GuestSpan Speaks!

I’ve talked to a lot of hotel managers and owners, and when it comes to new technology the biggest barrier is not actually price – it’s installation.  Literally, you can offer your new gizmo for free, and they’ll turn you down; but when you tell them how easy installation is, they seem to perk right up.  This is why software-as-a-service (SAAS) is so cool: all the hard parts have already been handled.

Take GuestSpan’s digital concierge, iRoom, for example.  iRoom takes ten minutes to install at a property.  And by ten minutes, I mean it takes ten minutes for GuestSpan to call your property’s wireless administrator, email them the web link, and confirm that it’s running correctly.  Poof – iRoom is now bringing local information to all your hotel’s internet users, and you spent that time drinking coffee.

Do I need new equipment for iRoom?

If you’ve got wireless internet, you’ve got iRoom.

Does it use up any of my bandwidth?

Nope.

What if we want to add our own content, or make recommendations to our guests?

Great! Send us your content, and we’ll have it updated in about ten minutes.

How will you update new information?

We manage live data feeds that automatically update at every location.

What if iRoom is temporarily out of service for any reason?

Your internet is still running; your guests simply move on to their emails.

What about information security?

We have supermen protecting our stuff, and hackers can’t get to you through us anyway.

What about hardware security?

Our gear is stored in a secure location in the Western United States.  You can have a tornado, and you’ll still have iRoom.

What about terrorists, aliens or apocalyptic fire storms?

See above about our supermen.

What about –

What about –

What about –

What about –

Relax, it’s handled.  Now go to that mix-n’-mingle your admin scheduled for you.

I have to pull the MBA card for a moment and respond to Stephen Hennis’ July 20 blog* about room rates and occupancy. The main gist of his blog is to prove that dropping rates to increase occupancy can actually hurt your RevPAR – which is a good message, because it’s correct in theory, and I’ve seen a number of hoteliers hold prices to their benefit.

For the record, I think he’s 85% right.

How Stephen is right:
Aside from the data analysis in his blog, there is the issue of cost structure. The folks in the supply chain world have a term called “Best Operating Level,” which basically means the level of production with the least per-unit cost. In the hotel world this translates to occupancy percentage. I’ve talked to a number of hoteliers, and most of them tell me their optimum occupancy is around 70-80%, which I have illustrated** below:

If you use the market demand curve as a guide for pricing, you can determine an estimated window of profitability that (generally) peaks at that best operating level (see below).

So Stephen is right – it doesn’t matter where the demand curve falls, dropping your rates to increase occupancy will cause you to lose money. And since so many hoteliers wildly push for sold-out nights as a starting strategy, holding rates and scaling back to a more profitable 70% occupancy is certainly a smart play.

Now, for that 15% of wrong:
Of course, if demand drops so low that you can’t operate above your break-even occupancy level, you’re in enough trouble that holding rates won’t do any good. So you can hold, but there has to be a better option than continuing to bleed out of principle. This is why, in both good and bad markets, I’m a big fan of a simple, two-step process.

*Increase demand by adding value, then

*Regulate occupancy back to optimum levels through pricing.

Increasing value is the trick of course, because so many value-adding features are so cost-intensive; and who can really afford to spend money when the money is tight? I confess I hold glibly to the idea that the best values can cost little or no money at all. For example, organizing communications to increase service response time can increase customer satisfaction without costing a dime. It’s a great strategy, and it won’t come at the expense of your room rates.

Shameless, self-promoting plug: GuestSpan’s iRoom has a quantified positive impact on customer satisfaction, and offers a cash-positive return on investment. Check it out at www.guestspan.com/iRoom!

*Stephen’s Blog can be read at http://www.hotelnewsnow.com/blog.aspx?PageType=Blogs&a=117&b=3704

**The illustrations are based on Bob Bobson’s Sleepy Mountain Inn, a cozy boutique at the base of the Misty Mountains, near the Mines of Moria.

Ten years ago, “bringing the hotel industry into the 21^st Century” meant finding a way to patch your Springer-Miller System together with your GuestWare and your Delphi – and when the IT department had trouble integrating the three, you had to hold inter-departmental meetings to coordinate everyone’s data.  This was better than the old-school paper trail?  The argument was always a long shot, because old-school managers have all the time in the world see if a new technology will float.

