drive down the cost of commissions. Given the penchant of millennials to chart their own path and their increasing share of the traveling public, expect to see Airbnb, Uber, and other "sharing economy" players continue to dominate the conversation and hoteliers continuing to focus on gaining a competitive advantage.At the end of the day, the key is to watch this trend and others like metasearch sites Trivago and Kayak so that your team can strategize on income opportunities and value optimization. Most importantly, it is time to shift market share from indirect bookings to direct bookings. Technology as a Competitive AdvantageCompetitive advantage consists of two components. The first is the distance between your hotel offerings and your nearest competitors or the competitive advantage gap ("GAP" for short). The second is "CAP" or competitive advantage period. In other words, if a hotel company has superior products and significant barriers to entry it has both a competitive gap (product differentiation) and a competitive cap (time lag for competitor entry).What immediate and practical steps can we utilize to optimize our competitive advantage? Differentiate from the competition. This may include re-evaluating your distribution processes and channels. The large amount of demographic and psychographic information available about the make-up of today's traveler requires analytical skills and creativity to correctly respond to the marketplace.Today, as Kalibri Labs, arguably the authority on this subject says, "owners expect management companies to generate direct booking...this makes sense because management fees are typically computed on the basis of the total revenue and not on the net revenue (revenue minus transaction costs)." When the direct bookings then result in repeat business, costs are reduced rather dramatically and even owners are happy!Many hotels do not have qualified staff to develop these direct bookings--so which is better? Paying an OTA or developing a team? For a quick fix, opt for the OTAs. For the long haul, work on your team to increase your profits and use OTAs to complement your direct bookings to obtain a healthy mix of business. And take advantage of all the tools OTAs offer including booking foreign independent travel (FIT).According to ScreenPilot, the firm we rely on for outside service in this area, these three tasks will help you:Refresh your PPC Strategy by doing more than just bidding on keywords that persuade people to click your ad. Tailor keyword combinations to clearly outline the benefits of booking direct, and include direct links to the specific rates displayed.Polish your phrasing and clarify benefits by experimenting with phrasing and making sure changes are made as needed.Provide social proof by encouraging guests to share reviews via their social accounts and consider featuring the best on the brand's social channels.It is time to draft your 2018 business plans and budgets. Make sure you have a thorough understanding of the market and your competitive advantage in the market--then get those direct bookings to get more dollars to the bottom line. Will you be ready?
Article by Robert A. Rauch

To operate or not to operate hotel restaurants

R. A. Rauch & Associates, Inc. ·15 September 2017
Beyond that, we pride ourselves on having attractive and clean rooms, tremendous customer service and a fantastic location at the entrance to Sedona. But when we realized that we had a highly unique, successful James Beard-recognized restaurateur at the helm of our leased restaurant, we decided to leave the food service worries to a real pro.Why? First, it is very difficult to make a restaurant work. Good food and a nice atmosphere are not enough. More than 25% of restaurants fail within one year, and 60% are out of business within three years. Expenses are high, and barriers to entry are low, so competition is fierce. The word of mouth required to make a restaurant successful is even tougher to come by than it is for the hotel itself. At least the hotel can afford a budget for digital marketing, some paid "buzz" and more. Restaurant margins are razor thin.We went with our lessee, Chef Jeff Smedstad of Elote, and what a great restaurant it is. Every evening, guests line up for the opening of the doors at 5 p.m. Elote is open Tuesday through Saturday, and while there are hundreds of restaurants to choose from, Elote is No. 1 in Sedona and ranked the third-best Mexican cuisine in the U.S. Great food, service, consistency and the buzz caused by quality and limited hours has served them well. The hotel gets guaranteed income, and the reputation transfers nicely to our hotel.At The Lafayette Hotel, Swim Club & Bungalows, our leased restaurant (the Red Fox) is like a destination and has an outside entrance. The clientele come for history (yes, the hotel is also historic) and comfort food. Personally, I like the food at our successful HOPE 46, which is operated by our management team and located inside the hotel. But getting guests to come to a restaurant inside a hotel is far more difficult than getting guests to come to one with an outside entrance or one that appears to be "free-standing."Both restaurants do well. The branding done by Michael Sterling Eaton--coupled with the quality of food offered by Chef Ryan Gilbert and the service our team provides--makes HOPE 46 a winner. But the effort that we put into it was time consuming, expensive and requires constant attention. On the other hand, Red Fox provides consistent income and near-zero effort.In analyzing whether or not to go outside with a lease or manage your own restaurant, the answer is fairly simple. If you are already a successful restaurateur and you love it, then do it. Will you make money? Possibly, but you will control the quality and reputation and also have the benefit of handling banquet food opportunities. And if you have banquets, then you can really make some profits.Our best example is our Hilton Garden Inn, located in San Diego on the border of Del Mar, California. We applied for a waiver to name the restaurant Bistro 39 because we were unable to find any panache with Hilton's restaurant concept, Great American Grill. Hilton views these restaurants as a means to an end: Serve breakfast, lunch and dinner and have your guests be happy. For a unique experience, we had winemaker dinners, wine and chocolate tastings, beer tastings and much more. We built a ballroom, an unusual touch for a Hilton Garden Inn, and booked more than $1 million in social events in year one.The bottom line is that we love food and beverage and know how to make it both profitable and complementary to the hotel marketing. We added a deli to the hotel and serve Boar's Head meats and cheeses--they line up for lunch at 11:30 a.m. Yes, it is the only Hilton Garden Inn with a deli, but then we are different. We look at each hotel uniquely so that we can decide whether or not a food-and-beverage program would be worthwhile or if we are better off with a leased operation.If you are still on the fence, just remember, if it is not in your blood to have holiday buffets, weekend events, tight margins in the restaurant, and extensive training and marketing, go with the lease! Otherwise, have some fun with it--after all, wine and beer tastings are wonderful for thanking your guests while teaching them about wine and craft beer. And if you do it for hotel guests, they only need to drive home on your elevator!
Article by Robert Rauch

Hotel Business Plan Development 2018: Getting Ready for 2018 Budgeting

R. A. Rauch & Associates, Inc. · 8 September 2017
Unemployment is low, consumer confidence is solid and household spending is strong. Interest rates remain low, business confidence is strong and nothing to derail the economy is imminent. Oil prices have been unusually flat notwithstanding the speed bump caused by Hurricane Harvey.All of this information bodes well for the hotel market in the U.S. which should lead to our estimate of 3 percent RevPAR growth in 2018. Last year at this time, we projected 4 percent RevPar growth for 2017 and stand by that number. Naturally, the caveat is that unexpected "event" that could stimulate a precipitous decline in demand. We believe that can be averted in 2018 despite the craziness in the Middle East, North Korea's chest pounding and the turbulent economies abroad.As we are now nearing the end of summer of 2017, this means budget and market planning time is here. While many operators merely look at last year's numbers to budget and forecast, the only meaningful way to budget is to analyze the market thoroughly. Whether you are opening a new business or getting ready for 2018 budgeting, now is the time to begin the planning process.The following action needs to be taken:Review trend report and competitive set information from STR. This will provide a baseline. Ghost call primary and secondary competitors to obtain price points, features and benefits. Obtain sales collateral and start a competitive information file. The process of "elicitation," coined by John Nolan in "Uncover Your Competitors' Top Business Secrets Legally and Quickly-And Protect Your Own" discusses the importance of this area.Meet with general managers and marketing team members of primary and secondary competitors. Site tour each business and establish a referral program. Coordinate a market review with your franchise marketing manager if appropriate; obtain a franchise national media schedule. Discuss opportunities for digital advertising to promote your business with your extended marketing team. Independents must create a digital presence.Develop a 2018 sales and marketing budget; do not assume growth from last year. Review the STR report and other market intelligence and market pace reports carefully. Review quality and quantity of sales collateral and ensure your email lists are updated for newsletters and blasts.Review customer information guides whether electronic or printed. Plan a sales blitz. Order blitz giveaways and mementos with your logo, address, web site and phone numbers. Choose items that will stay in contacts office such as candy jars, post-it notes or coffee mugs. Review your central reservation database property information file. Forward to your central reservations database supervisor.Meet with key contacts at your Convention and Visitors Bureau and Chambers of Commerce. Obtain a list of advertising and trade show opportunities for budgeting. Contact local Chambers of Commerce and obtain lists of your area's top businesses and employers. Qualify key companies and individuals to create or update your own emailing or mailing lists/labels. Business Journals also have great lists. Ensure that you have a list of your competitive set top demand generators (360 report).Contact guest loyalty rewards program administrators at franchise headquarters to arrange to promote your business in the next member newsletter. Solicit articles on your business as a feature story. Develop possible press releases for the coming year along with a public relations plan and contact each segment specialist for the franchise worldwide sales staff to see what opportunities are available to promote your business at upcoming trade shows, future segment specific directories or sales missions.Create a strong database for electronic mail promotions and ensure your website is not a brochure but rather a focused, customer-acquisition medium. Create website awareness, i.e., create some "buzz" via pay per click, SEO, SEM and unique offerings. And if your website is not mobile optimized by now, this needs to be corrected immediately.Continuously create and deliver "can't-resist" content. Traditional advertising is rapidly losing out as marketing professionals realize the advantages and effectiveness of digital content marketing. Marketing's new mantra of "brands must now act as publishers" has arrived in part because of social media and its potential to engage in meaningful conversations with their loyal fan base and potential clients alike.Develop a permission based electronic marketing program. This is a type of marketing whereby the target audience is solicited by e-mail and his or her approval is sought before marketing to them. By investing in the sharpest media tools like blogs, social media, newsletters, webinars, e-books, photo-sharing, videos, shared media and even Virtual Reality, you will drastically reduce the hefty investments in traditional paid media that are becoming substantially less effective with modern consumers. Simply put, you need to create and share content while being of interest to lots of people to be a player!Calculate the lifetime value of a new customer. As an example, if a traveler stays with you two nights per month at $150 per night for 5 years, that is $18,000 in today's dollars. This data is helpful in determining the value of a new customer. Include calls to action in all advertisements and measure the result of every email marketing blitz and test new approaches periodically.Use this process now or risk losing your competitive edge! And do yourself a favor and do not create the budget without first reviewing your Business Plan - otherwise you are just entering numbers to make yourself feel good. Remember that all business is local - national trends are merely the foundation of your plan.Enjoy the end of summer and Q4!

