2012 Cornell Hospitality Research Summit: Hotel and Restaurant Strategy: Key Elements for Success by Glenn Withiam Cornell Hospitality Proceedings Vol. 5 No. 132 , J a nMuayr y2 0210313 All CHR reports are available for free download, but may not be reposted, reproduced, or distributed without the express permission of the publisher. Cornell Hospitality Proceedings Vol. 5, No. 3 (April 2013) © 2013 Cornell University. This report may not be reproduced or distributed without the express permission of the publisher. Cornell Hospitality Report is produced for the benefit of the hospitality industry by The Center for Hospitality Research at Cornell University. Robert J. Kwortnik, Academic Director Jennifer Macera, Associate Director Glenn Withiam, Director of Publications Center for Hospitality Research Cornell University School of Hotel Administration 537 Statler Hall Ithaca, NY 14853 Phone: 607-255-9780 Fax: 607-254-2922 Advisory Board www.chr.cornell.edu Niklas Andréen, Group Vice President Global Hospitality & Partner Gerald Lawless, Executive Chairman, Jumeirah Group Marketing, Travelport GDS Christine Lee, Senior Director, U.S. Strategy, McDonald’s Corporation Scott Berman ‘84, Principal, Real Estate Business Advisory Services, Mark V. Lomanno Industry Leader, Hospitality & Leisure, PricewaterhouseCoopers David Meltzer MMH ‘96, Chief Commercial Officer, Sabre Hospitality Raymond Bickson, Managing Director and Chief Executive Officer, Taj Solutions Group of Hotels, Resorts, and Palaces William F. Minnock III ‘79, Senior Vice President, Global Operations Michael Cascone, President and Chief Operating Officer, Forbes Travel Deployment and Program Management, Marriott International, Inc. Guide Mike Montanari, VP, Strategic Accounts, Sales - Sales Management, Eric Danziger, President & CEO, Wyndham Hotel Group Schneider Electric North America Benjamin J. “Patrick” Denihan, Chief Executive Officer, Hari Nair, Vice President of Market Management North America, Denihan Hospitality Group Expedia, Inc. Chuck Floyd, Chief Operating Officer–North America, Hyatt Brian Payea, Head of Industry Relations, TripAdvisor RJ Friedlander, CEO, ReviewPro Chris Proulx ‘91, CEO, eCornell & Executive Education Gregg Gilman, Partner, Co-Chair, Employment Practices, Davis & Umar Riaz, Managing Director, Accenture Gilbert LLP Carolyn D. Richmond, Partner, Hospitality Practice, Fox Rothschild LLP Susan Helstab, EVP Corporate Marketing, Four Seasons Hotels and Resorts Susan Robertson, CAE, EVP of ASAE (501(c)6) & President of the ASAE Foundation (501(c)3), ASAE Foundation Paul Hineman, Executive Vice President, National Restaurant Association Michele Sarkisian, Senior Vice President, Maritz Steve Hood, Senior Vice President of Research, STR K. Vijayaraghavan, Chief Executive, Sathguru Management Consultants Jeffrey A. Horwitz, Chair, Lodging & Gaming Group and Head, Private (P) Ltd. Equity Real Estate, Proskauer Adam Weissenberg ‘85, Vice Chairman, US Travel, Hospitality, and Leisure Kevin J. Jacobs ‘94, Executive Vice President & Chief of Staff, Head of Leader, Deloitte & Touche USA LLP Real Estate, Hilton Worldwide Michelle Wohl, Vice President of Marketing, Revinate Kenneth Kahn, President/Owner, LRP Publications Kirk Kinsell MPS ‘80, President, The Americas, InterContinental Hotels Group Mark Koehler, Senior Vice President, Hotels, priceline.com Radhika Kulkarni, VP of Advanced Analytics R&D, SAS Institute Thank you to our generous Corporate Members Senior Partners Accenture ASAE Foundation Carlson Rezidor Hotel Group Hilton Worldwide National Restaurant Association SAS STR Taj Hotels Resorts and Palaces Partners Davis & Gilbert LLP Deloitte & Touche USA LLP Denihan Hospitality Group eCornell & Executive Education Expedia, Inc. Forbes Travel Guide Four Seasons Hotels and Resorts Fox Rothschild LLP Hyatt InterContinental Hotels Group Jumeirah Group LRP Publications Maritz Marriott International, Inc. Marsh’s Hospitality Practice McDonald’s USA priceline.com PricewaterhouseCoopers Proskauer ReviewPro Revinate Sabre Hospitality Solutions Sathguru Management Consultants (P) Ltd. Schneider Electric Travelport TripAdvisor Wyndham Hotel Group Friends 4Hoteliers.com • Berkshire Healthcare • Center for Advanced Retail Technology • Cleverdis • Complete Seating • Cruise Industry News • DK Shifflet & Associates • ehotelier.com • EyeforTravel • The Federation of Hotel & Restaurant Associations of India (FHRAI) • Gerencia de Hoteles & Restaurantes • Global Hospitality Resources • Hospitality Financial and Technological Professionals • hospitalityInside.com • hospitalitynet.org • Hospitality Technology Magazine • HotelExecutive.com • International CHRIE • International Society of Hospitality Consultants • iPerceptions • JDA Software Group, Inc. • J.D. Power and Associates • The Leading Hotels of the World, Ltd. • Lodging Hospitality • Lodging Magazine • LRA Worldwide, Inc. • Milestone Internet Marketing • MindFolio • Mindshare Technologies • PhoCusWright Inc. • PKF Hospitality Research • Questex Hospitality Group • The Resort Trades • RestaurantEdge.com • Shibata Publishing Co. • Sustainable Travel International • UniFocus • WIWIH.COM Cornell Hospitality Research Summit 2012 Hotel and Restaurant Strategy: Key Elements for Success by Glenn Withiam ABouT The AuThor Glenn Withiam is the director of publications at the Cornell Center for Hospitality Research. The CHRS proceedings series would not have been possible without the notes provided by the following session reporters: Elisa Chan, Nancy Chan, Laura Fraefel, Mathias Gouthier, Arnab Gupta, Rahul Kamalapurkar, Sanghee Park, Kate Loh Qiaoling, Natasha Singh, Kanika Thakran, Matthew Walsman, Jie Yang, Yunzi Zhang, and Enlin Zhou. The session reporter group was organized by Kimberly Schlossberg, CHR conference assistant 4 The Center for Hospitality Research • Cornell University exeCuTive SuMMAry he importance of strategic thinking resonated in numerous presentations at the 2012 Cornell THospitality Research Summit (CHRS), with some presenters focusing on restaurant issues, some on hotel industry considerations, and some looking at the hospitality and service industries more generally. Since the goal of most strategies is to build customers’ patronage and loyalty, CHRS presenters aimed many of their analyses at the foundations of customer brand loyalty. Employees’ attitudes and actions are critical in this regard, for example. Hotel owners are also essential to the success of customer-focused strategies, and the industry’s ownership fundamentals are constantly in flux. For a strategy to succeed, organizations must align their many activities and stakeholders. Inherent in the customer-oriented strategy is the essential matter of making sure that a brand’s marketers are hitting their intended target, which can be determined with appropriate measurement. Also critical to proper strategy is an understanding of the competitive set—and making sure that one has correctly identified the competitors. Within each strategy is a set of service offerings and property features, the value of which can be analyzed individually and in concert. A well-designed physical environment is inherent in any successful operation. Like other hospitality industry segments, restaurants are moving rapidly to integrate technology in their operations, notably with social media. Although loyalty programs are an inevitable part of the competitive scene, true loyalty comes through excellence in service that involves attention to detail, hospitality, and appropriate service. For many chains, franchisees are integral to ensuring the brand’s success and thus it’s important to consider the dynamics of a franchise system. Consumer research is also critical to a restaurant’s success. Cornell Hospitality Proceedings • April 2013 • www.chr.cornell.edu 5 Cornell hoSpiTAliTy proCeedinGS Cornell Hospitality Research Summit 2012: Hotel and Restaurant Strategy: Key Elements for Success by Glenn Withiam Strategy is the key to success for any hotel or restaurant company, but developing and implementing a strategy is sometimes an elusive goal. A series of presentations at the 2012 Cornell Hospitality Research Summit focused on how to develop and apply strategies in the hotel industry, restaurant industry, and the hospitality industry generally. Perhaps the most important aspect of strategic management is finding an appropriate way to measure whether a particular strategy is successful. Also critical is aligning all stakeholders in a hospitality operation. 