Discussions on travel & hospitality related industry challenges, innovations, trends and information

November 15, 2013

Inflight entertainment - Part II - Cost Optimization

1. Introduction

In one of my earlier blogs, I had broached the matter of how inflight entertainment is undergoing transformation. Here I am going to examine how a sound inflight entertainment strategy can reduce millions of dollars in costs for Airlines. For purposes of our discussions here, I am going to classify both the inflight magazines and seatback screens as components of inflight entertainment.

Fuel costs are one of the three major costs for an airline, with labor expenses and the aircraft maintenance being the other two. IATA predicts that fuel cost would be 34% of the average operating costs[1] for a typical airline.

One of the most prominent ways to reduce fuel usage is by reduction in the weight carried by the aircraft. American Airlines claims that replacing their pilot's 'electronic flight bags' that weigh 35 pounds with iPads will save the airline about $1.2M across all of its planes annually[2]. If we consider two iPads to replace the electronic flight bags, then:

Weight of two iPads (one for redundancy) = 3 pounds (approximately)

Weight savings achieved = 35 - 3 = 32 pounds

Therefore, the annual cost savings / pound of weight as estimated by AA = $(1.2M / 32) = $37,500

Hence, reduction in weight carried by an aircraft has huge potential savings in fuel costs.

2. Inflight Magazines

As part of this document, we analyze the cost reductions that can be achieved by reducing the weight of In-Flight magazines carried on aircrafts. With advancements in digital technology, it is now possible for airlines to consider having their In-flight magazines in digital formats that can be read using Kindle, iPads, Galaxy tabs, etc. An In-flight magazine weighs about 1.1 pound, and this is at the lower end of the spectrum. Some In-flight magazines weigh close to 4 pounds.

Considering an aircraft of 200 seats, the total weight of In-flight magazine will total up to 220pounds. The weight of a Samsung Galaxy tab 3 is 0.66 pounds. If all the magazines are replaced with tabs in the aircraft, the calculations will look like:

Docking Option for Tablets

Figure 1: Docking Options for iPads

Number of Seats on the aircraft = 200

Total weight of In-flight magazines = 220 pounds

Total weight of 200 Galaxy tablets = 132 pounds

Weight Difference gained by replacing In-flight magazines by Galaxy tabs = 88 pounds

If 1 pound saves $37,400, 88 pounds weight reduction will save, (40*37,500) = $3.3Million annually

Digitizing the magazines and other in-flight paper items like duty free catalogues, meal catalogues etc. has various other advantages such as

· Easy updates/corrections to the content

· Ability to search for the required information

· Change of font size to aid viewing

· Recommendations for content relevant to the ones being consumed by the user etc.

· Multilingual support

· Offline and online browsing

· Environmental benefits of saving paper

· Cost savings in reduction of distribution logistics

3. Inflight Entertainment Systems

Additionally, the tablets can replace existing In Flight Entertainment (IFE) devices from the aircraft and this will add to increased weight savings (Replacing the wired infrastructure for IFE's with wireless tablets will contribute to further weight savings, but we can consider that to be zero to keep the calculation simple). An IFE system such as Panasonic's eXLite can weigh 3.2 pounds on the lower end of the spectrum[3].

Removing 200 IFE's from the aircraft will save 640 pounds of weight

This will save the airline, 640 * 37,500 = $24 Million annually

4. Conclusion

In conclusion, potential savings up to US$27.3 million are possible with these simple changes.

Airlines should take a fresh look at the dead weight in their cabins that can be optimised with the help of the 'Always Connected, Always ON' passenger of today. FAA's permission for use of personal devices throughout their journey is further impetus to this initiative.



[1] http://www.iata.org/pressroom/pr/Pages/2012-03-20-01.aspx

[2] http://hub.aa.com/en/nr/pressrelease/american-airlines-first-commercial-carrier-with-faa-approval-to-use-electronic-flight-bags-in-all-phases-of-flight

[3] http://www.prnewswire.com/news-releases/air-new-zealand-selects-panasonic-avionics-corporations-exlite-ifec-solution-for-its-b777-200-refit-program-170260306.html

 

 

Disclosure: Infosys DigitizeEdge helps airlines convert their hardcopy content into digital content with minimal effort and render it directly through  a personalised exeprience zone on the consumer device

October 22, 2013

Inflight Retailing for Airlines - 5 lessons from other industries

In one of my previous articles, I had explored the nature of inflight retailing, its current state of affairs and where it was heading. And some of it has already started to unravel. As part of inflight retailing, one of the key features is food and beverages (F&B). Although there are industry reports that suggest that F&B does not attract any new revenue and/or passengers, there is also a contrasting view.