Enjoying Strong Revenues and Positioning for Fall Season

R. A. Rauch & Associates, Inc. · 3 August 2017
First, we are now recognized for our growth in San Diego, Phoenix and finally the U.S. Inc. 5000 will be recognizing us this fall for being one of the fastest growing companies in the country between 2014 and 2016. Recently, in addition to growing to nearly 20 hotel properties, we have added a 30 Under 30 award recipient, Chief Development Officer, Cameron Lamming (also my business partner), a highly talented and acclaimed VP Operations in Janet Fioriti, two rock stars, Director of Accounting Doug Ficke and Marketing Manager Sheryl Paulino and a phenomenal supporting team.We are poised to handle the changes that are happening in our exciting and noble profession of hospitality. These include but are not limited to Artificial Intelligence and Robotics, OTAs and Airbnb, personalization of vacation experiences, international travel and the ban, information and cyber security, personal training 2.0 and more.Artificial Intelligence and RoboticsIn 1982, Time Magazine declared the personal computer the "Machine of the Year." Prior to that, Isaac Asimov coined the term "robotics" in 1941, with three easy rules: Robots may not injure humans, must obey orders and must protect their own existence.I try to avoid negatives but after getting bloodied by unions, robot deniers and even a Chamber of Commerce for employing a robot, I must defend myself. Robots are small, portable, easy to train and reasonably priced. Our robot, acquired from Savioke for our Fairfield Inn & Suites by Marriott in San Marcos, CA, delivers various supplies and products to guests quickly and has tripled our sundry shop sales. Moreover, guests love interfacing with a robot as it is still a novelty. It allows us to let our night auditor stay at the desk rather than abandon the lobby. And perhaps most importantly, "smart machines will replace some jobs, but they will create many more," according to Jerry Kaplan in last week's Wall Street Journal article, Don't Fear the Robots.OTAs and AirbnbOnline Travel Agencies (OTAs) and Airbnb have awakened today's hotel community and we are committed to creating loyalty among our guests. The truth is, these companies, who own no real estate yet benefit from our guests, are ahead of us technologically and have come closer to the personalization that we need to provide to keep our guests coming back. And with the growth of travel and tourism, hotels must assume that the competition for our guests will continue. Hence, we need personalization that keeps our guests loyal to us and booking directly with us. According to my colleague and friend Peter Yesawich of MMGY Global, "Guest satisfaction tends to rise with personalization, and service providers enhance their pricing power when they are able to deliver bespoke experiences." Proudly keep those rates up but do provide very personalized services and embrace technology! If you have not tried Airbnb to see how the communication works, give it a try in the name of awareness--you might see the good and the bad.International TravelThe international travel market is one that was predicted to fall apart due solely to Donald Trump. Well, I am not here to opine on President Trump, but international travel is up despite the strength of the dollar. Attending a panel discussion at the Arizona Governor's Office of Tourism Conference in Phoenix last week, I heard from representatives of Germany, China, Canada, United Kingdom, Mexico and France. The panel was moderated by Brand USA executive Mike Fullerton. Mexico's biggest concern was a laptop ban, Germany was concerned about Trump's policies, China was fine with our policies and talked about Chinese spending 25 percent of their annual income on travel. France and Canada were also fine with Trump's policies and the U.K. had their own house to deal with post-Brexit. The travel ban itself did not come up much in conversation. This is clearly a growing market and we must support Brand USA.Information SecurityInformation Security is never a fun topic for hoteliers but the Verizon Data Breach Investigations Report (DBIR), Intercontinental Hotels Group Update on Data Breach and other travel industry breaches are becoming more frequent. In the 2017 DBIR, Verizon indicated that over 80 percent of the breaches involved weak, default or stolen passwords. It is critical that we adopt the Secure Payment Solution (SPS) and point to point encryption (P2PE). Ransomware attacks have doubled this year and while I am not assuming that Moore's Law (every year it will double) is the rule here, be aware that this is serious and that most cyber security and risk experts believe this will worsen.Personal Training 2.0As a Faculty Associate at Arizona State University and former corporate hotel training executive, I am very excited about Personal Training 2.0. No, gym workouts are not involved here. This is about taking the manual systems that we used in the past and using a technology solution now. In reading my favorite technology publication, Hospitality Upgrade, I noticed that 93 percent of Millennials say they crave lifelong learning and are willing to spend their own time and money on extended training. 39 percent of Millennials say that they had an opportunity to learn something new that would help them do their jobs better in the last month. Lastly, development opportunities and potential to grow are top factors for them when considering a new job. I am currently exploring these solutions from Amplifire, Axonify, Degreed, Udemy and NovoEd.Service Animals and Lodging AssociationsWith the end of summer in sight, I leave you with the Service Animal Dilemma - many of our guests are falsely claiming to have service animals, expecting us to accept "comfort pets" or just plain violating our no pet policies. Just last night, I observed three dogs on a leash barking loudly and being led by a family of four, walking in a back door to our hotel. It is important to know the laws and industry colleague Jim Abrams, California Hotel & Lodging Association has done a superb job of laying out what we can and can't do. See your hotel association website for details and make sure your guests read their rights--and yours. Speaking of hotel associations, I am an active member of the American Hotel & Lodging Association, California Hotel & Lodging Association and Arizona Hotel & Lodging Association and encourage you to take an active role in supporting this industry.Have a great August!

Revenue and cost strategies for boutiques, independents

R. A. Rauch & Associates, Inc. ·27 July 2017
Let's look at the revenue components of an independent hotel. A savvy sales team can make or break your hotel as group business generally books well in advance to provide the ideal base business. Without the power of a brand sales team and the tools that they provide, your independent hotel's sales efforts need to ensure that they are utilizing the right channels to effectively capture transient demand.While global distribution system business is mostly pay-to-play, it provides exceptional return on investment in the right markets. Responding to requests for proposals from national accounts can be tedious, but it is an essential piece to your revenue puzzle. Local negotiated rates are equally important for your sales team to seek out. These accounts are special rates set up with local businesses that have travel needs in the area and driven by the relationships your team develops with the travel manager of the company.Direct bookings are the most cost-effective business for boutique hotels, so it is always the goal to drive business to our own booking channels. Identifying what percent of business you need from group sales, GDS and online travel agencies is paramount to a successful revenue strategy. Understanding the cost of all of your booking channels allows you to properly layer in business by evaluating the effective average daily rate and adjusting your available rates accordingly. Set occupancy thresholds for your hotel as key indicators of when to increase your rates.Balancing meeting rooms and sleeping rooms has always been tough for revenue managers who have not been on the group sales side of the business and salespeople not familiar with RFPs. They must equip themselves with new tools. Identify your hotel's ideal rooms-to-space ratio to optimize profits on any piece of group business and to ensure your revenue manager and sales team are on the same page.Events and other contributing factorsWhile events might not provide a large number of roomnights, they do get people in the door of your hotel and help marketing efforts. If your hotel has an in-house food-and-beverage department, then capitalizing on these events is even more critical to achieving financial success and should be incorporated into your revenue strategies. Farm-to-table and locally-sourced product is expected at every dining occasion, and healthy options are also prized in today's market. Ensure your F&B team is keeping up with the latest event software--we use Social Tables)--healthy living trends, maintaining creativity and adjusting their menus accordingly.A destination is a high contributing factor in the decision-making process, so your sales team should highlight all of the attractive aspects of the local area. Does your hotel have a great bar for guests to grab a happy hour drink after their meeting? If your hotel is limited on amenities, then provide information on your local area and everything that could be attractive to a first-time visitor. The "work hard, play hard" mentality has taken the market by storm, so even if a client is looking to host a business meeting, they will also be exploring what to do once their meeting is finished.Digital marketingThe importance of marketing in your overall revenue strategies cannot be overstated, as it is the crux of how your boutique hotel sets itself apart. Establishing your hotel's identity and voice and ensuring that they are effectively communicated to all outlets is a must. Without the power of a big brand behind you, you are awarded the chance to create a brand that really defines the hotel and the experience your team provides. Your social media platforms create a stage for your hotel's voice to be heard, so their importance is far greater than they would be for a branded hotel. Develop creative packages and collateral that capture the guest experience to set yourself apart from a franchised hotel. These pieces tell a story that evokes a potential guest's wanderlust and shows value.Your website should be constantly updated with local happenings, events and hangouts to keep up with search engine optimization (SEO) changes that stress local focused searches. This is a complete advantage over branded hotels that have monotonous websites with limited control over content. The goal is to create a local community hub that provides exceptional content to any visitor.Revenue management should never be on the back burner, especially for boutique hotels. Strategies need to be constantly looked at and questioned so that they can evolve. Pay attention to your rates daily and check them multiple times per day during peak demand periods. Schedule weekly revenue meetings with your hotel's key managers so that everyone involved is staying engaged and on the same page with your current strategies. Independent hotels can adapt quickly to changes in the market, so use this to your advantage.Good luck!

Mid-Year Report: 2017 Remains Strong | By Robert A. Rauch

R. A. Rauch & Associates, Inc. · 6 July 2017
STR reported a 2016 occupancy of 65.4 percent and it appears that supply and demand are largely in sync, therfore, occupancy levels will hold. Our current outlook is a GDP growth of over 2 percent, maybe even hitting 3 percent later this year and we anticipate this pattern to continue through 2018.According to CBRE, leisure demand now represents a greater portion of total demand; this has been the primary contributor to the record occupancy levels discussed above. Based on data from STR, weekend hotel occupancies in the U.S. are now almost 10 points higher than weekday levels, and the average daily rates being achieved on Friday and Saturday nights now equal the weekday prices."Fitch Ratings expects U.S. lodging RevPAR will decelerate in Q3 and Q4 2017, but remain positive, allowing the strongest and second longest recovery since 1987 to endure through at least 2018. Fitch expects low single-digit RevPAR growth over the next two years, with resort, suburban and airport locations outperforming due to less new supply. We believe that 3 percent RevPar growth is most likely for the next six quarters.Fitch expects U.S. GDP will grow by 2.1 percent in 2017 and 2.6 percent in 2018. While consumer confidence and employment are both positive, rising interest rates are a concern in their minds. We are not concerned with modest interest rate growth as it will serve to curb new supply growth.According to Tourism Economics, lodging has outgrown other consumer spend in the last 3 years. We also believe that this will continue through 2018. Despite the above concerns from Fitch, interest rates are low, the recovery from 2010-2016 was not particularly robust, tax reform and repatriation of funds remains available to us, debt and equity both remain available. The 1990s brought us 111 straight months of growth. We believe we can attain that again.Foreign capital, frequently from China, continues to keep values steady if not higher than last year. Mergers and acquisitions are creating savings but when it comes to individual assets, the time has come to really optimize asset value in preparation for a change in the economy down the road.STR has identified a tipping point where negative revenue per available room (RevPar) growth in a certain number of U.S. submarkets indicates a turn in national RevPar performance. Naturally, there are cities where it is clear that external events produced negative RevPar growth. Those of us in Southern California know that Los Angeles received massive demand last year from the Porter Ranch gas leak. This has impacted year over year performance in 2017.New York has been hit with extremely high, double-digit supply growth and San Francisco has a closed Moscone Center. Double-digit supply growth will also impact Denver, Seattle and Nashville but forecasts for 2017 and 2018 call for flat occupancy levels and average rates at or above inflation.Other Tipping PointsIn the area of wages vs. robotics, we may be entering an era of profound artificial intelligence use in the hospitality industry. We have added a service robot at our Fairfield Inn & Suites in San Marcos, California and others will soon add housekeeping robots to vacuum, thereby reducing room cleaner times and helping reduce the troublesome back injuries our team members have. Wage growth is off the charts thanks to legislation mandating minimum wage increases of nearly 90 percent over a 7-year period from $8-$15 in California, a compound annual average increase of nearly 13 percent.There is also a tipping point that we are reaching from OTAs vs. hotels where hotels are fighting to increase direct bookings and OTAs continue to promote and advertise aggressively. AH&LA has a comprehensive plan to combat this but coexistence is still possible!Lastly, the supply/demand ratio is at a tipping point where supply is beginning to outpace demand and the millennials/boomers ratio is also at a tipping point where millennials will begin outpacing boomers in hotel demand. And yes, Airbnb is certainly reducing both the occupancy levels and average rates of high demand periods that previously showed strong compression from the market. Enjoy the summer ride, it will still be loads of fun!
Article by Robert A. Rauch, CHA