6 The Center for Hospitality Research • Cornell University Aligning your brand with your strategy. A major goal for brand managers is to have customers feel comfortable and at home when they enter your property. Employees are critical in creating that brand experience, as explained by Rick Garlick, research chairman for the Hospitality Sales and Marketing Association International (HSMAI) Foundation Board. Employees should reflect your values. When employ- ees are aligned with a company’s core values, they will be more effective at delivering the brand experience and value. Garlick presented the results of a study of 1,000 full-time hospitality employees, which he conducted with Maritz. Just over half of them worked in food service, about one-third were in hotels, and the rest worked for airlines, gaming, and other hospitality segments. Using a 125-item survey, the study measured workplace engagement, service climate, rewards and recognition, and values. The Maritz study found four types of hospitality employees, based on their values. Just over one-third were “pioneers,” who want to create and find meaning in their work and seek a fair degree of freedom. Just over one-quar- Rick Garlick: employee engagement is critical to service ter were “stabilizers,” who are the “worker bees” that keep a excellence. For this reason, employees’ goals should be company going and prefer stability and tradition. One-fifth aligned with employers’ goals. are “drivers,” who seek achievement and power. Finally, the “altruists” place their highest value on benevolence and About the 2012 Cornell Hospitality Research universalism. These proportions held relatively constant for Summit hotel and restaurant employees, as Garlick explained it, with a larger group of pioneers, followed by stabilizers, drivers, In a concentrated two-day period, the Cornell Hospitality Research and altruists. Summit 2012 presented over 80 presentations on a wide variety of Next, the study categorized employers, as viewed by the hospitality-related subjects, all focused on the key issues to advance employees. Just over one-third said they worked for “empow- the hospitality industry. Given the industry’s many moving parts, erers,” companies that place a high value on self-direction specialized disciplines, and parallel enterprises, the overall message and stimulation. Nearly half of the firms were viewed as from the CHRS is the need to engage all stakeholders in the critical “command and control,” which are firms that are focused on elements that create success for hospitality enterprises: providing power and making money. Finally, about one-fourth are seen service and facilities that satisfy customers, giving operators the tools as “mission-oriented,” businesses with a larger purpose, but to expand revenues, and controlling costs to provide a reasonable return for investors. In the process, hospitality executives and which are also high on conformity and tradition. academic researchers presented their research on the many Many employees found companies that matched their disciplines and issues that come to bear on the contemporary values, but mismatches are a challenge for employees and hospitality industry, including customer service, distribution, hotel employers alike. For example, when asked whether their investment and value, human resources, internet analytics, pricing company’s values match their own values, pioneers who and revenue management, restaurant service and operations, social worked for empowerers agreed that a match existed, as did media, sustainability, and technology. the driver-type employees who worked for the command and control companies. In contrast, the mismatches are driv- CHRS 2012 brought more than 230 hospitality industry practitioners and researchers to the Cornell School of Hotel Administration in ers in an empowering or mission-oriented firm, and altruis- October 2012. The CHRS was expressly designed by the Cornell tic employees in a command and control type environment. Center for Hospitality Research (CHR) to balance input from Garlick found clear payoffs for alignments between academic researchers and industry executives, with research-based employee and employer values, including lower turnover, presentations, keynote panel discussions, and hands-on workshops. recommending the firm to friends, and going beyond formal CHRS 2012 was also the capstone event for the twentieth responsibilities. Aligned employees are more likely to say anniversary of the Center for Hospitality Research. In an that they would stay with their employer, would recommend anniversary video, CHR advisory board members and former their employer to family and friends, and feel motivated to CHR directors explained the CHR’s development as the foremost do what it takes to get the job done. source of hospitality research. Cornell Hospitality Proceedings • April 2013 • www.chr.cornell.edu 7 Arthur Adler: The key drivers of hotel acquisitions include Amy Severson: international arrivals to the u.S. continue to industry fundamentals, availability and cost of capital, reiT grow and drive industry results. These travelers are stock prices, number of deals available, and hotel ownership increasingly adopting mobile apps. composition. Trends in hotel ownership. Hotel owners are a key to purchase top quality properties, typically urban or resort partner in the industry’s success. Following up his appear- properties in coastal gateway markets. In conclusion, Adler ance on the CHRS keynote CEO panel, Arthur Adler, man- sees the following forces for the next five years. Private aging director and CEO–Americas for Jones Lang LaSalle equity funds, REITs, and off-shore investors will all be ac- Hotels, outlined the key drivers of hotel acquisitions and tive with substantial capital, and hotels will continue to be gave his forecast of the forces affecting the industry for the favored asset classes, particularly given their ability to serve next five years. The five drivers are industry fundamentals, as an inflation hedge. Supply growth remains below average, availability and cost of capital, REIT stock prices, number of while lodging demand will continue to grow with the popu- deals available, and hotel ownership composition. A healthy lation and overall economic growth. Thus, the potential for industry means more deals, Adler explained, showing the asset price appreciation is substantial, especially compared connection between RevPAR and deal activity, and the ready to where things stood in 2009 at the bottom of the cycle. availability of capital and debt financing adds fuel to the deal International arrivals in the U.S. Helping to drive making engine. As REIT share prices climb, those organi- the industry’s asset appreciation is the continued growth of zations tend to become more active. The deal