Our COO and co-founder, David Turnbull, has lead a Demand Management MOOC (Massive Open Online Course) for some time now, and has received quite a lot of acclaim from students and industry experts. So we asked David to take what he teaches in the MOOC and expand upon it here. In part one of our introduction to Demand Management, David explains the basics of hotel Demand Management and how hotels can use this management strategy (it's more of a philosophy, really) to use tech to better understand and, of course, better serve their guests. Read part one of David's introduction to Demand Management below.
In 2010, David McCandless created the now famous quote, “Data is the new oil.” With that simple line McCandless prompted people to look at data as more than a simple driver for business, he distilled the potential for individual creativity, if data could be unlocked in a more visual, meaningful way.
In 2015, the hospitality industry rushed headfirst to implement “Big Data” initiatives. Even so, the indsutry today looks more like a landscape of scattered or uncoordinated implementation than a revolutionized industry. Amid the rush to utilize Big Data, what hoteliers actually need is smaller and smarter data that reduces the noise of poorly executed analytics. In short, hotels need tightly focused, actionable data. Hotels need information. The good news is that when implemented properly, a solid plan for utilizing data presents a major opportunity for inter-departamental collaboration as well as the developement of long-term asset value and short-term optimization.
On Generating Demand
It's crucial that hotels set up an effective long-term demand generation strategy. To begin, hotel stakeholders first need to define exactly what “Demand Generation” is. Then decision makers can determine how best to apply new technologies for its optimization.
Demand Generation as it applies to the hospitality industry, is best defined as: Focused sales, distribution, and marketing activities that drive interest and awareness in a company’s services and products. Think of it as a modern, more comprehensive, holistic approach to revenue management. To understand your company's own demand generation strategy, answer each of these questions for yourself:
- What is the product?
- How clear is the value proposition?
- What is the value to the customer?
- Who are the customers?
- How much does it cost?
- What is a healthy business mix?
- How do those connect technologically?
As rising revenue generation costs hinder growth, hoteliers will need new approaches and new tools in order to overcome these pitfalls. One of the best ways hotels can stay ahead of the competition is by using the technological resources available to them. Simply understanding what's already available for your team's disposal has plenty of value. But using these new tools wisely can provide an immediately tangible boost.
The Product Scope
In a 2013 paper on the subject of Hotel Demand Management, Bill Carroll of Cornell University, wrote; “There is no such thing as demand for a hotel stay.”
This is a great statement to help us understand how the industry has changed. Today, customers buy travel experiences, not rooms, and they do so on very specific channels. Meanwhile, hotels tend to plan their demand generation with awareness of the entire channel landscape, while viewing their products and services in a more segmented manner. This translates into planning tools for budgets and forecasts that often focus on narrow metrics like market segment.
And whilst market segments may reveal and track specific attributes about a customer’s profile, in the age of the internet, the ability to accurately assign customers to these segments is limited in advance of their arrival. Conversely, tracking channel segmentation reveals a much more detailed understanding of who the customer is, based on, for example, the choice of channel (direct or via an intermediary), the rate type, the policies accepted, and so on. It's details like these that help us to gain a better understanding of who the customer is and what products and services they are interested in throughout the lifecycle of their engagement with the hotel.
Once a more clear understanding of the customer is established, we can begin to figure out how to better motivate them to book with us via marketing, then how to give them the best possible experience, via custom-tailored offerings.
Filtering the various guest characteristics data can tell us which traveler preferences should be weighted heaviest, or which expectations we should satisfy first. Is a particular guest on a leisure trip where space, comfort, and design are more desirable? Or is our guest the typical business traveler, whose requirements are more focused on technology, convenience, efficiency, and an optimal working environment?
Not every hotelier realizes that many consumers perceive the hotel itself as the product, defined by its location, history, reputation, and design. We’ve discovered in recent years innovative hotel brands like citizenM have become popular by redefining the customer’s needs and the hotel living experience, moving, for example, the concept of where one works and relaxes from the bedroom to the public areas, in order to increase the social aspect of the consumers stay.
New terms such as the “bleisure traveler” redefine the expectations of the typical business traveler, who may choose a hotel due to both its proximity to the office or a particular meeting. They may also consider access to local restaurants or cultural events as part of the overall guest experience. It’s a tough product to sell as customers often seek to be inspired to try out new and different kinds of experiences.
These days, experiences such as smells, sounds, and lighting can help hotels to move beyond functional features & benefits, into the realm of tightly focused personalization. Hotels can fundamentally change how the brand differentiates the “experience” as part of a unique product offering. As consumers typically associate their favorite brands with their favorite experiences, hotels have in theory the best resources to implement an experiential approach, due to having one of the highest levels of customer interaction whilst the product is being consumed.
Finally, we must ask ourselves, “What types of experiences do we want to provide in the short and long term?” and, “How can we integrate these experiences into the product and our branding?” We must also take into account the customer‘s perceived value of a product and service. The level of satisfaction is therefore tightly related to the other functional policies and measures within the marketing mix. This ultimately requires a holistic approach to marketing – a company-wide focus on creating value with different departments working in tandem. Marketing isn’t just promotion but is intrinsically linked to revenue, sales, PR, and development. The hotel's product defines its positioning in the market.
Coming soon in a follow up post, we will explore the promotion of the product and the distribution that connect the consumer with the product.