Ten Years After - Hospitality Technology 2017

R. A. Rauch & Associates, Inc. ·16 May 2017
The rise of digital technology has molded a new kind of traveler, one who embraces available tools and uses them to jump across industry-defined silos. These new travelers do not need handholding; they need the resources and technology to be able to be self-sufficient. They want to be able to make reservations, check-in and plan their trip via a virtual concierge, all while sharing their experience on their social media outlets.Although today's traveler demands a high degree of personalization, increased technology use has created an interesting paradox: the human part of the service economy may diminish in importance with the rise of the independent, digital traveler forging his or her own way. Big data offers a way for travel companies to provide that invisible pillar of support to balance the inevitable expectation of a customized experience while simultaneously enhancing the need to remain independent.The boundary between professional and private worlds is increasingly blurred as a result of mobile devices that are changing business travel as we know it. Business travelers, especially Millennials, want to access readily available deals and tools when they travel. A recent survey by Pullman Hotels reports that:43 percent of international travelers always take their mobile professional devices with them on holiday or on weekend trips.89 percent of seasoned international travelers say mobile professional devices are a means of staying in touch with their loved ones.While there is a real conflict between personal and professional lives of travelers, business travelers are more upfront about adding on leisure time at the end of business trips. This traveler is known as the "bleisure" traveler and is now becoming a target for many properties. This presents new opportunities for airlines, hotels and destinations alike, all of which have to configure their services to be flexible. Conference and meeting planners also need to be cognizant of these changes.In addition to mobile devices changing business travel, they have created new sources for bookings. Travelers are overwhelmed by choices when booking online and mobile is creating the need for a better-curated experience. Booking providers can deliver well-targeted information to travelers due to their mining and analysis of all kinds of data. The growth of HotelTonight is an example of a mobile solution that focuses on the user experience and provides a quick and easy booking opportunity.With the mobile explosion has come the launch of apps that are helping merge customer service with the digital age. Apps are being used for everything from a digital concierge experience to accessing big data. Geo-location can make it easy to sell guests something that is literally right in front of them. A prime example is 1App, which sends guests deals to eat, shop and play in accessible areas. While we tried it as a beta test for hospitality, it has found a place in the retail sector.When thinking about how apps are changing the industry, it is also important to remember that the days of "walk-in" reservations are dwindling. With today's technology, guests rarely walk in to inquire about room availability. Instead, they turn to mobile tools to make their reservation. Mobile is the new walk-in. And, as most have heard, many hotel guests are checking in via mobile phones this year. While it is only effective for a party of one, (your significant other will not be able to use the smart phone key as only one at a time can be issued) this is available at select Marriott and Hilton properties.In addition to using apps to increase reach, hospitality businesses are utilizing the power of social media to grow. Facebook improves brand reputation, enhances listings and allows businesses to offer unique deals. Twitter lets hotels connect with guests in real time. However, it is not easy to set up and optimize your Facebook page and maintain your Twitter account without paying someone qualified to do it. Social media must be a crucial component of the marketing mix. Think of your property's Facebook page as a second website with the option for guests to contact hotel staff and make reservations.Technology and the importance of mobile sites are not just a trend, they are the new reality of hospitality. Having an understanding and a strategy for digital technology and mobile sites is key to successfully being able to reach the "new" traveler. Now is the time to tighten up mobile sites and find a balance between customer service and the self-sufficient traveler. Millennials have arrived and many other travelers have a millennial mindset. Yes, ten years after the tech explosion, times have changed. Embrace it - and enjoy a great remainder of 2017!
Article by Robert A. Rauch

Build a strong, satisfied team to be successful in 2017

R. A. Rauch & Associates, Inc. ·22 March 2017
Whether you're an owner, industry executive, general manager or aspiring industry leader, 2017 is going to be a very solid year. One of the keys to success will be team member satisfaction. Without a satisfied hotel staff, we have no foundation upon which to build.So, here is a primer that includes as a premise the following statement from Laurence Geller, founder of Strategic Hotels and Resorts and chancellor of the University of West London: "A great leader must surround him or herself with people that are better than themselves."Leadership"Strong leaders are essentially great generalists in terms of knowledge areas, attitudes and skill sets ... and focus on others and not themselves," according to Keith Kefgen, author of Loneliness of Leadership: Solitude to Success.Leadership is one of the areas we focus on within our hotels to promote a positive environment. Attitude starts from the top and trickles down to everyone else. Good managers/supervisors with a hands-on approach can build teams up and help grow individuals. When team members have someone to lean on, learn from and that listens to them, they are much more satisfied, and their quality of work significantly increases.In this environment where hospitality has become more science than art, it is often forgotten that to train and motivate staff, we must have a strong foundation of knowledge.In addition to some of the basics, this knowledge must include the ability to budget by forecasting both revenues and expenses, the awareness of which distribution channels are most profitable, revenue management tenets and finally trends. These include robotics, artificial intelligence, mobile check-in with smart phones and more. Further, a "business success plan" for the hospitality industry requires a new set of disciplines.Perhaps the most critical items for a business success plan are to have a vision, a clearly defined set of goals and a "glass-half-full" mindset. Leadership talents include being caring, giving and building others into leaders. Not only is it important to be a leader among your team and staff, it is crucial that one remains an industry leader as well.Trust"Where trust is high, resistance is low. Therefore, change and progress come quickly. Conversely, where trust is low, resistance is high. Therefore, change and progress come slowly," according to Dr. Randy Ross in his 2016 book Remarkable: Maximizing Results through Value Creation.Company culture has become extremely important in retaining good talent and trust is developed through this positive company culture. Jumping ship is easy to do unless employees are truly engaged and supportive of the mission. While job benefits are always a positive, they are now so common that they cannot stand alone when it comes to employee retention. Take a note from how we treat our guests and create an environment where your team feels valued, cared for and respected. Then watch as your service scores reflect the work of a satisfied team.Labor and related costsFinancial leadership skills are valuable for all leaders to have, especially those who want to advance.Leadership must always be caring and compassionate, but today's increasing worker compensation costs, health insurance costs and labor costs may cause a business to fail. If that occurs, human conditions such as layoffs, bankruptcy, foreclosure or hostile takeover will be much worse than the stress of dealing with and reigning in expenses. Today's labor costs represent nearly 45% of hotel costs when we factor in worker's compensation, health care costs and other payroll related expenses, so we must hire the best available talent.Hiring When we hire, we must look for leaders who have self-confidence, ask lots of questions and care for others. These are the types of people who can someday replace us; perhaps they have some unique skills that we do not have. After we have hired the right person, we must train the team members in the specifics of the job and coach them to do their job well. After both training and coaching, the manager (leader) needs to get out of the way and let people do their job. Delegate tasks, authority and decision-making, but hold people accountable for their actions. A manager who works seven days a week to make sure things get done right is missing the most important attribute of leadership.The bottom lineAt the end of the day, be honest, caring and hard-working, and you can begin to build the trust needed to drive your organization. Be both a teacher and a mentor so that when people learn, they also feel like they have a "go to" source for advice. Our greatest assets are our team members and our customers. If we treat them both honestly, care about them and work hard to preserve the quality and attention to detail that they require, we will have helped to create a "unique selling proposition" that sets us apart from the competition.Robert Rauch is an internationally-recognized hotelier, CEO, and founder of RAR Hospitality, a leading hotel management and consulting firm based in San Diego, California. RAR Hospitality's hotel collection includes independent, boutique and branded properties throughout North America.The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.
Article by Robert A. Rauch

What Does 2017 Hold for Social Media?

R. A. Rauch & Associates, Inc. ·31 January 2017
It is safe to say that social media and the marketing force that goes into it are here to stay. This is largely due to the space's ability to continuously evolve. Just 10 years ago Facebook morphed into a mainstream business tool, Twitter arrived, the iPhone exploded on the scene and Android phones followed closely behind. This series of events spurred social growth as platforms began to fulfill needs we didn't even know we had. Today, the number of major social platforms has reached a stable point but that doesn't mean that there will not be continued growth in 2017.There are over 2.5 billion active social media users worldwide. The big four platforms make up the vast majority of these users consisting of Facebook, Twitter, Instagram and Snapchat. Considering their popularity, you have probably heard of at least one of them but if you are not a frequent user of each then there are numerous changes that have most likely occurred since the last time you logged in. These four social outlets have become a staple of everyday life so it is more important than ever that hoteliers familiarize themselves with these platforms to ensure that we continuously speak our guests' language. While they once individually filled niche roles in the social world, the features seen across each platform have begun to standardize; a trend we'll see continue into 2017. Let's take a look at how each platform has evolved this past year and what we can look forward to in 2017. We'll then explore some changes that will affect the entire social landscape.FacebookThe eldest of the featured platforms, Facebook has been known to make significant changes to their product year to year. This past year brought us Facebook Reactions, an expansion on the popular "like" function that allows users to be more expressive with five emojis. Clever marketers have used this function to create polls by assigning certain criteria to each emoji. This promotes engagement with your guests and allows another forum for them to express their opinions. Along with Reactions, Facebook Live was an extremely important evolution to the platform. Video will continue to be king in 2017, especially when it comes to live content. The function allows you to speak directly to your guests and creates a sense of urgency due to it being live. Engagement is key for a successful Live strategy, so create content that promotes your guests to comment as you go.In an effort to keep up with Snapchat, Facebook acquired a company called Masquerade. Masquerade allows users to record videos and edit them similarly to Snapchat's filter function. This augmented reality technology has become a huge focus of Facebook alongside their virtual reality efforts. Look for lenses and filters to become an everyday application within Facebook in the near future, furthering the homogenization of the platforms. While virtual reality is still the future, the everyday application for consumers is just not convenient yet which is why it had minimal impact last year. As Facebook continues to develop the technology it will be important for hotels to stay ahead of the curve by being early adopters.TwitterCEO of Twitter, Jack Dorsey, recently shed some light on the future direction of the platform in a message to Twitter employees:"Twitter is what's happening, and what everyone is talking about (literally!). News and talk. We're the people's news network. People choose us for news because we're the fastest. Fastest to get news, and fastest to share news with the whole world. Now let's strive to be the first. The first place people check to see what's happening...and the first place to break what's happening. In the moment LIVE, or a fast recap of what we know so far...what matters."In essence, Twitter is becoming a news product. The platform has seen a decline over the past few years but that in no way means it is dead. While publicly looking for a buyer, Twitter is still constantly evolving. They are the original big four platform to embrace live streaming video (with their purchase of Periscope) and continue to push this trend by entering broadcast partnerships with organizations like the NFL.Taking a cue from the hospitality industry, Twitter focused greatly on improving their customer service for users and businesses. It would make sense that this trend continues with improved business tools to help stabilize the platform. One theory behind the recent decline is that the novel concept of the 140 character limits has worn off. Consumers today are looking for more in-depth content which is hard to do within Twitter. An evolution of the platform could potentially allow businesses the ability to expand past the normal 140-character limit and provide bigger, slower content like Facebook or Instagram.InstagramFacebook-owned Instagram continues to be one of the fastest evolving social media platforms with an exceedingly bright future. Instagram released its Stories feature this past year that appeared to be in direct response to Snapchat's success. The feature promotes content that will vanish in 24 hours. In another key move this past year, Instagram released Business Tools. This feature allows verified profiles access to analytics and the ability to create ads directly within the platform. These two features combined allow for adding "See More" links to Instagram Stories. This has simplified the process of driving traffic from Instagram that can be utilized for booking and other promotions for hotels.As we look forward, it can be expected to see much more in depth business tools available for verified profiles. This has been an area of opportunity for the platform since inception so it only makes sense that it would be continually developed. In the theme of homogenization, we can also look to Instagram to enter the live video game realm and expand its direct messaging features. These two features are prevalent across all the major platforms and continue to be features looked for by users and businesses alike.SnapchatSnapchat is the most exciting of the big four platforms to watch. From the hotel side of things, it has been difficult to break into Snapchat with any meaningful impact (unless you have a very creative and dedicated marketing effort on property) but that will likely change as the young application continues to evolve. This past year brought about many exciting and innovative changes that have begun to open the door for businesses to actively participate. One of these was the release of sponsored geofilters. Geofilters allow any user to create a unique filter available within a targeted radius to anyone using Snapchat. While exciting for brands, the cost is still a bit steep for most to participate.Spectacles marks Snap Inc's first venture into a physical product. They have done what other wearables have not by capturing the illusive "cool" factor. Spectacles are mainly targeted at Snapchat's teenage audience and have been marketed mostly by word of mouth as the product was not made available to media and is extremely hard to get. With the development of Spectacles, Snap Inc has pioneered 115-degree field of view video which is similar to that of the human eye. The importance of this technology is that it solves the age-old question of whether to film video landscape or portrait because the content will always fill a mobile screen. For reference, here is a demonstration of this technology: https://youtu.be/7-18SDeArE8Organic Decline and CommunicationsAcross all of the big four social media platforms, there has been a notable decline in organic visibility of content. This has brought about a pay to play ad renaissance of sorts as social media ad spend is up 33.5 percent to nearly $24 billion dollars annually. This evolution will continue because as the platforms are continually trying to improve user experience, they will decrease the visibility of business created content. This will also increase the importance of social media influencers (users with a large fan base that become product advocates). For hoteliers, these social influencers are travel bloggers that have smartly expanded into social media.Communications has always been important across social media but all of the big four platforms have been improving their messaging features. The continued research into artificial intelligence and chatbots looks to support these efforts and a combination of chatbot based ads is likely in the near future. Nothing beats real-time engagement though, especially as the technology is being developed. This trend of an increase in communications exchanged between brands and consumers leads to expanded customization of guest experiences and good customer service for hotels. In addition, Facebook has entered the professional communication game with Workplace by creating a centralized, internal hub for communication and productivity. It will be interesting to see if the other platforms try to follow suit.To be Continued - EvolutionSocial media's evolution can be a lot to keep up with due to the speed at which change occurs but it does not have to be overwhelming. Hotels can benefit from all of the big four platforms but that does not mean they have to be on all of them. With homogenization prevalent there are no longer niche benefits to individual platforms. A focus should be placed on the platform that best speaks to your demographic to achieve continued success as the evolution of social media continues.Heres to a great "social" 2017!
Article by Robert A. Rauch