volume also international travel to the United States. As detailed by Amy picks up when hotel owners see that buyers are in the market Severson, senior director of industry relations for Expedia, and decide to sell their hotels (or are forced to sell distressed some 62 million international travelers spent $153 billion in properties). One noteworthy factor in price and transaction the U.S. in 2011. The top five source countries, as measured volume is the meager supply pipeline, which will remain by room-nights, are Canada, the United Kingdom, Germany, below average for the next couple of years. Japan, and Brazil. Top destinations are New York City, Las As the type of ownership organization has changed over Vegas, and Orlando, but some of the fastest growing markets time, Adler notes that the largest ten owners have gradu- include Bangor and Portland, Maine, and Atlantic City, New ally come to represent an increasingly large percentage of Jersey. properties. Although REIT activity is once again picking up, International guests use multiple channels and plat- Adler anticipates that private equity investors will continue forms as they plan their trip. To attract these visitors, to be the most active group in the market. Equity investors Severson points out the importance of posting local content tend to be opportunistic as they seek value in almost any with appropriate key words in a platform-sensitive man- market, while REITs tend to focus on high quality assets in ner. Sometime in the next two years, the number of mobile the top 15 markets. Off-shore investors will also continue 8 The Center for Hospitality Research • Cornell University Evan Lewis: The importance of wi-fi continues to grow for Michael Taylor: Companies need to align all stakeholders in international travelers, based on a survey of Asian business the many collaborations that are required to operate a travelers. business. internet users worldwide will surpass those using desktop program the top reason for their hotel choice. Travelers computers. Mobile sites are not merely desktop sites reduced from India were more price sensitive than those from other in size, so hotels should design appropriate mobile sites. nations. As a closing note, the survey found that only about Prices should be given in travelers’ local currency so that one-fourth of the travelers usually used a hotel’s fitness facili- they truly understand the cost of the trip, sites should allow ties. Most travelers spent their time in the hotel working. searches for local attractions, and the site should offer a wide Alignment optimization. Michael Taylor, of Schelling variety of payment options. Point, focused his presentation on how companies can International arrivals in Asia. Research by Accor improve alignment in their business, as companies have Hotels profiled business travelers in Asia to gain a sense of numerous collaborations—nearly 80—to accomplish their their travel patterns. As detailed by Evan Lewis, vice presi- various goals. Collaborations determine an organization’s dent of communications for Accor Asia Pacific, the Asian direction, distance, speed, and differentiation. At the same business travelers were predominately men (about three- time, collaborators may have competing objectives: quality quarters), who averaged ten trips in the first six months of and accuracy, speed and effort, and engagement and owner- 2012. About one-third of those trips took the traveler to a ship. In any process, Taylor points out that people want to different country, and the number of trips planned or taken know how they’re doing, whether they’re aligning over key in 2012 was substantially higher than in 2011. Lewis noted points, and how they would measure those points. In any that the single most popular designation was Singapore, but process, there are rational, but incomplete inputs; logical, Thailand is growing in popularity. Oddly, while Singapore but flawed plans; and positive, but below-par outcomes. was a top destination for business travelers from Hong Kong, Gaining alignment combines elements of three scien- the reverse was not true, and the top three destinations tific currents: the theory of independent decision making for travelers from Singapore were Malaysia, Thailand, and (how people act in mixed motive, non zero sum situations), Indonesia. Almost six in ten of the travelers booked their relational networks (social exchange theory), and action hotel stay on Brand.com, except in China where OTAs tend science (what causes people to act or not act). This analysis to be used more heavily. The top two trip purposes were produced four components for alignment success: participa- company meetings and visiting customers. Not surprisingly, tion, GUBA coverage (goals, unintended consequences, bar- location was the reason given most frequently for choice of a riers, and assumptions), theme coverage, and discussability. property, with wi-fi a close second. Again, Chinese business Gaining alignment on the four GUBA points is challenging, travelers were the exception, as they considered the loyalty unless one expressly addresses them. Taylor also pointed Cornell Hospitality Proceedings • April 2013 • www.chr.cornell.edu 9 Audience interaction is a critical aspect of CHRS Jonathan Douglas: hotel design must draw on the guests’ presentations. Here, Ted Teng, CEO of The Leading Hotels of desire for an experience by developing a story that includes the World, makes a point as Cindy Estis Green, CEO of Kalibri authentic guest experiences. Labs, looks on. to three sources of failed alignment, namely, different data, Nadkarni presented the case of four market segments different dictionary, and different drivers. These must be that are targeted by two well-known hospitality brands. The identified and reconciled. Most people identify different segments are labeled young and free (singles under 35), drivers as the reason for misalignment, but in fact the failure family (people 18-59 with children), free birds (couples in alignment is more likely to arise from different data and, 30-59 without children), and matures (those 60 and over to a lesser extent, a different dictionary. Four assets will who are still active). The analysis compares the individual assist in alignment: what success looks like, how we’ll make brand’s demand, customer value assessment, and ADR for it happen, how we’ll ensure it works, and why we are doing each segment to the average indices for their competitive it. In other words, the group must first agree on why it exists set. Thus, Brand A’s demand far exceeds the segment’s index and what it is doing. Looking at the GUBA framework, the for the young and free and family demographics, while the goal is less likely to be the source of misalignment than the Brand B is above the demand index for the free birds and assumptions, barriers, and unintended consequences con- mature groups. However, Brand A gets high satisfaction rat- nected with that goal. ings from the free birds, and Brand B gets high marks from Making sure you’ve hit the customer target. Most young and free. hotel marketers target specific customer segments, but the Those measures are worth knowing, but the final step of critical goal is to make sure to identify and serve the correct the analysis is the key: determining which segment is deliv- targets—in particular, by analyzing the value of the customer ering ADR. For Brand A, the young and free and free birds to the brand. A presentation by Chris Klauda and Nandini segments have ADRs above the overall index, while family Nadkarni, of D.K. Shifflet and Associates (DKSA) explained is not recording a high ADR, despite its strong