We’re now ten years into the 21^st Century, and some hotel properties are still using paper to manage their guest accounts – and the computer monitors at the front desk might have LCD screens, but come behind the counter and you’ll see more DOS and dot matrix than most hoteliers would care to admit.

Historically, the hotel industry side-stepped the “new technology imperative,” and waited to see what would happen.  Most people would be tempted to criticize hoteliers, because now they have a lot of old-fashioned infrastructure.  However, what they don’t have is a legacy burden of obsolete technology.  In a market as mature and competitive as the hospitality industry, “incremental increases in profit margin” are simply not a compelling argument.  If you want to introduce new technology into their world, you’ve got to be willing make a serious impact; otherwise it’s not worth taking seriously.

Well…how serious does “zero impact on existing infrastructure” sound?  That’s the kind of magic that software as a service (SAAS) can make for the hotel industry.  All hoteliers had to do was to wait until technology caught up to them. SAAS now provides a way to access 21^st Century technology without such a large capital investment.  Want a “hotel in a box” or “telecom in a box”?  With SAAS, you don’t even need to buy the box – you just plug into it.

Here are five great examples of SAAS technology in the hotel industry:

Again – 21^st Century technology, zero impact on infrastructure…I think the waiting is done.

Yesterday Chris and I attended a coaching session put on by FundingUniverse in preparation for their speed pitching event on June 4, which we will be participating in. Kent Thomas, CEO of CFO Solutions, made a presentation on how to handle deal specifics and offered his 10 Tips for Raising Capital. I thought they were good so I am posting them here for your enjoyment.

1. Use Your Own Money First-even though the prevailing thought for some time has been to build a company on other people’s money it is a sign of confidence and preparation to investors that the entrepreneur has some skin in the game as well.

2. Friends & Family- If mom won’t invest in you why should others? Now, there may be many reasons that friends and family don’t invest ranging from their financial situation to holding dilution to a minimum, they should at least be approached.

3. Act Like It’s Your Own Money- Kent said that during the dot come bubble entrepreneurs were spending large sums of money irresponsibly. That is the reason the bubble burst. Being able to give investors a detailed report of where any money to date has been spent will tell them if you are treating the money as your own.

4. Market Research- This is a big, big problem for entrepreneurs. Know your market. There are many free or cheap options out there to allow companies to conduct some basic market research that will give them valuable insights into their market. For instance, Chris and I have launched a survey to travelers asking for their feedback on our idea and have spoken to and continue to speak to hoteliers to get their feedback.

5. Cash Flow Projections- If someone were to invest, how long would their money last? Knowing your monthly burn rate and how long money will take you is key. If you are wrong or worse, don’t know, then it is likely these same investors are going to have to put more money in or help you raise more much sooner than either of you expected.

6. Valuaton-Get Real- Something Kent said repeatedly was “Put yourself on the other side of the table.” Investors are looking for a 10x return on their money. To achieve that they are going to need to end up with a substantial enough equity stake so that even if they are diluted by future rounds of funding they still hold enough to realize that return. He said the sweet spot for most investors is between 20% and 40%.

7. You’re Responsible- In running a company entrepreneurs can delegate a great many things. But one thing they cannot delegate is fundraising. Investors want to see a dedicated, passionate entrepreneur behind their investment.

8. Smart Money- Look for money that comes with more than just dollars. Investors that bring expertise or insight into your particular industry are the best ones. Also, just as investors will be checking you out, make sure you check them out before accepting anything.

9. Accounting Records- Know your books. It is very frightening to investors when entrepreneurs are in the dark when it comes to accounting. There are smart people and services out there to help out those who aren’t financial geniuses, but don’t neglect this part of your business.

10. What’s the Offer/Instrument?- Come to investors with a deal in mind. They aren’t going to negotiate against themselves so don’t ask them for a number, they will just move on. Know what amount of equity you are selling for their money or what type of instrument you are looking to use to raise the funds.

Chad and I spent two days in Las Vegas at the Hotel Design Expo (May 14-16, 2008). The convention was housed in the Sands Conference Center and must have included nearly 10,000 exhibiting vendors. Two full floors were devoted to displaying every conceivable item that could possibly be stuffed into a hotel room to improve its design and functionality.