I read two very interesting blogs and 1 very interesting article recently

  1. Opportunities sprout up for airlines to sell premium meals in economy cabins - This blog focusses on the potential of inflight meals to generate ancillary revenue
  2. New wireless inflight retail system aims to help airlines maximise revenues - This blog focuses on "VIP On-The-Go", a wireless inflight retail system
  3. Economy Class Meals Get an a la Carte Upgrade - This article focusses specifically on the needs of economy class inflight dining

These developments are in line with my assessment. Airlines have to look beyond their traditional ticket sales to expand their revenue base. In my opinion, airlines have to start thinking of themselves like shopping malls, Facebook, TV and most importantly Amazon.

Lesson 1: Having a captive audience is a good thing

Airlines tend to think of themselves as basic transporters and passengers as commodity/goods that need to be transported. This perspective must change. Passengers are actually a set of captive audience that unfortunately is tied to their seats for long hours and has very little contact with their loved ones, colleagues and friends on the ground. So what is it that an airline can do for them, be it from the perspective of 'entertainment', 'service' or 'shopping'?

Lesson 2: Lessons from Shopping Mall - Window shopping leads to wads of money

People love to browse and window shop but in the process always offer a bigger share of their wallet than they would when they were doing pointed purchase. This has got to do with enhanced quality of experience that a mall offers compared to a mom-and-pop outlet. Look at the evolution of any major city in the world. During the days of mom-and-pop stores, people go to a shop knowing exactly what they want and when these are replaced by malls, people go there just to 'check-out' the mall, eventually always buying things at twice the price of a mom-and-pop outlet. (People, who are too young to understand this, please feel free to contact me directly) J

Lesson 3: Lessons from Facebook - Staying in touch is important to people

People love to stay in touch with their friends, colleagues and loved ones and are willing to spend great amounts of time and effort to do so. Which means inflight connectivity and Wi-Fi are an absolute essential for airlines to install. When making that happen, if airlines want to sell some premium packages, the passengers would most likely pay gladly.

Lesson 4: Lessons from TV industry - Freemium - advertisements can be tolerated when served with quality entertainment but give me the option to pay and watch what I want

People love to watch quality entertainment for free and hence are willing to tolerate the advertising world but when it comes to premium content, they are equally willing to pay for it. Just look at the evolution of pay-per-view TV

Lesson 5: Lessons from Amazon - Recommendations IT Systems have huge revenue upside

Personalisation and recommendation will always help to sell more and at a premium. According to a report on CNN recently, Amazon has reported a 29% increase in sales (from US$9.9 billion to US$12.83 in 2013). And to quote the report "A lot of that growth arguably has to do with the way Amazon has integrated recommendations into nearly every part of the purchasing process from product discovery to check-out." Need I say more!

So whether they like it or not, Airlines must wake up to the cause of personalisation and recommendation.

I believe any airline trying to gaze the crystal-ball to predict the future must look at the above five lessons, if they wish to evolve into the next generation of their industry, more importantly be around for another 20 years without the fear of bankruptcy looming every alternate year......

Happy to hear feedback....

August 19, 2013

Vine, Anyone? Rome2Rio or Waytogo? Social Agility in 21st Century

Did you hear about the micro-video-blogging site that went from start to acquisition in well under 6 months - Vine? It allows users to take and upload a 6 second video. It's not even appropriate to talk about Pinterest or Instagram in the same breath which tooks years to mature and reach their valuations.

Similarly there is a travel app (and website) - Rome2Rio - a door-to-door (almost) guide for travel rather than point to point search which most search engines cater for. Similarly there is ClearTrip's Way2Go.