demand. how to identify key market segments and analyze their con- Instead, Brand B is achieving a relatively higher ADR from tribution. DKSA continuously samples consumers to analyze family travelers, as well as from free birds (which has been their preferences for lodging type, brand, and reservation consistently strong in each test for this brand). With this procedure, among many other variables. Nadkarni noted analysis, we can answer the question of which segment is the that DKSA has found that most customer research fails to true target. For Brand A, it is family, which has high demand quantify the value of a customer to the brand, but effective and strong room spending, even though ADR is not as high marketing decisions require the identification of “true” tar- as other segments. For Brand B, it’s not a surprise that the get customers that provide financial value to the brand. free birds segment is the highest in room spending, based on its strong demand and relatively high ADR. The point of this 10 The Center for Hospitality Research • Cornell University Arturs Kalnins: one way to learn about the customer Jun Li: Consumers’ click-stream data can help a hotel identify experience is to measure it in real time, based on the many its competitive set. clues guests use to assess their experience. analysis goes beyond determining whether you are hitting that their customers aren’t really considering. These are the your targets, because a brand also wants to be sure that key findings of a study of hotels in New York City. Jun Li, the “true” target actually fits with brand strategy. Finally, if of the Ross Business School at the University of Michigan, your brand has no true target, that too is a call to reconsider and Serguei Netessine, of INSEAD, used consumer data to brand strategy. develop the New York hotels’ competitive sets. The pricing The distance effect. An analysis by Cornell professor transparency created by online travel agents can augment Arturs Kalnins found that the distance between headquar- a hotel’s pricing errors, if it is not monitoring its actual ters and a particular sales outlet seems to have at least some competitors. With 500-plus hotels in the New York market, direct effect on how long that outlet survives, as compared determining competitors can by challenging, but hoteliers to those which are closer to HQ. Kalnins compared the can use customers’ click stream data to identify their true survival rates for pairs of units of numerous businesses in competitive set. Li and Netessine analyzed the search activi- Texas, including such diverse enterprises as gas stations, ties of over 3,500 users of a major OTA. The analysis created women’s clothing stores, and restaurants. He found both “networks” of competitors, in which some midtown hotels that revenues were weaker for the more distant units and were actually in competition with those far downtown in the those units were not as long-lived. However, large chains financial district, while other competitors were (not surpris- with wholly owned outlets seemed to avoid the negative ingly) close by. The researchers found that independent effects of distance. properties were most likely to be overlooked or mismatched Using only revenue data for hotels, Kalnins found that in a competitive set. Another driving force for mismatches is distant hotels’ RevPAR held up better than that of distant an appeal to different sub-markets by supposedly competing units in other businesses, and large chains seemed to have hotels. One clue for hoteliers regarding competitors could be developed systems to counteract the distance effect. But the “also considered” and “also viewed” hotels on such sites there was still a revenue penalty for distance from the cen- as TripAdvisor. tral office. The effect was particularly pronounced for small Analyzing your competitive set. Carter Wilson of STR hotels and independent properties. Analytics presented his firm’s examination of the 30,000 Identifying your competitors. When hoteliers analyze competitive sets in the U.S., as named by individual hotels. the prices and promotions offered by their competitive In short, many hotels are misaligned with regard to their set of hotels, they may not be including all of their actual competitive set. That is, they are believe they are competing competitors and they may be paying attention to hotels against hotels that in fact are not competitors, while they are Cornell Hospitality Proceedings • April 2013 • www.chr.cornell.edu 11 Carter Wilson: The hotels that you name in your competitive Cathy Enz: The factors that lead to the success of a new set should name you back. Most hotels have an market entrant are complex, but strategic difference from “unconsidered set” of competitors. other hotels in the cluster is a major factor. failing to take into account hotels that are competitive. STR’s Hotel cluster considerations. Without doubt, a hotel’s competitive sets range from as few as three to as many as performance is at least partially affected by the presence of thirty-six properties, with an average of about five. nearby hotels. A series of studies by Cornell professors Cathy The starting point for Wilson’s analysis is the name- Enz and Linda Canina examined the effects of clustering. back percentage. That is, hotels in a competitive set should Regardless of the type of hotel, the property must try to dif- mutually name each other as competitors. Only 45 to 50 ferentiate itself from competitors, particularly if it is newly percent of hotels’ nominal competitors name that hotel back. opened. Economy and mid-scale hotels can benefit from This means that most hotels have an “unconsidered set” of co-location with upscale hotels, possibly due to spillover an average of three hotels that consider your hotel to be a effects. Their most recent study examined RevPARs of more competitor, but they are not on your radar. Wilson cautions than 6,500 hotels between 2000 and 2011. Factors in the against the all-too-human reaction that the management success of new entrants are complex, but the greater the new of the unconsidered hotels is wrong about who competes entrant’s strategic difference from other hotels in the cluster, with whom. Instead, you can compare ADR, occupancy, and the stronger the new entrant’s performance. The study also other ratios with other, similar hotels to see which properties found that new brand-operated properties deliver higher actually match up as competitors. performance than those operated by franchisees or inde- Once the comp set is determined, Wilson says simple pendent properties. One likely explanation for the brands’ averages are not sufficient to analyze revenue opportunities. stronger revenue performance is that they tend to ramp Instead, you can compare your hotel’s occupancy, ADR, and up rates more quickly than other entrants. If the market is RevPAR against the band or range of competitors. If you’re at saturated with existing brands, a new entrant’s performance the low end of the band, you might want to consider how the tends to be lower. However, if the market contains a group top performers are achieving their numbers. That bandwidth of homogeneous hotels, a new entrant generally does better, analysis can also tell you whether you are truly competing provided it has the necessary strategic difference. against particular hotels. Moreover, depending on how com- The value of trade shows. Although virtual meet- plex your operation is, you may have more than one comp ings will continue to grow in importance, trade shows will set, but that is uncommon. continue as a vehicle for networking, promotion, and sales. 