Consider these marketing strategies to stay competitive

R. A. Rauch & Associates, Inc. ·25 January 2017
According to Geoffrey Moore in his book "Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet," stock price is a measure of future potential based on present competitive advantage.Competitive advantage consists of two components: competitive advantage gap and competitive advantage period. The competitive advantage gap (or GAP) is the distance between your hotel offerings and your nearest competitors. The competitive advantage period (or CAP) is the projected period a company can maintain its differentiated position. In other words, if a hotel company has superior products and significant barriers to entry, it has both a competitive gap (product differentiation) and a competitive cap (time lag for competitor entry).When developing a cohesive marketing strategy, both CAP and GAP should be incorporated to achieve success for sustained periods. With that in mind, here are some guiding principles to help you achieve a competitive advantage in your market.Distribution dilemma and marketing dollarsMany hotels receive reservations from third-party sources, most notably online travel agencies. It is important to understand the OTA booking process and what its impact is on the hotel. OTAs buy keywords that allow them to dominate the search process. This is largely due to their ability and willingness to spend marketing dollars. For example, if a guest attempts a search with the keywords "hotels in Scottsdale, Arizona," the top four results are Google Ads and, not surprisingly, these four ads are all for OTAs. While the results will vary based on the time of day and the number of people bidding on certain keywords, OTAs dominate the broadest-searched terms.After scrolling past the four ad placements, you will see a Google Maps listing with three locations. These Google Local rankings are the results of a great search engine optimization campaign as well as Google's local algorithm. Once past the map, we get into the organic search results.The top three results ("Top-10-type posts") are a great example of content marketing, and are extremely engaging and useful for guests, which is why Google has given them such high priority in its organic ranking. If you take note of what websites these links are for, you will not be surprised to find out they are all OTAs and metasearch engines. A metasearch engine--which is defined as a search tool that uses another search engine's data to produce its own results from the internet, like Kayak, Trivago or another aggregator--further demonstrates how OTAs control key real estate on search engine results pages, because Kayak is owned by Priceline and Trivago is owned by Expedia. In fact, Trivago has been climbing Google's ranks in related searches to hotels over the past five years.Search engine optimization: Content marketingThis is where content comes into play. Content that is well-written, includes verbiage that plays well within the search engines and, most importantly, is what users want to consume, will win over potential guests.Optimizing content marketing is different than just having command of the English language. It requires up-to-date knowledge on search algorithms and a vast understanding of what your online audience likes. This may come in the form of an agency or internal professional but basic search engine marketing is one of the most effective ways to grow your business in an increasingly competitive marketplace.With millions of businesses out there all vying for the same eyeballs, it's never been more important to advertise online and search engine marketing is the most effective way to promote your products and grow your business. Companies such as Milestone, GCommerce and Screen Pilot can help get you started.Data and analytics: What should you look for?Your hotel has access to a lot of data, but the question is, do you use it? It is very costly to implement a comprehensive data analysis plan, especially across multiple hotel brands where systems cannot be integrated. However, each hotel has more information about its guests than ever before.Prior to check-in, guests can now provide their favorite room types, room temperature, foods, TV shows, pillows and more. This tailored guest experience currently exists in new, high-end hotels but it will soon be available at every hotel. Utilizing this information and adapting it to our targeted advertising campaigns on social media and search engines can produce much higher returns on investment.I use data to understand price sensitivity in each market. When is it better to take the soccer team of young adults to a room? What market segment is really better for this hotel? With occupancies at a peak, it is paramount to our success that we optimize rates to offset the rising costs of labor, health care and more. Taking all this data into account when building our marketing strategies will help us attract guests that are perfect for our hotels. In turn, this produces a better guest experience that results in higher reputation scores. It is a win-win.To sum things upMarketing is often an afterthought within the hospitality industry and where there is focus, it is pigeonholed to specific buzzword-oriented areas with hopes of creating a temporary boost in traffic translating into a temporary boost in bookings. This reactive nature is, unfortunately, a product of hospitality--an industry that lives and breathes off operations to achieve success. But marketing is meant to be coupled with a long-term strategy that guides the branding, voice and growth of your hotel over the next 10 to 30 years.The OTAs embraced marketing in today's internet age before hotels but that does not make them the enemy. With the proper marketing strategies in place and a good understanding of your channel mix, hotels can work to regain ground on search engine results pages and be prepared for future success thanks to CAP and GAP principles.
Article by Robert A. Rauch

Preliminary Hotel Industry Forecast: 2017

R. A. Rauch & Associates, Inc. · 6 January 2017
Since 2016 is barely gone, we may as well spell out the big news and the impact that news may have on 2017 and beyond. The first was Marriott--that was a big merger with Starwood and provides the new company with over 1,000,000 hotel rooms in 5,700 hotels, 30 brands and huge bargaining power with online travel agencies. The second was the Republican sweep--Donald Trump will have an opportunity to change the economic landscape. President-elect Trump will have a majority in both the Senate and House of Representatives. If he focuses on trade, wages, regulations and the strength of our nation, he could keep this long but slow recovery going and dramatically enhance it. Historically, a Republican sweep has provided for very low inflation but clearly there is work ahead.Oil prices are back up over $50, consumer confidence is high, interest rates remain low albeit forecast to inch up and a new administration might pump up the economy beyond what we had initially forecasted last year. A soft landing is no longer imminent--in fact, gross domestic product may actually approach 3 percent in 2017, double what we forecasted last December for this coming year. Adding personal income growth, consumer confidence and low unemployment together with strong corporate earnings indicates that both the leisure and corporate traveler have the means to travel and pay for lodging.There will always be naysayers, so what caveats could stall the economy? International markets are not as stable as the U.S. and terrorist threats continue to play a role in the way the global economy behaves. The chances that a prolonged global funk would impact the U.S. economy today are much higher--we are not immune to any global crisis. Further, emerging economies are no longer fueling all of the growth, so a few sneezes and we could experience a turn in economic fortunes. Notwithstanding the aforementioned, if we continue the Visa Waiver Program, 2017 will be a solid year for international travel despite the strength of the dollar.U.S. Lodging IndustryU.S. hotels grew revenue per available room (RevPAR) at more than a 3 percent clip in 2016. This is down from over 6 percent in 2015 but that was somewhat expected, especially after a very slow Q1 2016. Occupancy growth has slowed in Q3 and Q4 as demand from corporate clients has experienced a decrease (some of it oil sector related) and an increase in new supply threatens some markets. At the same time, low gas prices fueled some growth in leisure travel. Occupancy levels are at a historic high and average daily rate (ADR) represents all of RevPAR growth. We see no reason that the economy cannot stay afloat and thrive in 2017 and keep ADR growth at that 3 percent level, albeit barely enough to keep pace with costs.New supply is not likely to stop the continuation of positive RevPAR growth for this extended period of time. Banks will begin to put the brakes on lending in time to avoid approving deals that are just too late in the cycle for aggressive underwriting. That means those who are experienced, have solid equity, strong brands or unique ideas, are in great markets and are considered trustworthy and solid borrowers will be able to develop. Increased developer cost of capital, new supply and Airbnb and others in the "sharing economy" are marginally reducing feasibility. Development economics in many markets will not support new construction.While these factors might curb supply growth, the "sharing economy" is not going to have a material impact on demand in most markets and International travel will not go away if the American Hotel & Lodging Association holds strong in support of the Visa Waiver Program. Ergo, it will be something else that stops this growth--a Black Swan event or a global meltdown are not likely to occur but could certainly stop this positive growth. Only time will tell but 2017 looks rock solid.CBRE Hotels' Americas Research is projecting that the U.S. lodging industry will achieve an annual occupancy rate of 65.3 percent in 2017, just shy of the 65.4 percent all-time record occupancy level expected for 2016. Average rate growth should finish at 3.1 percent. The big challenge might be to reverse some of the trends that hoteliers have been battling relative to high costs of health care, wages and supplies. Further, CBRE has issued a report on reduced labor productivity. Hence, net income may have peaked unless we can successfully reverse these cost trends.Trends to WatchLast month, we put out our Top 10 trends for 2017. While soft brands will continue to be a trend, it has been 10 years since Facebook morphed into a mainstream business tool, Twitter arrived, the iPhone exploded on the scene and Android phones were born. Today, the pace of change has accelerated dramatically. In his new book,Thank You for Being Late, Thomas Friedman explores this very age of acceleration. Our trends to watch this year are led by technology, three of which are featured below:Artificial Intelligence (AI) and Robotics are for real. AI is a fast-moving technology that enables machines to perform tasks that could previously be done only by humans. Robots will have an impact on some area of the guest or associate experience in 2017 and we have ordered our first one just in time to open our Fairfield Inn & Suites by Marriott in San Marcos, CA.Text and Chat are here to stay. Chat apps like Facebook's Messenger and WeChat, the app that I use when dialing abroad and the most popular communications app in China, have huge implications for our industry. Texting guests in response to "in the moment" needs, safety and security issues that would require immediate and subtle communication or eliminating language barriers are all technologically feasible and available and can provide for ancillary revenue streams.Mobile Check-in has been around for the last few years but will hit full stride quickly as the technology has been refined. Just about every guest has a smartphone and if a guest does not actually utilize mobile check-in by going directly to their room, they will show up at a pod rather than a formal front desk.Specific MarketsWe would be remiss if we did not offer any hints about our two home markets of San Diego, CA and Phoenix, AZ. While our growth is into all California and Arizona markets at the present time, we have 12 hotels in San Diego County and 5 in Maricopa County in Arizona (Metro Phoenix). Overall, in California, the major markets in both the San Francisco Bay Area and the Los Angeles Metropolitan Area experienced very strong average rate growth and marginal occupancy growth (one exception was the relocation of guests in NW Los Angeles area).San DiegoAccording to Beacon, The San Diego County labor market has steadily expanded, increasing 2.2 percent between October 2015 and October 2016 but is decelerating since 2015, slightly behind the state of California. The local unemployment rate is 4.7 percent or close to full employment. Job growth has been primarily fueled by the entrance of new jobseekers into the labor market. Overall, job gains were fueled by outsized growth in major employment sectors, including Education and Health Care, Leisure and Hospitality and Professional, Science, and Technology.Occupancy should be flat with demand meeting but not exceeding the 2 percent supply growth. Average rates should grow 3 percent. The fear that San Diego is overbuilding is overstated. Most of the new supply is downtown where occupancy levels exceed 80 percent. In the county of San Diego, there are over 63,000 hotel rooms. Currently, there are less than 2,000 hotel rooms under construction with another 2,000 in the "soon to be developed" pipeline. If they were all built, the increase would be 7 percent new supply. We have averaged over 2.5 percent per year over the past 25 years, so it would only take three years to absorb this supply.In 2017, occupancy, average rate and revenue per available room should finish at close to 77 percent, $160 and $123 respectively, all-time highs in each category. We remain bullish on 2017 and are opening a hotel of our own in February.PhoenixLook for continued job growth as Arizona finished 2016 with over 3 million in the workforce and Metro Phoenix surpassed 2 million workers. With Governor Ducey in control, the pipeline for new businesses and expansions is stronger than I have witnessed since arriving in Arizona in 1978. Incentives play a big role, but a "stable and predictable business climate, workforce depth, quality of life and education pipeline are the most-cited reasons CEOs have said Arizona beat other states and markets," according to the Phoenix Business Journal.With minimal new supply growth, (Tempe is an exception but new corporate growth in that submarket has kept pace with new supply) the Metro Phoenix market will have a very strong 2017. Comparisons to the record year of 2015 made the first half of 2016 look weak but it has picked up dramatically in Q3 and Q4.In 2017, average rate growth should be 4 percent with an additional 2 percent in occupancy growth. We expect occupancy, average rate and revenue per available room to finish close to 69 percent, $125 and $86 respectively.A Soft Landing? Not Likely in 20172017 looks to be another solid year for the lodging industry with three percent growth in gross domestic product, nearly double what we originally forecasted early in 2016. We are no longer calling for a soft landing in 2017 (it still could occur in 2018) but that can change due to a multitude of unpredictable factors. Look for technology to play a huge role in how this year shapes up as trends of doing business can directly impact demand on individual hotels. This idea carries into the industry as a whole as we continue to catch up with the technology of today.We sincerely hope you had a wonderful holiday season and wish you a Happy New Year! To a successful 2017 and beyond!
Article by Robert Rauch