 

Rome2rioWay2GoThe point is that there are hundreds of apps, micro-sites, sites and portals coming online every single day. With pace of acquisitions (Marissa Mayer alone has burnt almost US$2 billion in recent times acquiring a host of start-ups and companies), it is very hard for any travel company to keep up with the pace of change that is happening in the technology landscape. Whether you are an airline or a hotel or a travel agent, where do you advertise, where do you ensure presence, which do you skip, should you be "cool and hip" or "traditional and reliable". There is such a flurry of activity in technology landscape that you will find it hard to decide where to be present, where to skip, where to respond, where to miss.  

 

Imagine a 6 second video of your Inflight attendant's rude behaviour getting uploaded on vine. Or a photo of your kitchen-blunder being uploaded onto Instagram or Pinterest. Or your flight not being one of the option listed on Rome2Rio or Way2Go.

These are real-life scenarios that all travel companies should constantly be prepared upon. Today's world is very mobile, always-connected, always-ON. Content and Information is no longer king. Connectivity is, Experience is. This is the reality of the 21st century. Corporations - the bigger you are, the more responsive you are expected to be. The slower your response, the poorer your presence, the more likely are your chances of getting caught with the hand in the cookie jar.

 

 

Social Agility is the need of the hour. Be present, be connected, be responsive. Are you prepared for the next generation of consumers to grow up?

May 1, 2013

What is Customer Experience? - A synopsis

Customer Experience is a term that, like its predecessor 'Customer Relationship Management (CRM)', is being sufficiently discussed, debated and talked about. Here I would attempt to summarise the vast literature around it in meaningful way, which even a layman can understand while making the best of efforts to ensure sufficient academic stimulation for the well-informed of the field.

1. Customer Touch points

First, let's look at what is a customer touch-point. A customer touch-point is defined as a point of interaction between the customer and the business that is selling the product/service which the customer requires. This customer-business interaction may happen over any of the channels of communication

2. Customer Experience Channels

There are multiple channels to facilitate interaction between a customer and a business. These could be classified as direct channels (like the call centre) or indirect (like TV advertising). Based on the use of technology, these channels could also be classified as Digital Channels (like Website, mobile phone) and Physical Channels (like retail store). There may also be social channels of customer experience. These are indirect channels typically where a potential customer hears about a product/service experience of a business from his/her friend. These are typically social channels, traditionally limited to word-of-mouth marketing (WOMM) but more recently including new age Digital channels like Facebook, Twitter, etc.

3. Customer Lifecycle & Stages

Customer Lifecycle is the sum-total of all the stages that a customer goes through during his/her interaction with a business from awareness, discovery, attraction, interaction, purchase, use, cultivation to advocacy/termination.

Customer_Lifecycle.png

4. Customer Journey

Each stage of the customer lifecycle above has a customer objective and the customer goes through a series of steps to achieve his/her objective. This is known as a customer journey. And Customer Journey Mapping has its promoters and detractors and the benefits have to be weighed in by the business before undertaking it.

5. Customer Experience Definition

With those basic components defined, I believe we are at a point where we can define Customer Experience. Customer Experience is a cumulative total of what a customer feels (experiences) across all touch-points, across all stages of the customer lifecycle, across all customer experience channels.

6. Customer Experience Classification

Several sub-sets of customer experience have been attempted. From online experience to User Experience to Digital Customer Experience, there are many attempts to classify/slice-and-dice customer experience subsets. But most are in its infancy and industry specific.

7. Differentiation from Customer Relationship and other previous concepts

Customer Relationship Management (CRM), Word-of-mouth-marketing (WOMM), Customer Service, Voice of Customer (VOC) initiatives and Net Promoter Score (NPS) are all concepts related to customer experience. Each of them deserves its own discussion but broadly speaking they all represent a segment/subset of customer experience but not customer experience in its entirety. E.g. WOMM & NPS mainly reflect the outcome of customer experience but do not measure its enablers.