12 The Center for Hospitality Research • Cornell University Mary Tabacchi: hotels can be more intentional in their spa Stephani Robson: A well-designed physical facility is critical operation and thus gain a greater contribution to the to service excellence. bottom line. In the preliminary findings of a study by Cornell’s Rohit so late in the development process that she or he has no say Verma and HyunJeong “Spring” Han, of Russia’s National in the spa’s design or features. Tabacchi sees no reason that Research University, trade show exhibitors and participants spas should not be larger contributors to the bottom line, both agreed that trade shows offer considerable value, al- but more to the point, the spa operator and hotel operator though they see a need to keep costs in line. The pilot study, need to agree on the benchmarks for success. For better spa conducted with the support of the ASAE Foundation (The success, hoteliers might want to work more directly with spa American Society of Association Executives), outlined the operators during development. Her research discovered that, aspects of trade shows that offer the most utility. In addi- based on the realization that spa guests are big spenders, tion to face-to-face interaction, exhibitors and participants owners and operators both see spas as an expected amenity agreed that the educational value, including the quality of that attracts guests and promotes higher room rates, but presentations, speakers, and panelists, is a top criterion for not necessarily as a revenue center, even though spas can be choosing a particular trade show. Both groups also cited operated profitably. The desire to build a “beautiful palace” keeping costs affordable, including registration, transporta- works against the spa’s profitability, since overly large, fancy tion, and lodging. For exhibitors, a large number of people spas may have too much non-revenue space that is inflexible attending is an important consideration. On balance, exhibi- and inefficient. Instead, she recommends promoting the spa tors and participants find the most utility in having the as a core competency that is integrated with the hotel and show in a large city or mid-size city in the U.S., and a show its offerings. The property also needs to determine whether running two to four days seemed most worthwhile to both its spa exists for profit or to add value to the hotel’s package groups. Verma and Han will expand their sample in their more generally. ongoing study, given that these findings were based on the Evidence-based facility design. Service is clearly criti- views of about 450 participants and 70 exhibitors. cal in both hospitals and hotels, but a well designed physical The value of spas. For many properties, a spa is a environment is also essential to both. While it’s true that “must-have” amenity, but Cornell professor Mary Tabacchi hospitals are increasingly drawing design ideas from the suggested that in too many cases, the actual operation of hospitality industry, those changes are a result of evidence- the spa is almost an afterthought. In a new study of hotel based design, according to Cornell’s Stephanie Robson. spas, she found, for instance, that the spa director is hired Using evidence-based design, hospitals have implemented Cornell Hospitality Proceedings • April 2013 • www.chr.cornell.edu 13 Kelly Semrad: professional conduct, emotional touch, and Juliette Boone: Although workplace barriers are part of the deep interaction are essential to service excellence. reason for the noticeable absence of women in the C-suite of hospitality firms, personal issues seem to be more salient. numerous innovations, including single-patient rooms, envi- conducted a study to develop a uniform scale of hospital- ronmental noise reduction and masking, taking advantage of ity service. The study’s factor analysis revealed three robust the restorative effects of nature, providing access to daylight factors: professional conduct, emotional touch, and deep and appropriate lighting, and putting artwork on the walls. interaction. Thus, true hospitality means deep interactions In many instance, hospitals are also including hospitality- between parties. However, since different hospitality enter- style settings in their facilities, such as public amenities prises offer different perspectives on hospitality, a uniform (e.g., fitness and wellness center, patient center for exercise tool may be too general. Moreover, a uniform standard and entertainment), improved room amenities (e.g., shower would not necessarily work across cultures. stalls and large easy chairs), and better access, as well as Rebalancing the C-suite. The hospitality industry is patient-friendly décor. far from the only business with few women as chief execu- Queue analysis for concierge medicine. Another tive officers, but given the large percentage of women in amenity which hospitals are borrowing from the hospitality other hospitality positions, the absence of women CEOs industry is the concierge. In this case, a patient pays a fee is particularly noticeable. Although twenty of the Fortune (currently $1,300 to $1,800) for “concierge medicine,” which 500 company CEOs are women, none of them head one of provides preference in scheduling, among other benefits. the thirteen hospitality companies in the 500. An analysis Cornell’s Srinagesh Gavirneni analyzed the benefits of such of “women in the corner office,” by Juliette Boone of HVS an approach both for healthcare providers and patients. Executive Search (with co-authors James Houran and Keith He found that well over 400 physicians are signed up for Kefgen), explored two primary reasons for this phenomenon. “MDVIP,” one such program. Patient participants tend to be Boone sees both traditional workplace barriers and person- younger and wealthier than average. However, the concierge ally imposed barriers as impediments. Of the two, personally option did have the advantage of making the system more imposed issues may be more salient. efficient by reducing queues. The workplace barriers are familiar: counterproductive Toward a hospitality index. Although the SERVQUAL male behavior, inhospitable corporate culture, lack of career analysis has been applied to assess service quality in many planning or ladders, lack of mentoring, social exclusion, hospitality contexts, Asli Tasci, an assistant professor at the poor opportunities for managers, and stereotyping. The per- University of Florida, noted that the human dimension of sonal barriers are family demands—including unwillingness emotional labor is missing from existing measurement tools. to relocate, spouse resistance, biological roles (i.e., mater- With Kelly Semrad, also of the University of Florida, Tasci nity)—and the life-stage typical of promotions, which is in 14 The Center for Hospitality Research • Cornell University Jim Swartz: ihG has implemented a balanced scorecard for Sam Cole: innovation and process improvements can help risk management that connects security and safety scores destinations continue to develop. planners need to look with business proposals. foreward as they approve new developments. one’s 40s. Thus, Boone’s research finds that the chief impedi- risk management performance. IHG’s Jim Swartz said this ment to women’s success is the home. approach has connected security and safety scores with To examine this issue further, HVS Executive Search business requests for proposals, based on research con- conducted a four-week online survey that drew 99 C-level ducted with co-authors John Ludlow, Chris Chu, Xiaolei executive respondents (54 men and 45 women). Most were Zhang, and Alexandros Paraskevas. In