This was our first trip to this conference. I couldn’t believe how many companies manufacture intelligence doorknobs for commercial purposes. Self-locking, personnel-tracking, microbe killing doorknobs were everywhere. (Did you know that they make a doorknob that kills about all of the bacteria and viruses that come off of your hand within 20 seconds? The coating is supposed to last for 20+ years! Jim Pinter or TownSteel was happy to show us how it all worked. With 6 kids, I’m going to install those doorknobs through my whole house.)

There was very little in the way of electronics at the show. A couple of vendors stood out, and I wish I had written their names down to give individual shoutouts. A few phone manufacturers were there. The coolest place we stopped was a virtual reality company that is doing amazing animation to preview cityscapes, design concepts and architectural renderings. The quality of their animations was top notch. (I can’t think of any use of their application in my life, but I’m going to work on it. I want my own virtual reality studio)

Chris’ HD Expo Conference Grades:

We met great people, but unless we’re a vendor there next year, I’m not sure if we’ll get excited enough to see a million shower heads, fabric textures and pillow displays again.

I don’t talk to librarians anymore. Can’t think of the last time I spoke to someone at the bank. Airline counters are a thing of the past. If I have 10 items or less at the grocery store, I don’t talk to a cashier (unless I have produce. Produce is complicated..). By the time I arrive at the movies, I go right to the concession stand and into the theater. When was the last time I went inside a convenience store to pay for gas? I’d never have to go into the store if they would simply put a drink dispenser next to the gas pump.

Every one of these areas in my life (and more) provide a self-service option. I am willing to take them up on their offer more often than not (except of course, in the case of produce. I can’t figure out how to ring up the right lettuce…)

And, judging by the number of growing terminals and the people at those terminals, I’m not alone. User interfaces are simple. The technology works. I can get what I want.

And, I’m not anti-people. I tend to like people. My wife is a people. My kids are people (in varying degrees). I’m mostly people myself.

But, I’ll tell you, there are some instances when I’m happier with my self-service experience than others. The library is fantastic. Easy. Quick. Scan a barcode on the outer cover of the book and be off. The grocery store, Wal-Mart and Home Depot are not my favorite. The self-checkout process is complex. Lots of payment options. “Unexpected Objects in Bagging Area?” ARGH!

Last week, I was speaking with Ram Thakur, PhD who is on top of self-service. He said that simplicity is the key. The more complex the process, the higher level of dissatisfaction. Makes sense to me.

But, self-service isn’t going away. It is getting smarter and will pop up in almost every area of our life. They don’t make mistakes. They are easy to use. They are less expensive and more consistent than humans and they don’t mind working at all hours without a break.

(Note: GuestSpan is very concerned with this topic as we intend to put self-service into every hotel room in the world. Hotel guests will get everything they want (food, product, information, service) more quickly than they have every experienced. Watch for us in your next hotel stay.)

According to an article in Hotel Business Magazine, Kimpton Hotels is making a big bet in what many would consider a bad market. Kimpton has raised $800 Million in funding for new projects to be invested in the next three years. The article states:

While much of the hotel investment community awaits further clarity on where true asset values currently are before making another move, Kimpton…has made a bold statement of faith in the market, the boutique sector, and more significantly, its own brand.

Indeed Kimpton’s strategy is bold. I think it also speaks to the real state of the market. Companies that are nimble such as Kimpton can benefit from the lowered asset values and expand their hotel portfolios. Kimpton CEO Michael Depatie is quoted in the article as saying,

“while there isn’t a lot of current activity, we expect that will change in the coming months. We’re very bullish.”

He continues,

“So in 2009 and 2010 there will be a moderation of new supply and if the economy comes back at that same3 time, that will bode well for asset values.”

It is as simple as buy low sell high. Kimpton is poised to take advantage of a lagging market and, what’s more important, they have the confidence in the resurgence of the market to do so. Further elaborating on how the company is approaching this, Joseph Long, Executive VP of Acquisition said,

“No one knows where the market is on the downward scale and whether it’s down 20%, 30% or 50%. And there is a dearth of deals getting done because the values are not being validated due to the lack of financing. But at some point that will change and it may be in about six months.”

I like Kimpton’s confidence in both their brand and the status of the market. In an era of negative media about the economic outlook it is good to see a company with a lot at stake taking risks to further their brand and their market position.