Customer_Experience_CRM.png

8. Challenges of Customer Experience (CX)

Lastly I want to briefly touch upon the current challenges of customer experience. So assuming you comprehend CX, its value to your business but the obvious next question is how? The primary obstacles in enforcing a proper CX strategy in an organisation are as follows, in my opinion:

a. Tools for Customer Experience - There are very few IT tools available for CX namely along the following objectives:

i. Customer Experience Innovation - How do I use technology to innovate CX of my business? Are there existing tools that I can implement and let them suggest innovative solutions to my CX challenges?

ii. Customer Experience Delivery - If I have a CX strategy in place, what IT tools should I procure to implement them in my existing IT ecosystem?

b. Customer Experience Monetization - What CX strategy should I implement so that I get the maximum bang for my buck? I have attempted to address the challenge of "Customer Experience Monetization" for hotels industry in one of my other articles.

c. Customer Experience Measurement - How do I as a business quantify "experience" and then measure it? Should I measure it using financial metrics like revenue or service metrics like FCR (First Call Resolution) or survey based metrics like CSAT (Customer Satisfaction) or social metrics like NPS.

I hope the definitions and the challenges articulated would serve to give a foundation to those looking to learn about "What exactly is customer experience?" For experts in the field, I welcome them to contribute about what are the other major challenges that I might have missed out as well as proposing their solutions to the challenges I have elaborated above. I look forward to learning from my peers and seniors in the field...

April 16, 2013

Travel & Leisure Industry: Trends & Challenges

In my last blog, I wrote about the importance of both understanding what your customers want now and more importantly, what customers are going to want in the future.  Now, I want to introduce some of the trends we are seeing today in the travel and leisure industry, and then mention some of the challenges the industry faces because of these trends.     

So, what are the current trends?  First of all, customer service continues to play a giant role in property selection.  Customers nowadays demand higher levels of customer service and want customized travel experiences.  The same is true for business travel.  There are so many options for business customers to choose from.  If one property fails to meet the expectations of a customer, he or she has plenty of other options.  Likewise, it's much easier now for a potential customer to shop around themselves to get the best value via property websites as well as travel websites like Orbitz and Travelocity.  However, people still want first class treatment.  They want something unique...something they will remember.  Business clients, while perhaps easier to predict and to cater to, make up the majority of travelers and they want comfort, and for their experience to remind them of home.

Another trend that we are seeing in the travel and leisure industry, the use of social media, has become a prevailing part in how customers shop for their hotels.  Customers are checking out many websites before clicking the "buy" button.  They tend to follow the advice of their favorite bloggers and/or friends through vehicles such as Twitter, Facebook, and Yelp to form their opinions before they make their purchase decisions.   Also, more and more potential customers are doing this on a mobile platform.  Not only do they do their research via mobile, they want to book while mobile, too.  Companies must be prepared for this if they want to be successful in this new environment.

Although customers want better experiences, the global economy (and their personal checking accounts), continue to play large roles in their decision making.  Because of the global economy, another trend we are seeing in the industry is that customers are looking for vacation resorts closer to home.  With rising fuel costs, people have less money to spend on air travel.  Thus, potential customers are looking for "all-inclusives" so they know how much they need to budget.  This price sensitivity becomes a challenge for properties as they are forced to get creative in how they package their offerings.  Similarly in business travel, businesses are becoming stricter as to which properties its employees can stay at and how much they can spend.  I know from personal experience that trying to find a hotel on a tight budget that offers the amenities I want is difficult.  Price plays a big part in my decision making process. 

A final trend that we see in the industry is that customers are looking for more "socially responsible" resorts to stay at on either business or holiday.  The topic of sustainability has become a leading one and hotel/resort customers want their properties to offer eco-friendly accommodations and experiences.  Hotel managers are certainly looking for ways to save money and going "green" often is a good way to reduce costs.  Some of things important to customers (and the businesses) are properties that are saving on water, energy, and solid wastes.  Similarly, being "green" means guests and the staff are healthier which is something we all want.

These trends are driving changes in the industry.  So, to stay abreast as to what customers want, businesses need to do the following:

·         Hotels and resorts need to use Social Media to engage their customers.  What does this mean?  Well, certainly the company must interact with their customers via Facebook, Twitter, etc.  They must keep their information (posts) fresh and perhaps offer specials through these channels.  Next, they should monitor public conversation.   The moment there is something negative posted online, they must react and reach out to the person and try and get the matter resolved. 

·         We've talked about the power of the mobile trend.  Travel and leisure businesses must allow customers to book via mobile.  More and more people would rather book mobile because of its speed and efficiency, and perhaps they just don't want to spend the time talking with somebody on the other end of the phone.