addition to being a in the hotel industry, with some in the restaurant industry facet of responsible business operation, a proactive, strategic and a few in cruise and casino firms. Women respondents approach to risk management also has brought favorable were far more likely never to have married than were the financial results, notably connected with insurance expenses men. Of the married respondents, far more women had and claims management, and has improved the guest experi- working spouses than did the men. ence. In addition to setting meaningful measures, the system With regard to the barriers to the corner office, 58 is designed to highlight risk and focus on intervention. percent of the men thought those barriers were personally Augmented destination life cycle. Sam Cole, of the imposed, and only 37 percent said traditional workplace University at Buffalo, presented his expanded model of desti- barriers were a factor. On the other hand, 52 percent of the nation development. Expanding on the existing destination women cited workplace barriers as an issue. However, both life cycle model, Cole investigated how destination develop- genders generally agreed that mentoring and career plan- ment is influenced by synergies between accommodation ning are absent in the hospitality industry. Thus, deliberate businesses and other tourist attractions, particularly in discrimination did not seem to be a barrier, but Boone urges regard to the causes of congestion that stifle further develop- hospitality companies to be careful to avoid stereotyping. ment and the relief that is found as a result of innovation The path through the “invisible obstacle course” should be and other process improvements. One continuing issue is made visible through leadership and skills development, as that destination planners’ decisions are based on conditions well as through mentoring and personal development. In at one point in time, but the situation may have changed by conclusion, Boone suggested that responsibility for advanc- the time the decisions are implemented. The life cycle can be ing talented career women rests both on the companies and re-set by local innovation that interacts with global markets, on the individuals. taking into account local heritage. One point to consider is Applying the balanced scorecard. In its quest for that additional hotel rooms also mean infrastructure invest- continuous improvement, InterContinental Hotels Group ments. In one case the cost per room of building the road to is applying a balanced scorecard approach to assess its the hotel was greater than the cost of the rooms themselves. Cornell Hospitality Proceedings • April 2013 • www.chr.cornell.edu 15 David Sherwyn: Both labor and management would benefit Ravi Mehrotra: For effective rate management, hotels must from adopting “ethical principles” in labor organizing break down the silos and consider all aspects of the campaigns. operation. Those rooms also trigger other expenses, such as OTA fees, social needs that are not adequately addressed by existing in- labor, and supplies, all of which must be factored into the stitutions. One of these is Karma Kitchen, which focuses on development plan. Issues to consider are the income from the “gift economy.” Those who prepare food are paid in the tourism, the tourism footprint, and the reaction of local coin of volunteerism, while income is generated from diners residents to tourism development plans. who eat for free but make donations or volunteer. Social SHARE-ing data. Steve Hood, of STR, provided an engineers take on complex social problems, sometimes in update on STR’s SHARE center, which is designed to provide the face of resistance from government or existing business real-life data to university professors for classroom study. interests. Table for Two is an example of this model, as it The program is now in place for over 100 universities, and provides carefully priced meals that are designed to tackle includes data from hotels around the world. The most popu- the issue of obesity in developed countries, while it then lar forms of data are live performance data, trend reports takes the proceeds to provide meals for children in Africa. (including RevPAR and transient data), profit and loss infor- Rebooting labor relations. For hotels that are faced mation, pipeline, and hotel size and amenities. STR has also with the possibility of union organizing efforts, David Sher- developed training programs and such aids as discussion wyn, of the Cornell School of Hotel Administration, propos- questions. Hood says the goal is to help students graduate es an “ethical principles” approach to organizing campaigns. with numerical skills that allow them to move into analytical The core elements of the proposal are that employees who positions in the industry. want a union should have a union and those who do not Doing well by doing good. An examination of enter- want to organize should not have to do so. The hinge for the prises that both have a social impact and financial viability decision to organize should be the traditional anonymous found three generic types of enterprise. The study, by Colin vote. In contrast, union leaders and some politicians have Johnson, of San Francisco State University, explained these proposed a “card check” approach, which would mandate a three types as follows. Social bricoleurs (that is, people union with no vote once a majority of workers checks off a who make assemblies of whatever is on hand) act on locally card indicating their interest in a union election. discovered opportunities with locally available resources to Restaurant Strategies develop beneficial enterprises. As an example, Five Green Forks uses a fee-for-service model which sells its social Restaurant industry prospects. Reluctant recovery or not, services to target populations, sometimes with a third-party the U.S. restaurant industry continues to address the overall payer. Social constructionists develop ventures that tackle trend of people eating meals away from home. An analysis 16 The Center for Hospitality Research • Cornell University Hudson Reihle: enduring restaurant trends include a focus Colin Johnson: enterprises that have both social impace and on local foods, more online reservations, and increased financial viability may use one of three strategies: taking importance for sustainability and recycled products. advantage of local opportunities, meeting needs that are not addressed, and undertaking social engineering. by Hudson Reihle, of the National Restaurant Association, Restaurant technology trends. Restaurant chains are noted that annual growth rates have eased, most likely due moving ahead with integrating information technology in to the extremely modest growth in disposable income. Since their operations, according to a study by Michael White, much restaurant business is driven by tourism, travel pat- business research manager for the National Restaurant As- terns are important. On the expense side, restaurateurs are sociation, and Cornell’s Rohit Verma. Looking at technology seeing commodity prices still rising, and they are concerned use by nine large food-service chains, White and Verma about new government regulations. found that eight of the nine have mobile apps, seven of the Riehle sees the following trends, some of which are nine have a restaurant locator and post their menu. Less in multi-year patterns: consumers focusing on local food common is ordering and payment technology, but chains and also on children make up an important market share; are adopting those apps rapidly. White added that custom- 90 percent of restaurateurs are involved in charitable