Robert Rauch's Top 10 Trends in Hospitality for 2017

R. A. Rauch & Associates, Inc. · 6 December 2016
Just 10 years ago, Facebook morphed into a mainstream business tool, Twitter arrived, the iPhone exploded on the scene and Android phones were born. Today, the pace of change has accelerated dramatically. In his new book, Thank You for Being Late, Thomas Friedman explores this very age of acceleration. Our trends this year do not include every trend, just what we believe are the Top 10. Certainly we could add the Internet of Things (IoT) but we cover some of that in our technology trends below. We could also add the proliferation of brands but that is more of a continuation of the past few years. Feel free to weigh in on social media or on our website!Artificial Intelligence (AI) and Robotics are for real. AI is a fast-moving technology that enables machines to perform tasks that could previously be done only by humans. Robots will have an impact on some area of the guest or associate experience in 2017. One of the benefits of robots will be the data they provide us as guests utilize the services. The Residence Inn LAX uses a robot named Wally to retrieve items for employees and guests. Maidbot has developed a housekeeping robot, Rosie, and Hilton has Connie the Concierge. Hotels will use the robots just as much for customer service and excitement as it might be doing for ultimate savings on labor costs.While there is a threat to workers whose jobs are "routine," AI will not cause mass unemployment. It might, however, have a positive impact on net income as a capital expense replaces a labor cost and at the same time may require many workers to learn new skills. The overall result of mechanization in the past has actually created new jobs. Only time will tell!Text and Chat are here to stay. Chat apps like Facebooks's Messenger and WeChat, the app that I use when dialing abroad and the most popular communications app in China, have huge implications for our industry. Texting guests in response to "in the moment" needs, safety and security issues that would require immediate and subtle communication or eliminating language barriers are all technologically feasible and available. Texting can provide for ancillary revenue streams (we've beta tested an "eat, play or shop" app that guided guests to local deals including at our own facilities). Chat is already global and Chatbots are basically AI that can appear as customer service assistants. Services like Zingle allow us to communicate with our guests from one central hub (whether they are using a messenger app or texting) and offers automation.Mobile Check-in has been around for the last few years but will hit full stride quickly as the technology has been refined. Just about every guest has a smartphone and if a guest does not actually utilize mobile check-in by going directly to their room, they will show up at a pod rather than a formal front desk. In the future, these pods will be tablet based kiosks like you see in the airport. A guest can pick their room directly from their phone and the door lock will be programmed to only open when that mobile device is nearby. Taking this idea into the rooms themselves, some brands have begun to move away from having the traditional guestroom phone. Instead, they opt for an in-room tablet that controls every aspect of the room. Ideally, these two sets of technology will be merged into one so that a guest can control everything directly from their mobile device.Sharing Economy or Alternative Lodging, call it what you want, but Airbnb and Uber have created a firestorm in our industry. Uber has virtually put taxis out of business and Airbnb threatens to become a primary lodging force. While Airbnb steals some market share from hotels, its future is likely as an online travel agency of sorts. Their low commission structure allows them more upside as a very unique distribution channel that represents both hosts and hotels rather than a traditional competitor to hotels. Additionally, they will become tired of the litigation with hundreds of cities. These companies, Airbnb and Uber are perfect examples of how technology can simplify a business by streamlining the purchase process. Hotels should look to them for inspiration rather than as the enemy and seek to answer the question, "why would a guest choose to book Airbnb over my hotel?"Loyalty Pricing is a huge component to revenue management! Getting guests to book direct and determining the value of each guest are keys to success here. With online travel agencies (OTAs) charging high commissions, it is imperative to manage the cost of acquisition of each customer and find ways to educate them to book directly with the hotel. OTAs have spent hundreds of millions of marketing dollars to condition consumers to think they have the best deals available. Brand campaigns like Hilton's "Stop Clicking Around" are a great start to combat this perception. Millennials are not as brand agnostic as we once thought so let's educate our guests on the benefits of booking direct and ensure we know the cost of each channel (Kalibri Labs is the expert on this subject).In-Room Technology is vastly different than it was at the turn of the century. Today's guests expect the in-room entertainment experience to be better than or at least as good as they have at home and they want it on demand. Gone are the days when "Free HBO" on your marquee will build hotel business. If a guest cannot access their Netflix account or various on demand streaming services, then how is the in-room experience better than what they have at home? Additionally, look for various customizable technologies to start being included in room packages. Everything from custom lighting, smart mirrors and in-room tablets will be tailored to the specific guest's preferences before they arrive.Marketing and Social Media 2.0 is here so it is time to measure the results of all these new data points. Creativity in social media has caused lots of fans, likes and followers but quantitative success does not always transfer to tangible ROI. Data and analytics must be mined to measure successes and look for new ways to improve our guest experience or market toward a specific demographic. Search engine marketing, optimization and advertising initiatives are crucial to our hotels' success in this digital age and remember that mobile is king!Culinary Options are expanding beyond the standard hotel restaurant. Guests expect an experience at every level when visiting a hotel, so F&B should not be an afterthought (even if it is just a Grab n Go option). Locally sourced products (especially the concept of root to leaves) and unique experiences continue to be the rage but make sure to still have some mass appeal options for the wary traveler just in need of a good burger. Look for the confinements of a traditional restaurant to disappear being replaced by open social areas that can be utilized for multiple purposes. Specific menus for room and pool service will be replaced by either a full menu or unique delivery services as the open-eating concept expands to all areas of the hotel.Company Culture has become extremely important in retaining good talent. Jumping ship is easy to do unless employees are truly engaged and supportive of the mission. While job benefits are always a positive, they are now so common place that they cannot stand alone when it comes to employee retention. Take a note from how we treat our guests and create an environment where your team feels valued, cared for and respected. Then watch as your service scores reflect the work of a satisfied team. With minimum wage increasing throughout the country and a workforce more health conscious than ever, this trend of defining a positive company culture can be seen everywhere.Design, Brands and New Markets are blended together here because the pace of change is enormous and some changes meet right here. Minimalist design has certainly played a large role in some of the new soft brands as well as independent boutique hotels. Further, while it is likely not good business to focus design on one market segment, the growth of the millennial market, coupled with the growth of the Chinese market leaves us two very rapidly growing segments. Millennials became the largest generation in April of 2016 and will represent over 80 million Americans within 20 years. The Chinese outbound travel market is number one in the world and will likely hit 200 million by 2020.Next month, we will begin updating our forecast to reflect some of the political changes that might be impacting demand in our lodging sector. In the meantime, may you and your families enjoy a festive holiday season and an exciting New Year!
Article by Robert A. Rauch