·         Green and Sustainability are not just fancy buzz words anymore.  People want to make a difference in the environment, so hotels must make their properties more eco-friendly.  Customers are placing an emphasis on properties implementing eco-friendly practices.  This could be as simple as asking their guests whether they prefer a "green" service limiting the washing of towels and sheets (unless requested), or even timers on HVAC and lighting in the rooms.

·         Finally, properties must continue to stress a high importance on customer service.  Great customer service builds customer loyalty.  In such a highly competitive industry, hotel properties must always focus on improving their offering and staying focused on its customers.

Trends need to be given the attention they deserve.  Hoteliers that do this have a much better chance of beings successful in such a competitive environment. 

April 15, 2013

Hotels - Customer Experience Index (CXi) & revenues

Customer experience as a concept is not alien to the hotel industry; some might even suggest that Hotel industry invented customer experience. With its star-ratings for establishing consistent product features to brand consistency as envisioned by Marriot, Hilton, Intercontinental, etc. hotel business has always been about creating positive experiences. From Weddings, birthdays and conferences to prom nights and honey moons, almost every consumer of the world has had some of his/her most memorable experiences in a hotel. So what is this hype about Customer Experience and can a hotel make more money with it?

Forrester's Harley Manning in his blog dated Nov' 2012, has defined Customer Experience as "How customers perceive their interactions with your company". It encompasses all touch-points while aiming to distinguish customer service and marketing from Customer Experience. Forrester has measured Customer Experience Index (CXi) since 2007 across 12 odd industries including Hotels. Hotels typically perform well in these measurements and are also one of the greatest benefactors from further improvements. Of the 150+ brands covered in the 2012 measurements, the "Good" performers from hospitality included "Hampton Inn/Suites" and "La Quinta Inn & Suites" among the top 10 Customer Experience brands. Additionally, Forrester estimates that if a hotel were to move from a below-average CXi score to an above-average score, it could see more than $1.3 billion in total revenue benefit. This roughly translates to slightly over 6% in projected increase of topline. Really? For business already excelling far beyond any others in terms of customer experience, is such a significant increase even possible?

Whether you like it or not, change is a good thing. It creates possibilities. With internet, the information and the digital age, rise of the Generation Ys and Zs, things are more dynamic than ever. With multiple channels of customer experience and competition nipping at the heels of every major hotel in the world, it is no longer about just consistency and quality. It is also about differentiation and expectation. So where do we start?

First, let's look at the different channels of customer experience

1.       Physical channels - Print Ads, Billboards, on-premise, in-room, restaurant, facilities, employee interactions, etc

2.       Digital channels - Delivered online through internet, via a laptop, Mobile, Tablet, etc. This is sometimes specifically referred to as "Digital Experience"

 

Next let's examine the different stages of customer experience. A generic hotel customer engagement lifecycle would consist of the following stages:

1.       Inspiration (Awareness of Need and Discovery of Info)  Hotel_CXI_stages.png

2.       Planning (Evaluation of Options)

3.       Purchase

4.       Preparation

5.       Stay

6.       Engagement (Advocacy or termination of relationship)... think social media and online sharing here

 

 

And then there is the how to achieve and who should be responsible? Whether you like it or not, employee engagement is a key to creating memorable customer experiences across touch-points, especially in a people intensive business like hospitality.

 

So in my opinion the three key features to maximise customer experience for a hotel would be as follows

 ·         Relevance through Personalisation - As popularised by Netflix and Amazon among other is the key to creating unique experiences

·         Ease of use - Everything from booking to check-in to ordering room service should be easy to use from the customer perspective. So obviously your IVR system asking guests to choose from 5 options for at least 5 questions before letting them talk to a customer service agent is a BAD customer experience product.

·         Fun to use - People like to repeat doing things that create pleasurable memories. We mortals are pleasure-seeking creatures and things that are fun to use and leave us with happy memories automatically draw us back to them. This is why we love our theme parks so much.

 

So why should you re-invent your product to align it with personalisation, ease and fun concept. The answer is simple - it makes business sense.