ers appreciate restaurant technology because it gives them activities; more Americans are using online reservations, as improved convenience, control, and information, and better smartphones and social media use increases; nearly three- pricing options. For the restaurants, appropriate technology quarters of the 18-to-34-year-old market is using tabletop can improve service speed, reduce processing cost, provide electronic payment; people are interested in cooking classes; improved marketing information, and gain better revenue and sustainability and recycled products are of increasing management. White pointed out that restaurants must work importance. with their service associates as technology is implemented, As the population continues to grow, the industry will since employees will be concerned about technology replac- see a moderate-growth environment, Riehle believes, at ing their jobs. The study found that younger guests expect least for the next year. Economic fundamentals seem to be technology to be in place, while older guests are mixed in improving, but consumers will still carefully manage their their willingness to use tableside apps. check size and food-price inflation will remain a chal- Of the restaurants that have a website, four of five have lenge, even as operators are reluctant to raise prices due to maps or store locators, and a similar number post menus competitive forces. Consumers are more self-reliant and seek and promotions. Chain restaurants have moved more empowerment, they are using new engagement channels, quickly into technology use than independents, particularly and the seek a community connection. Despite the chal- for such growing apps as online advertising services, wi-fi, lenges, Riehle sees a positive future for the U.S. restaurant and social media marketing. Online ordering is growing but industry. has been adopted by about one-fourth of the restaurants Cornell Hospitality Proceedings • April 2013 • www.chr.cornell.edu 17 Michael White: restaurant chains are integrating their James Coyle: restaurants should focus on key touchpoints information technology and using numerous applications to for customer loyalty, including using guests’ names, inviting improve service speed. the guest to return, .and having the manager visit tables. surveyed, and mobile apps are in place in about 12 percent extent, the ability to place an order while they are in line. In of restaurants. Just a small percentage of restaurants have conclusion, White pointed out that customers’ technology implemented tabletop or kiosk ordering devices. Look- preferences are constantly evolving, but there is a significant ing only at the restaurants that use mobile apps, the most difference between the preferences of customers who are common use is for menus (70%), followed by maps (50%), frequent technology users (experts) and those who are not ordering (39%), and payments (25%). Looking at that last as adept with technology. Perhaps of greatest concern, White item, the restaurant industry remains split on whether guests sees a significant gap between customers’ technology percep- would like mobile or electronic payment options. About tions and operators’ perceptions of what technologies the one-third of those surveyed agreed that guests want to pay customers would prefer. their checks electronically, but those agreeing included far Building restaurant loyalty. Based on research and more chain operators than independents. Respondents split mystery shopper analysis of more than 7,500 visits to restau- almost down the middle on the question of whether offering rants globally, James Coyle, of Coyle Hospitality Group, has customer-facing technology would improve loyalty, but well formulated the elements that make a restaurant great. He over two-thirds thought that investing in restaurant technol- explained that this excellence is what develops true guest ogy enhances the customer experience and also makes an loyalty. He found that the key indicators of excellence are at- operation more profitable. tention to detail (tangible items), hospitality (how the task is Turning to customers’ attitudes, White and Verma completed), revenue generation (salesmanship), and service conducted a survey to gauge customers’ acceptance of (completing the task). technology. In general, they found that customers were Looking at six possible touchpoints, Coyle said that willing to accept self-ordering on a tablet at the table or in a many restaurants miss the following opportunities for excel- kiosk. Nearly all the respondents had used pagers for queue lence that foster guest loyalty. When the guest telephones for management, and about two-thirds had used the internet to a reservation, barely half address the guest by name once it’s place a product order. Customers with a high technology use given, and only half requested email addresses for confirma- were more likely to have reserved a table online, but overall tion. At reception, the best restaurants invited the guest to that application had been used by about half of all customers. return, and the host used the guest’s name and made pleas- The guests viewed that ability to make online reservations as ant conversation while accompanying the guests to the table technology with a high utility, and they also liked the idea (rather than sprinting ahead). The barkeep thanked guests of tableside payment with a handheld device and, to a lesser and invited them to return about half of the time, and at 18 The Center for Hospitality Research • Cornell University Ben Lawrence: The relationship between the franchisor and MIke McCall: one key to loyalty programs is to make sure its franchisees is critical to the success of the franchise that your members feel that they are being specially treated. system. the table servers in barely one-third of restaurants thanked beverage management at the School of Hotel Administra- guests by name once they had that information from the tion. In a study of 207 franchisees, Lawrence found a clear credit card. A critical loyalty point is to have the manage- delineation between attitudes toward the brand owner and ment out on the floor. Just over half of restaurant managers the brand itself, especially in franchise systems that have personally delivered a dish that had been sent back, and less been sold repeatedly. He suggested that the franchisee’s than half of restaurants had managers that made personal relationship with the brand can be a mechanism for improv- contact with a table. Managers making contact with at least ing the overall franchise relationship. On balance, the greater three tables on a shift are a strong loyalty booster. Finally, the franchisees’ identification with the brand, the greater almost half of restaurants failed the critical standard of neat, their identification with the franchisor and their willingness odor-free restrooms. to invest in the system and work with marketing initiatives. Coyle pointed out that the specific behaviors that dis- Initially, the franchisee might have identified with the com- tinguished excellent restaurants are neither complicated nor pany’s founder, and many firms attempt to continue to draw costly. They mostly involve heads-up service: captains who on that legacy even after the founder is gone. This perception greet guests at the podium with a smile and welcome; serv- of the brand as a “partner” in the franchising relationship ers who greet the guest within two minutes of being seated, increases the level of trust in the system and can strengthen develop rapport, are forthcoming with menu details, invite the governance mechanisms, including identification with the guest