Marketing Strategies for a Competitive Advantage in 2017

R. A. Rauch & Associates, Inc. · 7 November 2016
According to Geoffrey Moore in his book Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet, stock price is a measure of future potential based on present competitive advantage. Competitive advantage consists of two components, GAP and CAP. The first, GAP, is the distance between your hotel offerings and your nearest competitors or the competitive advantage gap. The second is CAP, the competitive advantage period, that is the projected period a company can maintain its differentiated position. In other words if a hotel company has superior products and significant barriers to entry, it has both a competitive gap (product differentiation) and a competitive cap (time lag for competitor entry).When developing a cohesive marketing strategy, both CAP and GAP should be incorporated to achieve success for sustained periods. With that in mind, here are some guiding principles to help you achieve a competitive advantage in your market.Distribution Dilemma and Marketing DollarsMany hotels receive reservations from third party sources, most notably online travel agencies (OTAs). It is important to understand the OTA booking process and what its impact is on the hotel. OTAs buy keywords that allow them to dominate the search process. This is largely due to their ability and willingness to spend marketing dollars. For example, if a guest attempts a search with the keywords "hotels in Scottsdale, Arizona," a search engine results page (SERP) on a non-mobile device will appear as follows:As you can see, the top four results are Google Ads and not surprisingly, these four ads are all for OTAs. While the results will vary based on the time of day and the number of people bidding on certain keywords, OTAs dominate the broadest searched terms.After scrolling past the four ad placements, you will see a Google Maps listing with three locations. These Google Local rankings are the results of a great search engine optimization (SEO) campaign as well as Google's local algorithm. Once past the map we get into the organic search results, as follows:This example is from the same search query, "hotels in Scottsdale, Arizona." The top three results are a great example of content marketing, i.e., these "Top 10" type posts are extremely engaging and useful for guests, which is why Google has given them such high priority in their organic ranking. If you take note of the websites these links are for, you will not be surprised to find out they are all OTAs and metasearch engines. Metasearch engines (defined as a search tool that uses another search engine's data to produce their own results from the Internet, think Kayak, Trivago or another aggregator) further demonstrate how OTAs control key real estate on SERPs because Kayak is owned by Priceline and Trivago is owned by Expedia. As an aside, Trivago has been climbing Google's ranks in related searches to hotels over the past 5 years.The Perfect Mix - Channel ManagementMore than ever it will be vital for hotel owners and operators to stay on top of the distribution landscape that is expanding beyond OTAs including popular sales vehicles such as meta-search, flash sales and mobile channels. Beyond simple awareness of the different mediums available to sell hotel rooms, hoteliers must know the cost and expected return of each distribution channel. Hoteliers must preserve rate parity and their brand by utilizing the most cost-effective distribution channels instead of using desperate measures to sell inventory.One option to consider is to search for a cheaper OTA. For example, why not use Airbnb? At 3 percent they are a much cheaper choice than the others. Sure, they are not a traditional OTA because they have non-hotels as their core business. Look for Facebook, Google, Amazon and Apple to join in on the fun in 2017 and beyond. Let's hope these new competitors in the OTA world price their commissions at levels closer to Airbnb.When creating a strategic distribution channel plan, direct to hotel and voice tend to be the most overlooked channels representing almost 40 percent of our business. Direct to hotel and voice includes walk-ins, calls directly to the property, groups and any other booking handled on property. These channels also happen to be the most cost effective for hotels by avoiding commission charges while having a higher conversion rate. To optimize profits the property needs to utilize guest service agents (GSAs) as an extension of the sales team. Give the GSAs tools to "close the sale" by training them to answer questions and provide guests with the information they are seeking.5-Point Plan to Book DirectThe best answer to improve the distribution dilemma is to get as many customers as possible to book directly with you. The chains have launched aggressive campaigns and Kalibri Labs has come up with a 5-point plan that will help hoteliers. Cindy Estes Green, the most articulate consultant I have heard on this subject, has determined five benefits that direct bookings via brand.com will have to make you more profitable:Lower the cost of initial customer acquisition. COPE (contribution to operating profit and expenses) is revenue after transaction related costs.Increase the knowledge of the guest to personalize his/her experience. Brand.com bookers create 17.9 percent higher net revenue than those coming from OTAs.Build on that relationship. The lifetime value of a guest is huge as the cost to acquire a guest for the first time is much higher than that of a repeat guest.Diversify your demand streams. It is a very high risk to have limited customer types and clients when a downturn comes.Improve guest engagement. When guests get what they expect, they become more loyal.Adapt or Get Left Behind - Messaging AppsThe industry has only recently adopted chat apps. WhatsApp, Facebook Messenger, Lola Travel and artificial intelligence apps are out there. WeChat, my favorite, is a messaging and calling app that allows you to easily connect with family and friends across countries. It's the all-in-one communications app for text (SMS/MMS), voice and video calls. Keep your eyes on Chatbots, by definition a type of conversational agent or computer program designed to simulate an intelligent conversation with one or more human users via auditory or textual methods. A number of vendors are trying to break through and become a leader. We use Zingle at a number of our hotels and the feedback from our guests being able to communicate directly with the hotel via text has been nothing but positive!The Science Behind Revenue ManagementRevenue management has morphed from the days it was first introduced by the airline industry in the 1970s to being a complex science today. Managers have always lowered prices to stimulate sales when demand is weak and have raised prices during peak demand periods. Hotels are now able to update prices for all future arrival dates to match market demands each day via advanced market intelligence applications. TravelClick has pace reports for transient and group demand that look at bookings one year in advance. STR is now offering intelligence looking at future bookings rather than solely historic figures. Today, it is time for the industry to price based on value perception and not just price relative to a competitor. Understanding the true demand in a marketplace is quite scientific.The hotels that need help with revenue management are generally focused-service hotels. Full-service hotels typically have a seasoned professional at the helm. One of the interesting things about these properties is that they are able to sell more than rooms and these assets (think spas, golf courses and restaurants) can be sold as well as the meeting facilities by new apps. I was involved in the planning stages of a new app that will sell all of those services as well as rooms by the hour (no, not for the reasons you're thinking, rather selling rooms when they are needed). Take a look at HotelsByDay or AsYouStay and you will see the opportunities for certain markets.Search Engine Optimization - Content MarketingThis is where content comes into play. Content that is well-written, includes verbiage that plays well within the search engines and, most importantly, is what users want to consume, will win over potential guests. Optimizing content marketing is different than just having command of the English language. It requires up-to-date knowledge on search algorithms and a vast understanding of what your online audience likes. This may come in the form of an agency or internal professional but basic search engine marketing (SEM) is one of the most effective ways to grow your business in an increasingly competitive marketplace. With millions of businesses out there all vying for the same eyeballs, it's never been more important to advertise online and SEM is the most effective way to promote your products and grow your business. Companies like Milestone, GCommerce and Screen Pilot can help get you started.Conversational and Social MarketingThe number of major social platforms has plateaued for the moment and they've begun to homogenize, e.g., Instagram Moments, and Snapchat LiveStories. There is limitless content being exchanged by the second all of which is a recipe for shorter-than-normal attention spans or what we call GADD (guest attention deficit disorder). Despite this, the potential is strong for your hotel property to enthrall even the most distracted social media user. Remember that content is king. Travel brands and companies have all discovered that high-quality content is the key to any successful social marketing campaign. One ultra-creative blog post or a string of fun Facebook updates is just a start. Committing to quality content that attracts travelers should happen with every Tweet, LinkedIn comment, Facebook or Instagram update and blog post.While it's smart to offer discounts and deals via social media to jumpstart your following from time to time, you shouldn't post these too often. Instead, your daily strategy should be to provide compelling content that stimulates more interest. This coupled with "wow" customer service that creates positive reviews is what will help you build and retain your reputation.While social media is not a panacea and does not yet close many deals, travelers clearly rely on the information to help them choose a hotel. Moreover, we are entering a period of time where reputation management is also becoming a science. Studies have shown that 90 percent of travelers trust recommendations from their friends and family more than any other form of advertising. Additionally, 70 percent of travelers make decisions based on reviews and responses on review sites. This field is growing as technology companies work to differentiate themselves.In 2016 half of the travel industry is using social media as a way of generating revenue and bookings. The majority of hoteliers have jumped onto the digital bandwagon to engage with customers. Social media has become a significant factor in a website's ability to rank. Content that has a social connection to a user, meaning someone you are linked to via Facebook, Twitter, or any major social network, is prioritized within their SERPs. Hotels can no longer afford to linger over adding social media to their marketing mix. It's now a necessary element of traffic-driving success.Hotel guests buy based on a loyalty to your business, not just the price. Loyalty is earned through superior "wow" customer service which creates a spectacular reputation. The content that is provided in your relationships with guests via social media should embody that stellar service and reputation. It's not about the discount you offer, it's about the passion for customer service that you provide, the knowledge of the market you have and ultimately the value that you have created both inside your four walls and in cyberspace.Data and Analytics - What Should You Look For?Your hotel has access to lots of data but the question is, do you use it? It is very costly to implement a comprehensive data analysis plan, especially across multiple hotel brands where systems cannot be integrated. However, each hotel has more information about its guests than ever before. Prior to being checked in guests can now provide their favorite room types, room temperature, foods, TV shows, pillows and more. This tailored guest experience currently exists in new high-end hotels but it will soon be available at every hotel. Utilizing this information and adapting it to our targeted advertising campaigns on social media and search engines can produce much higher returns on investment.I use data to understand price sensitivity in each market. When is it better to take the soccer team of young adults four to a room? What market segment is really better for this hotel? With occupancies at peak, it is paramount to our success that we optimize rates to offset the rising costs of labor, healthcare and more. Taking all this data into account when building our marketing strategies will help us attract guests that are perfect for our hotels. In turn, this produces a better guest experience that results in higher reputation scores. It is a win-win!To Sum Things UpMarketing is often an afterthought within the hospitality industry and where there is focus, it is pigeonholed to specific buzzword-oriented areas with hopes of creating a temporary boost in traffic translating into a temporary boost in bookings. This reactive nature is, unfortunately, a product of hospitality, an industry that lives and breathes off operations to achieve success. But marketing is meant to be coupled with a long-term strategy that guides the branding, voice and growth of your hotel over the next 10 to 30 years.The OTAs embraced marketing in today's Internet age before hotels but that does not make them the enemy. With the proper marketing strategies in place and a good understanding of your channel mix, hotels can work to regain ground on SERPs and be setup for future success thanks to CAP and GAP principles.To a great 2017!
Article by Robert A Rauch

The Misconceptions of Millennials and Meetings

R. A. Rauch & Associates, Inc. · 5 August 2016
There are a number of misconceptions floating around the hotel industry about our largest growing demographic, the Millennials. This stems from an overgeneralization of the key trends that they have brought to the forefront of our industry. The Millennials, generally categorized as those born between 1980 - 1995, are a maturing group that prizes the use of technology for efficiency and ease of doing business. This is why it comes to the surprise of many that they actually prefer face-to-face meetings and events just as much if not more than previous generations. Often characterized as having their eyes glued to a mobile device, Millennials need to not be pigeon-holed so quickly in the minds of meeting and events planners.Networking is prized as a key factor in one's professional growth for Millennials. In today's competitive job market, a college education often does not translate directly into job opportunities, so Millennials have taken it upon themselves to expand their network and create these opportunities. Self-education is another big reason events are becoming increasingly more attractive. Learning industry specific information from a professional speaking at these events can help one gain the knowledge needed to give an applicant a competitive advantage in an interview. As hoteliers, we need to ensure our meeting and event space remains attractive to this demographic for continued success.So let's get the obvious out of the way. Technology. Want meeting or event space to stand out to Millennials? Ensure that technology is up to date. This includes good quality high-speed WiFi, projectors that do not require bloaty software downloads to connect to them and numerous power outlets that are easily accessible. If a VGA cable is the only method of connecting a laptop to a projector, then we have a problem. We should constantly be checking our equipment to make sure it is still functioning properly and have a thorough understanding of how it works. If our equipment is not easy to use, we should invest in upgrading it as soon as possible because prices have gone down considerably over the years.Food and beverage can be a huge selling point for a potential Millennial client. Gone are the days where frozen foods are acceptable. Quality product is expected at every dining occasion. Healthy options are also prized among this demographic. While comfort foods are still appreciated, ensure our food and beverage team is keeping up with the latest healthy living trends and adjusting their menus accordingly. Let your chef be creative if you have one! Sometimes some of the most inspired ideas stem from thinking outside the norm.When Millennials are looking for the right place to host or attend their meetings and events the destination as a whole is a high contributing factor in their decision making process. Does the hotel have a great bar where they can grab a happy hour drink after the meeting? As we discussed earlier, networking is everything to Millennials so let's make sure to highlight any amenity that promotes it, even if we think it is not relevant to the meeting or event. If our hotel is limited on amenities, then we should provide information on our local area and anything that could be attractive to a first-time visitor. Millennials work hard but they also like to play hard so even if they are looking to host a business meeting, they will also be exploring what to do once their meeting is finished.With the market being highly competitive, below are some potential differentiators that today's Millennial meeting planners might like to utilize:Use non-traditional spaces as opposed to "meeting rooms"Be willing to move furniture around to create flexibilityUse digital dry erase boards that can be connected to a laptopChange up the food to local, authentic cuisine that does not mirror standard hotel fareUse audience polling and real time analyticsCreate an activity that benefits the local communityWhile some of the over generalizations about Millennials have roots that are true, we need to do our best to not assume things when it comes to this generation. We must avoid the common misconceptions and realize that just because technology may be the word we associate most often with them, Millennials actually prize face-to-face interaction at meetings and events just as much, if not more than previous generations. The common fear that this tech-savvy generation will lead to a decline in meetings and events is simply not true. Live video streaming may have built upon what video meetings first brought to the table, but nothing will ever replace genuine human interaction.Prepare yourselves as we are in the final stretch of 2016 and we have heard rumblings of an uptick in group sales for August and September already. While calendar comps can have an impact on year over year business and the fourth quarter could reverse an uptrend, news of increased group bookings is always welcome! Use this information to ensure you are capturing your fair share as we come out of the summer months and finish the year out strong.
Article by Robert Rauch

Midyear forecast: Will a slow start continue?