Terry Jones, founder and former CEO of Travelocity, told a major hotel brand:

“People don’t like to stay at your hotel. People like what they can do when they are at your hotel. That may be a business meeting, getaway or trip to see Grandma. They didn’t come to your hotel to stay at your hotel.”

Mr. Jones’ comment was not what the brand wanted to hear, but was true.

And, this thought applies to business travelers as much as anything. When I am on the road for business, I want to be a member of the local community. Those first couple of nights, eating at the close diners rather than the good restaurants, are not as enjoyable as they could be.

That’s why GuestSpan is creating a system that puts hotel guests right into the local scene from the minute they arrive.

I’m not just trying to create self-promotion in this post. I’d appreciate readers leaving comments about what they would like out of their travel experience. What information are you lacking that would help you make the most of a stay in a new city?

Also, take 3 minutes to be part of our survey audience. If you travel for business, take our 9-question survey by clicking HERE.

We are going to make your next hotel stay much better than you might have imagined.

The Cornell Center for Hospitality Research recently hosted a roundtable discussion on the risks and rewards of technology service innovations. Some of the topics hold a particular interest here at GuestSpan. Particularly in the area’s of using technology to create a better experience for hotel guests and improve the performance of hotel staff. A point one of the panelists made was:

“Regardless of how the innovation is implemented, it must be embraced by staff and management, and guests must see the changes as valuable.’ When innovations are meant to cut costs, for instance, both employees and guests may need an explanation of the innovation. One example that roundtable participants cited is the addition of self-service kiosks in some hotel lobbies. Employees regarded these with suspicion and guests were slow to adopt kiosks in some cases. Several participants suggested that the moral of that experience (and of other technological innovations) is that technology needs to be balanced with personal service innovations.

This is a good bit for any company or hotel looking to technology as a solution to service. If you are going to roll something new out you need to have the entire staff involved in educating guests on how this new technology will improve their stay.

Another are of discussion where GuestSpan shines is when it comes to ROI:

Measuring the return on the innovation investment presents an additional challenge. One logical approach is to measure customers’ responses to the change, typically with focus groups or surveys. Roundtable participants who have used focus groups said that they are not always reliable. Moreover, many customers do not want to be questioned.
Instead of taking surveys, managers could observe customers’ actual responses to the innovation-what they do, rather than what they say. Observing customers’ loyalty, or, for that matter, employees’ loyalty, could be one gauge of an innovation’s success. Other participants suggested that financially oriented measurements, such as share of wallet, might make more sense. In many cases, the most successful innovations are based on customers’ suggestions.

If you instituted a technology service solution that was aimed at increasing the orders in room service wouldn’t the best way to measure that be whether or not there were an actual increase in room service orders? I think that results will ultimately be the best gauge of success for any service innovation.

Hoteliers chant the refrain, “Our people (guest service staff) make the difference to our guests.”

Great.

But, not necessarily true.

I won’t spend time today talking about most of my business travel and the decline in guest service staff I have experienced.

Instead, let’s examine an article by Kate Leggett of KANA (A multi-channel client service company). Ms. Leggett talks about her experience of trying to build a relationship with a bank. After years of being a customer at her local branch, she realized that the bank didn’t know her any better than they did the day she opened the account.

In brief, when starting a home remodeling project, she opened a home equity line of credit. Nobody at the bank told her that a cash-out refi would have been less expensive. Shortly thereafter, a family emergency took her out of town and because she wasn’t thinking about her bank account, she incurred $250 of overdraft charges, even though there was plenty of money sitting in a side account. These events led her to think:

“After 10 years of working with my bank and being consistently disappointed, I considered what I valued in my interactions with my bank. Yes, having a personal relationship was important, but what was more important was that the bank help answer questions that I had, and to recommend basic financial plans tailored to my situation.”

She ended up finding an online bank that provided all the services she wanted, answered all of her questions and seemed to “know’ her better than the service people at the local branch. Kate’s concluding thought provides a lot to think about when considering the idea of service:

“I used to think that a long interaction for each service issue led to a better relationship. But now, I am not so convinced. A short, fulfilling interaction where you get what you want by looking for it yourself can be as fulfilling as one in which you are held by hand.”

To me, the message is that we have to rethink how we deliver meaningful service to clients, guests, patrons, etc… The presence of a person is less valuable than providing answers, no matter the interaction method.

Just something to chew on for those that claim that their people make the difference. You’d better have really good people if you’re going to beat technology.