to return, offer dessert with specific recommenda- the brand. Thus, the franchisor should focus on maintaining tions, serve beverages within five minutes of being seated, its legitimate ownership of the brand. and offer refills proactively; and managers who engage with Parsing loyalty programs. Research by Mike McCall, staff and guests at the door or on the floor. Overall, guests a CHR research fellow, and Clay Voorhees, of Michigan appreciate it when the restaurant’s staff ensures that timing State University, analyzed the effects of a restaurant’s loyalty flows smoothly for each table. program, and found that customers enrolled in the program Managing franchise brands. Although franchising spent $190 more on average than those not enrolled. But has been one of the greatest engines of expansion for the McCall explained that the analysis was not as simple as it restaurant industry, the relationship between the franchisor seemed, because all of the lift in the program came from cus- and franchisee can at times be challenging. Connecting the tomers who had been promoted to elite loyalty status. Com- partners in the franchise deal is the brand itself, according pared to customers not enrolled in the program, members to a study by Ben Lawrence, assistant professor of food and in the lower tier actually spent less on average, where as elite Cornell Hospitality Proceedings • April 2013 • www.chr.cornell.edu 19 customers showed a $250 increase in spending in this par- ticular study. Thus, although the loyalty program did have a favorable effect, McCall said that the key to making the program more than a “coupon” for value seekers is to ensure that customers feel special as members of the program. One way to do this is by ensuring that tier rewards make sense, but this does not always have to involve monetary rewards. Programs with a huge gap between tiers can discourage customers from continuing with the program. In a study of a retail company’s loyalty program, McCall and Voorhees found that a retail store’s loyalty program had an optimal size, which was determined by the number of program members that the store could reasonably serve. Until the program hit that point, stores that exceeded their own average in signups saw better profits, while stores that fell below their average in enrollments saw lower profits. However, increased enrollment was more likely improve store profits when competition was low. Moreover, when the program does not promote brand equity, it functions only as a coupon. On balance, the study found that most programs Christine Lee: The Mcdonald’s McCafé concept was driven by improve a firm’s performance, but so far the McCall and corporate strategy based on consumer research. Voorhees have found no programs that are optimized to maximize the benefit to the company. Developing McCafé. Seeing the continued growth of the coffeehouse trend, McDonald’s sought to democratize the gourmet coffee experience for all consumers, explained Christine Lee, who works on McDonald’s corporate strategy. Although the number of cups of coffee consumed per person in the U.S. has fallen since the 1960s, an important trend shift occurred beginning in the 1990s, when people in the 18- to 24-year-old segment began to increase theirconsumption. The coffee house trend involved more than coffee, Lee explained. It also gave people a place to feel connected and offered a place to gather with a personalized service experience. To adapt this concept, McDonald’s and its franchi- sees upgraded all coffee equipment in 14,000 restaurants, redesigned the drive through, and engineered the beverage delivery process for speed and to create “coffee theater.” With new coffee blends, the McCafé concept then expanded to smoothies and fruit drinks, in season. Not only did custom- ers move from the coffee house to McDonald’s, but the new beverages gave customers more reason to visit the restau- rants and improved brand perceptions. n 20 The Center for Hospitality Research • Cornell University Cornell Center for Hospitality Research Publication Index www.chr.cornell.edu Cornell Hospitality Quarterly Vol. 5, No. 1 2012 Cornell Hospitality Vol. 12 No. 9 The Contagion Effect: Research Summit: Critical Issues for Understanding the Impact of Changes in http://cqx.sagepub.com/ Industry and Educators, by Glenn Individual and Work-unit Satisfaction on 2013 Reports Withiam Hospitality Industry Turnover, by Timothy Hinkin, Ph.D., Brooks Holtom, Ph.D., and Vol 13. No. 6 Common Global and Local 2012 Reports Dong Liu, Ph.D. Drivers of RevPAR in Asian Cities, by Vol. 12 No. 16 Restaurant Daily Deals: Crocker Liu , Ph.D., Pamela Moulton , The Operator Experience, by Joyce Vol. 12 No. 8 Saving the Bed from Ph.D., and Dan Quan, Ph.D. Wu, Sheryl E. Kimes, Ph.D., and Utpal the Fed, Levon Goukasian, Ph.D., and Dholakia, Ph.D. Qingzhong Ma, Ph.D. Vol 13. No. 5 Network Exploitation Capability:Model Validation, by Gabriele Vol. 12 No. 15 The Impact of Social Vol. 12 No. 7 The Ithaca Beer Company: Piccoli, Ph.D., William J. Carroll, Ph.D., Media on Lodging Performance, by Chris A Case Study of the Application of the and Paolo Torchio K. Anderson, Ph.D. McKinsey 7-S Framework, by J. Bruce Tracey, Ph.D., and Brendon Blood Vol. 13, No. 4 Attitudes of Chinese Vol. 12 No. 14 HR Branding How Outbound Travelers: The Hotel Industry Human Resources Can Learn from Vol. 12 No. 6 Strategic Revenue Welcomes a Growing Market, by Peng Product and Service Branding to Improve Management and the Role of Competitive Liu, Ph.D., Qingqing Lin, Lingqiang Zhou, Attraction, Selection, and Retention, by Price Shifting, by Cathy A. Enz, Ph.D., Ph.D., and Raj Chandnani Derrick Kim and Michael Sturman, Ph.D. Linda Canina, Ph.D., and Breffni Noone, Ph.D. Vol. 13, No. 3 The Target Market Vol. 12 No. 13 Service Scripting and Misapprehension: Lessons from Authenticity: Insights for the Hospitality Vol. 12 No. 5 Emerging Marketing Restaurant Duplication of Purchase Data, Industry, by Liana Victorino, Ph.D., Channels in Hospitality: A Global Study of Michael Lynn, Ph.D. Alexander Bolinger, Ph.D., and Rohit Internet-Enabled Flash Sales and Private Verma, Ph.D. Sales, by Gabriele Piccoli, Ph.D., and Vol. 13 No. 2 Compendium 2013 Chekitan Devc, Ph.D. Vol. 12 No. 12 Determining Materiality in Vol. 13 No. 1 2012 Annual Report Hotel Carbon Footprinting: What Counts Vol. 12 No. 4 The Effect of Corporate Culture and Strategic Orientation on 2013 Industry Perspectives and What Does Not, by Eric Ricaurte Financial Performance: An Analysis of Vol. 3, No. 1 Using Research to Determine Vol. 12 No. 11 Earnings Announcements South Korean Upscale and Luxury Hotels, the ROI of Product Enhancements: A in the Hospitality Industry: Do You Hear by HyunJeong “Spring” Han, Ph.D., and Best Western Case Study, by Rick Garlick, What I Say?, Pamela Moulton, Ph.D., and Rohit Verma, Ph.D. Ph.D., and Joyce Schlentner Di Wu Vol. 12 No. 3 The Role of Multi- 2013 Proceedings Vol. 12 No. 10 Optimizing Hotel Pricing: Restaurant Reservation Sites in Restaurant Distribution Management, by Sheryl E. Vol. 5, No. 2 2012 Cornell Hospitality A New Approach to Hotel Reservations, by Kimes, Ph.D., and Katherine Kies Research Summit: Building Service Peng Liu, Ph.D. Excellence for Customer Satisfaction, by Vol. 12 No. 2 Compendium 2012 Glenn Withiam Vol. 12 No. 1 2011 Annual Report Cornell Hospitality Proceedings • April 2013 • www.chr.cornell.edu 21 Cornell Center for Hospitality Research 537 Statler Hall Ithaca, NY 14853 USA 607-255-9780 www.chr.cornell.edu All Chr reports are available for free download, but may not be reposted, reproduced, or distributed without the express permission of the publisher.