R. A. Rauch & Associates, Inc. · 6 July 2016
and mainly Airbnb--has yet to really affect the hospitality industry as most of the impact has been during the aforementioned high-demand periods.Fallout from minimum-wage increases and changes to the overtime laws for salaried workers will begin to be noticeable in 2017 and rising health care costs will negatively affect profits. As mentioned above, we are lowering our U.S. RevPAR Forecast to 3.75%, down from our original 5%, however, there are no meaningful changes in fundamentals going into the summer of 2016. Supply-and-demand dynamics are strong in most markets and rate growth should be solid all summer.The bottom line for hotel owners is sell now if you do not plan to hold for a few years as next year will not be as robust.Trends to watch in 2016Marriott International's pending acquisition of Starwood Hotels & Resorts Worldwide as well as the Expedia acquisition of Orbitz and HNA Group's proposed Carlson Hotels deal are harbingers of a consolidation coming in the hotel industry. While it is too soon to determine what other brands or companies will decide to come together, it is clear that we are entering the age of consolidation as the economy is clearly in the mature stage. Hotel values may have peaked nationally as real estate investment trusts are not actively purchasing since their stocks declined and the runway from 2013 to 2015 is shorter. However, values will not decline sharply this year. Private equity is in abundance, 2016 still has a positive, election-year outlook and foreign capital continues to find the U.S. lodging industry attractive.Although we are coming to the end of our current economic cycle, it does not mean we are entering a recession. We are currently still forecasting between 1% and 2% growth for 2017, but as hoteliers we need to prepare ahead of time for this pullback after several years of fantastic growth. Invest in upgrading your product while profits are strong and interest rates are low so you can keep up with the new supply as we enter this soft landing. With the current geopolitical threats around the world, any unforeseen event could tilt this soft landing toward a more difficult economic environment.Strategies to SucceedDigital Marketing--Today, there is no excuse to rely on gut instincts in developing an operating strategy. Fact-based decision-making is much easier now that systems are available for general managers and marketers to improve their business acumen. Technology, data and analytics are all improving, and teams must not work in a vacuum, meaning that synchronized decisions with all departments are paramount to success. There are business intelligence and analytic applications that, coupled with a revenue-management and reputation-management system, can be deployed to automate the information process.The online travel agencies have been considered the enemy long enough. Consider them a friend but do not rely on them, as the goal must be to increase direct bookings to your property. Think of them as strategic partners that make up less of your demand component going forward. Now is a great time to start testing the waters and see what works in revenue management and digital marketing. Be innovative and see what drives new revenues and what does not.Content Creation--Remember that when content is created it must be created for different devices. Mobile is king! Ergo, fine tune your content by channel and medium.Content must be fresh and original as well as valued by your readers/guests. Marketers must also work with revenue managers so that the content targets the guest that is appropriate for the hotel. Customer-acquisition costs that contribute to the the bottom line--including booking engine transaction cost, ad spend and all other costs associated with customer acquisition--are very high and will certainly continue to be high if a large number of those guests do not return. Repeat guests are much easier to get back than new guests. Experience during the guest stay as well as communication before and after check-out is critical.Knowing your audience, keeping a fresh web presence and understanding your channels will go a long way toward successfully marketing to both new and repeat guests. Desertion management, which is a way to address the guest who does not come back, can allow you to have much better reviews while retaining guests who were going to leave and never come back. In other words, if you do make an error, catch it and make a comeback!Revenue Management--Demand forecasts by market are good but the real question is "What are the booking patterns in the market?" Also, what future dates are already selling and at what pace?Do not rely exclusively on competitive market intelligence as cancellations may not be captured in time for you to react. Sharing economy or vacation rentals might affect the market, especially during high-demand dates. The truth is, no matter how good your revenue management system is, an experienced user wins in every market.Analytics--Today's analytics can assist hoteliers in providing guests with personalized and responsive experiences. The ability to target the wants and needs of today's travelers is so far beyond that of just a few years ago. So long as the data we have is not abused, we have huge opportunities to provide incredible service. To ensure this, if you do not have a dedicated customer experience team, now is a good time to create one.Enjoy the summer--it will be financially rewarding for those who are prepared to capture high rates while we can.
Article by Robert Rauch

A Slow Start, But Will It Continue?

R. A. Rauch & Associates, Inc. · 3 June 2016
it will be financially rewarding for those who are prepared and capture high rates while we can!
Article by Robert Rauch

Sharing Economy - A Hoteliers Comprehensive Review

R. A. Rauch & Associates, Inc. · 3 March 2016
With a $25.5B valuation, Airbnb and other short-term rental companies are avoiding taxes and regulations. In addition, Airbnb is big business. According to a recent study by Penn State University, in New York City, 72 percent of the rental units are illegal and in San Francisco, 18 percent of their revenues are derived from "superhosts" who have multiple units. To date, it appears the major cities with significant Airbnb impact are New York, Miami, Boston, DC, Chicago, Austin, Los Angeles and San Francisco.In these and in other cities, Airbnb also impacts the housing industry, creating both a shortage of housing units and potentially an increase in rents from those units remaining in the normal apartment rental pool. Further, as the economy softens a bit in 2017 after an election year, will Airbnb's supply increase, coupled with the hotel supply pipeline, have a more material impact on occupancy and hence rate? Will corporate users find their way to Airbnb in abundance next year? As a large company, the question is, should we the hotel industry insist on Airbnb paying taxes and managing their "hosts" to avoid illegal hotels?Rauch's Airbnb ReviewOn a trial basis, I decided to book an Airbnb rental unit. After booking, I was asked to please not tell any of the other apartment dwellers that I was an Airbnb guest. It is clear that many buildings have a minimum stay of 30 days so my 1-night Los Angeles stay would be either illegal or at the minimum, frowned upon. I received a clean apartment but had no way of knowing whether or not the sheets or towels were freshly cleaned for me as they were not folded neatly as we do for our hotel guests. The arrival and departure process was strange as I never met my host though she was readily available via text/phone. I had access to reviews about the host but not necessarily about that apartment per se. Further, and perhaps most importantly, I was asked by the host to enter the apartment building by following a resident in and following them on to the elevator so that the resident would inadvertently allow me access to the floors. Then the unit I was staying in was unlocked and I was able to access the unit key, access FOB and parking pass if needed.The truth is, after having heard from Troy Flanigan of the American Hotel & Lodging Association (AH&LA), I am convinced that Airbnb is a big business that in essence avoids the responsibilities of being in business and puts consumers at risk be it in regards to safety, background checks, health or fire standards. Further, while I think we should embrace Airbnb as a legitimate competitor, we are not to be compared to the taxi industry, a group that attacked their new competitor, Uber, at every turn. We should work with Airbnb on solutions for leveling the playing field without antagonizing them. Think of them more as an online travel agency, a combination competitor and ally. The hotel industry is an organized, highly regulated industry with high quality standards and an easy way to determine bad products-poor reviews and franchise removals for a couple of ways along with the highly regarded AH&LA as our main association.Taxis, Uber and LyftThe taxi industry is a disaster so Uber trounced them on arrival. In my quest to understand how bad it is, I took two taxi rides, one in Phoenix and the other in San Diego. Neither driver was pleasant and there is no way to review your experience unless you want to send a comment card via mail to the Airport Authority. Further, both drivers asked for cash saying the credit card machine did not work. Really? For those who use Uber and Lyft, we know there are problems (first time drivers who are either lost, not tech-savvy or worse yet, both) but generally, notwithstanding surge pricing, it is a good experience.In San Diego, Uber is allowed at the airport. In Phoenix, it is not as airport officials claim Uber will not provide background checks on drivers to the airport authority. Uber, along with its main competitor Lyft, is part of the new job creation of "independent worker." Airbnb frankly is in the same boat. Is it a full-time job to be an Airbnb host? Yes in some instances, no in most. How about working for the larger companies that actually run illegal hotels by having say 10 rooms in an apartment? So will Airbnb end up as more of an online travel agency (OTA) or a direct hotel competitor or both?We probably need new rules for this sharing economy. Labor laws have not kept up with the needs of businesses and employees. In America, you are either an employee or not. With contingent employees from temp firms, part-time employees and sharing economy employees like Uber and Lyft, what we need is a new category of independent worker. According to a study by Harries, Krueger and Cramer highlighted in the Wall Street Journal in December 2015, the "Uberization" of work creates an imbalance of hours worked from week to week. This creates real challenges for everything from health care to minimum wages earned (does a driver get paid for waiting?) and more.OTAsThe large OTAs (think Expedia and Priceline) are able to exert significant influence over hotel choices that are available to the customer. Customer ratings can be impacted by our "walk" policies, commission structures and other subjective factors. Airbnb offers a much lower commission rate than either of these two main OTAs. This might get independent hotels and B&Bs to list their properties with Airbnb.Hotel companies currently need OTAs as they represent 15 percent of the market and that will increase as the economy softens a bit in 2017 after election year economics plays out. The big brands have clout in competing for market share. The Marriott/Starwood merger of 2016 produced another monster entity and we might see additional mergers of epic proportions sooner rather than later. This leaves independent hotels struggling to fight to attract users to their own websites. After all, relying on OTAs increases operating expenses at a time when average rate growth will begin to slow and new supply will enter the equation. Franchise fees are now double digit costs which give independents that slight advantage but they will have to spend those "saved" dollars on marketing.The Bottom LineThe combination of Airbnb, new hotel supply, an economic slowdown and potential global economic decline put us in jeopardy at the first signs of an event of any magnitude. As individual hoteliers, we must protect ourselves with a powerful digital presence to compete. As an industry, we must strive for a balanced approach to the new realities of mega-companies in our industry. Unless we are Marriott, Hilton, IHG, Airbnb, Expedia or Priceline, we are the little guy. I like our chances of survival and success but it will not come without continued hard work and awareness that this industry is not the art it was but rather the science it has become.
Article by Robert A. Rauch

Keys to Success: Employee Satisfaction

R. A. Rauch & Associates, Inc. ·16 February 2016
2016 is going to be an amazing year for the hotel industry as we previously forecasted. We have also covered the Top 10 Trends of the year to help us stay ahead of the game. But one of the additional keys to success in the coming year is employee satisfaction. Without a satisfied hotel staff we have no foundation upon which to build.At the recent Marriott owners meeting I attended in December, when asked what will make Marriott hotels successful, Bill Marriott said that the key to success at a hotel is to take care of our employees because employees will in turn take care of our guests and our guests will come back. I could not agree more so here are some thoughts on how we should walk that talk.LeadershipStrong leadership is one of the areas we focus on within our hotels to promote a positive environment. Attitude starts from the top and trickles down to everyone else. Good managers/supervisors with a hands-on approach can build teams up and help grow individuals. When employees have someone to lean on, learn from, and that listens to them, they are much more satisfied and their quality of work significantly increases.As an example, our front desk staff has some of the most challenging work on property as they interact with our guests more than anyone else. This makes their jobs extremely important to the success of our hotels and as such, their satisfaction in the workplace is paramount. Whether it is assisting with a guest issue or covering the front desk while an employee is on break, it is the littlest things that can make the biggest difference.As most of us know, employee satisfaction extends well beyond front desk agents to housekeepers, maintenance staff, and all other employees be they managers, supervisors, or line level employees. What could be perceived as the smallest interaction between an employee and a guest could create a lifetime of memories translating into a loyal guest, referral business, or an excellent TripAdvisor review.The phrase "that's not my job" is a killer for a hotel, restaurant or frankly any service business. Likewise, a title does not limit one's ability to assist in other departments. Seeing a General Manager cover the front desk or a Director of Sales helping room service clear trays may not seem significant on the surface, but it sends a unifying message to the entire team that we have each other's backs. Teamwork breeds satisfaction.Recognizing the team for doing a good job is equally important in overall employee satisfaction. Individual accolades are always nice for a positive guest comment or a job well done. Setting goals for the team as a whole creates key performance indicators (KPIs). Whether these goals are for perfect sells in a given period or reaching a certain TripAdvisor ranking, these KPIs give the team something to strive for that can then be celebrated together as a team once the milestones are achieved. An ice cream social or bringing in lunch is not that expensive and will pay dividends in terms of increased revenue well above and beyond the cost of these functions.As was discussed in Ken Blanchard's One Minute Manager, leadership behavior that acknowledges someone for having done something right will stimulate the team as a whole. Unfortunately, many managers see their role as correcting behavior only when it is wrong. We have all worked for the manager that was always on our case when we made a mistake, was slow to give praise for having done something right and rarely said, "good job." Good Leadership is always noticing when someone does something right and makes mention of it. Blanchard also promoted "management by walking around" which in our business refers to checking restaurant service in process, inspecting rooms and working "in the trenches."In Service America by Karl Albrecht and Ron Eke, "moments of truth" was a phrase coined by Jan Carlzon, then president of Scandinavian Airlines, to reflect moments of customer service interaction. As such, every service encounter that a team member will make and every expectation that leadership has must be communicated and reinforced. When a team member has clear expectations from leadership, job satisfaction greatly increases and service scores soar.Labor CostsFiscal health is another leadership responsibility item that requires guiding the organization toward profitability. Line managers and department heads sometimes lose sight of the fact that their decisions have financial impacts on the business. Leadership must always be caring and compassionate but today's worker compensation costs, insurance costs, energy costs and labor costs may cause a business to fail. If that occurs, human conditions like layoffs, bankruptcy, foreclosure or hostile takeover will be much worse than the stress of dealing with and reigning in expenses.One of the easiest ways to add stress to the team is by understaffing the hotel. Labor is one of our biggest costs as hoteliers and while we need to be diligent in managing labor levels, cutting hours only to save a few dollars leaves a heavy burden on the team and may actually be detrimental to the hotel's financial performance in the long run. A stressed out team is not only bad for internal morale but also noticeable to guests. Alternatively, an adequately staffed hotel with satisfied employees is not only evident to our guests but tends to be acknowledged via social media platforms that provide terrific exposure for the hotel.We are in the service industry. This means that despite the cost of labor and benefits, we need to provide good service to our employees as well as our guests. Employees who are satisfied at work, show up with a positive attitude, receive strong guidance, have clear expectations and are recognized for their efforts convey these attributes to our guests and provide a substantially better service experience. After all, employees want to feel valued, cared for and respected. Give them that and they will go above and beyond every time. By ensuring that our service is top-notch, we are setting our hotels up for success not only in 2016, but for years to come.
Article by Robert A. Rauch

A Soft Landing in 2017

R. A. Rauch & Associates, Inc. · 5 January 2016
good luck in 2016! It will be a great year so enjoy it!
Article by Robert A. Rauch, CHA

The Transformation of the Hotel Industry from Art to Science

R. A. Rauch & Associates, Inc. · 8 July 2015
A Quick Summary of Hotel PricingRevenue management is the set of techniques that determine which reservation requests to accept and which to reject to optimize revenue. The principles of revenue management had their origin in the airline industry back in the 1970s, but the concepts are equally applicable to hotels, restaurants, attractions and recreation venues.The airlines used mergers and supply constraints to avoid commoditization. They simply owned the routes they wanted and pulled aircraft off the runways, which in turn filled flights. Hotel brands, led by Marriott and Hilton in the 1980s and 1990s, delivered a myriad of new brands such as Homewood Suites by Hilton, Hilton Garden Inn, Residence Inn by Marriott and Courtyard by Marriott. By the 21st century, every major hotel company had a verticality of brands from budget to full-service hotels. Online Travel Agencies, (OTAs) began to sell hotel product at deep discounts and this led the brands to negotiate fees with the OTAs.Today, it is time for the industry to price based on value perception and not just price relative to a competitor. Understanding the true demand in a marketplace is quite scientific.Know your Customers' Behavior and Decision ProcessPackaging is the answer to the commoditization conundrum. The large amount of demographic and psychographic information available about the make-up of today's traveler requires analytical skills and creativity to correctly respond to the marketplace. Product choices by consumers are influenced by a model of the consumer decision process. There are two risks that hotel executives must overcome to achieve success in the marketplace:Performance Risk - the chance that the product may not satisfy the consumerFinancial Risk - the monetary loss from a wrong decisionAs for performance risk, loyalty to a chain is a major factor in product choice by consumers. Hotels allow guests to accumulate points that may be exchanged for guest stays and upgrades. The consumer's perception of the hospitality company and what it stands for is paramount to the success of the venture. Product quality must be exceptional, service must be at the level of "wow" and there must be a compelling value proposition for the consumer to choose your business.As for financial risk, loss of market share is difficult to regain. Desertion Management may be the single most important marketing strategy in today's market. Consistent staff services and attitude make a significant difference in competitive advantage in every market segment. Hotels that can train and motivate their team members will have a much better chance of getting repeat business. We will further dissect desertion management later in this article.Sample Formulas for SuccessMy father, Richard A. Rauch, Ph.D. created a multivariate model of consumer behavior that applies here in part. As such, I am borrowing key facets of this model from his work in the field of retailing in the 1990s:A = B x W x NA= Attitude toward the businessB= Belief of a consumer that the business possesses a particular desirable attributeW= Weight of importance of the attribute to the consumerN= Number of attributes important to consumersKnowing the millennial traveler, understanding that international travelers represent the single largest growth market in terms of lodging demand and leading your team with strategies that incorporate the trends occurring today is the recipe for success. There are a few key trends that must be monitored and engaged. These include reputation management, innovative technology (think smart phones for both mobile web access and guest check-in) and the sharing economy. Airbnb is becoming a real player in the lodging demand mix.The Science of MarketingDigital Marketing is required to both acquire and retain guests. And believe it or not, only a real quality revolution gives you the competitive edge, because as mentioned above, brand loyalty is very limited in today's millennial dominant hospitality market. Since hospitality businesses do not hold customers captive, the only way we can prevent "desertion" is to continually outperform the competition. In addition, by soliciting feedback from the "deserters" or former customers, we can dig out the weaknesses that really matter. As Bill Gates says to his executive team, "tell me about the problems, not our successes."The growth of mobile is a game changer in that the amount of time between looking, booking and staying is reduced. And everyone has a phone that doubles as a camera for instant social media "Kodak" moments. Customer experience or "CX" today allows us to drive a CX-friendly culture through interconnection and innovation. Anyone attending a conference today will be exposed to the trends of personalization, big data, omni-channel/multichannel campaign management, marketing automation and location-based services. Measurement of all of these will dictate what gets utilized.Real time marketing and providing content on an ongoing basis will dominate the industry. Although it would be unwise to discount the impact of traditional marketing, real time marketing must take place on a regular basis and incorporate guest-generated content, especially via social media. This must be a crucial component of the marketing mix. In addition, Facebook pages need to take advantage of custom apps that can highlight a hotel's unique features, characteristics, and charm. Whether it is Facebook or another social media outlet, guests should be able to contact the hotel with an expectation that they will receive a response in a timely manner.Video campaigns on social media, when done properly, are proving to be successful for hoteliers looking to generate guest engagement. We are anticipating the use of video campaigns this year and have already introduced the use of Flip.to to engage future guests in social media conversations. Flip.to allows for hotels to connect with guests from the moment they make a reservation and to create a unique experience upon arrival. By connecting with the hotel, guests are able to share with their friends and family about their upcoming trip. Flip.to then creates a custom experience for their social media connections that can help lead to future bookings.The Science of Hospitality Permeates All Areas of OperationsMillennials have become the fastest growing customer segment within the hospitality industry. Lobby bars and hotel restaurants are wide open with combination work, play and eat/drink spaces designed with this millennial customer in mind, one who is a "party of one" but "hanging out together." Millennials also have no problems speaking up. If what they are seeking is not handled to their liking, they will turn to Twitter, Facebook, Yelp or TripAdvisor to voice their complaints.Moreover, millennial travelers do not exhibit the same loyalty to brands as their parents do. This opens the doors for independents and makes it even more difficult to keep that guest returning. Choosing partners from the attraction or transportation side can make lots of sense, especially if the guest perception of the partner is both in sync with your values and of a perceived high quality. Most importantly, the formula above must be adjusted for each psychographic market segment.Customer service must include enabling guests to be self-sufficient. As an example, if a guest wants to find information using his/her smart phone, providing an app or mobile website that accommodates that information will appeal to many. The rise of this digital traveler requires the hotel industry to balance the expectation of personalization while enhancing the need to remain independent. Customer service must also be genuine and provide great, high quality recommendations delivered by a truly caring team member. "WOW" customer service is the only way to ensure repeat business.International visitors have been talked about for two years but these travelers are here now. International leisure travel has increased markedly due to the visa waiver program introduced in 2012 and this is moving more international tourists to travel to the United States. With the new "10 year visa" agreement between the U.S. and China signed recently, we will be getting more than our fair share of Chinese travelers. Considering the average Chinese traveler spends a week in the U.S., huge incremental demand is created. These Chinese travelers average spending over $1,000 per day when traveling abroad, excluding accommodations.Booking more profitable business is critical as more revenues result from strong increases in occupancy levels, average rates and revenue per available room (RevPAR). This may suggest more profits, but the growth in distribution costs as well as other operating costs such as health care and the minimum wage increases can stunt profit growth. While the revenues are coming first and foremost from RevPAR growth, there are additional ways to increase both revenue and net income.One way to improve net income is by less reliance on the online travel agencies (OTAs). By directing guests to your hotel's website and telephones, the savings are abundant. The digital distribution costs are soaring and the number of players entering the market to compete with OTAs is rapidly rising (think Google, Facebook, Apple, TripAdvisor, Amazon and more). The key is to negotiate with your distribution team (yes, the OTAs can be an integral part of your team) and reduce your commissions. Then make certain that you have a strategy in place to earn the repeat business of every single guest...and get them to book direct next time. Think incentives!Innovative technology, mobile check-in, and seamless connectivity across platforms and devices are no longer the future, they are the present. Today, mobile apps are being used as everything from a digital concierge to accessing big data. Geo-location can make it easy to sell guests something that is literally right in front of them. In a recent survey by Software Advice, guests desired local restaurant and hotel restaurant discounts when looking for deals as well as maps with coupons for other deals. Most importantly, when looking at the face of a changing consumer today, technology innovation is paramount. As most have heard, Starwood and Hilton will be having guests check in via mobile phone later in 2015.The sharing economy is a new reality hoteliers are still grasping to embrace. Over the past few months we have seen jurisdictions attempt to regulate this reality as evidenced by the San Francisco City Council implementing new legislation providing a legal avenue for Airbnb.The classic model of competitive advantage is Michael Porter's Five Forces shown below. This is still a useful model for the hotel industry. The most interesting part of this is the "substitute" portion of the grid...this is what Airbnb is all about and they will have had a huge impact on our industry by the time most people wake up to it.1While the Santa Monica City Council has decided to enact new regulations to ban rental sites that offer short-term vacation rentals in the city and other jurisdictions are aggressively looking to manage this phenomenon, Airbnb is a powerful force.Where To Go From HereThe transition from art to science in hospitality has caught many by surprise and unfortunately, these are the people that are falling behind. It is crucial that you understand the hospitality industry as it is today because if you continue to only focus on the art, you will be missing out on capturing more business and increasing your profitability.

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