Assuming we take a hotel with following characteristics

1.       Revenue - US$4B

2.       RevPAR (Revenue per available room) - US$135

3.       ADR (Average Daily Rate) - US$180

4.       Customer base - 10 million annual visitors

5.       Average stay - 2.2 nights

Using a standard revenue projection methodology, you would be able to generate up to US$178M in additional revenue including additional ancillary sales. Furthermore, you could get additional cost savings of US$1.56M per annum.

 

 Hotel_CXI_ROI.png

 

As you can see, it pays to be rated highly on your CXI ratings. Do you still need another reason to embark on a customer experience journey? J

 

P.S.: This is the second in the series of 5 articles for Customer Experience Strategy for hotels. Previous one here

 

 

 

April 3, 2013

Inflight Retailing - then, now and beyond...


As I took a domestic India flight over a lazy afternoon last Sunday, I was pleasantly surprised to see them make retailing efforts on-board - selling food and beverages at first and then some consumer goods like watches, eyewear, bags, etc. I was flying this airline for the first time. And it brought back pleasant memories of when I was first exposed to the concept of inflight merchandising. It was in mid-90s aboard a Singapore Airlines flight when a couple of flight stewardess rolled out the duty free cart in the second hour of the flight. Preceding that was an announcement about the same with reference to an in-pocket duty free sales magazine which had the entire product catalogue. The magazine titled "KrisShop" was printed on high-quality glossy paper making it look more expensive than any magazine you could buy in your neighbourhood shop. It had images and presentation style that would entice any window shopper to make a purchase. Not to mention the duty free rates seemed better than most airport stores. It had some very desirable luxury items at prices that not only seemed reasonable (given they were tax free) but seemed like a very good idea simply for their novelty. Back then to say "I bought it aboard a flight from Tokyo" seemed a lot better than saying I bought it in the local mall. Flying was still not commoditised in those days.

Fast forward to 2013, and the idea seemed like a stretch and a drag. Captive audience with nothing else to do, since there was no inflight entertainment on-board, it caught the attention of many but the buyers were relatively few. Food/Beverage sales were far better than merchandise, although fetching far lower prices. Here I must mention the extremely credible efforts of the inflight crew, who seemed both trained and professional in their sales efforts but meeting little success.

So what was missing?

In my opinion, at least the following:

1.     Product Catalogue - We are way past magazines for product listing. In this day and age when you can switch on your own laptops/handhelds during the flight, people are not so keen on browsing the back-seat pocket inflight magazines. Airlines have to think of a whole new product listing approach

2.     Novelty Factor - Flying is commoditised. Everyone flies and buying things on flight seem more "last-minute" than attractive. So unless you are buying something for yourself, it seems like a waste of money

3.     Optimum Sales Cycle and Price Point - Consumer products have a typical sales cycle for each price point. Some products are purchased after several browsing, comparisons and trials and some at the drop of a hat. The distinction of how long it takes to make a purchase decision for a category of the product must be factored into the choice of having it on-board. For e.g., personally I would not buy a watch costing upwards of US$50 in less than 1 hour. After all I am going to be stuck with it for a while and hence want to be careful. So trying to sell it to me on a flight with total flying time of less than 3 hours is not going to have a high probability of success. Finding the right balance between the price points and their sales cycle is very important. Fast Moving Consumer Goods (FMCG) products may be more successful in short haul domestic flights while some travel accessories like phone/laptop chargers more so in international flights.

4.     Optimum Product display - The sales carts used to sell the products must have an attractive display. We are now living in a digital age where visual appeal is a given and without it the best of sales efforts would fail. It can no longer be a cart with racks stacked with items. It needs a visual appeal to it that draws attention without seeming intrusive.

5.     Total Sales cycle - It is more about making a sale than just making the sale on-board. So the passenger should be engaged right from the pre-flight check-in to post-flight baggage collection through creative means to get them to make a purchase, rather than just limiting the sales process to 1 hour during the flight itself. I spent 40 additional minutes at the check-in gate due to the flight delay - bored out of my mind with absolutely nothing to do. Perfect opportunity to give me something engaging to read or browse. Free internet access to Airlines online product catalogues at the airport can further help to engage passengers. Digital advertising, mobile phone apps, etc.

6.     Advertising - When I went on the flight, I had no idea they would be selling things on-board. Some passengers seem to be aware but most were clueless. Most of us were short on small change as well. We were mostly carrying large currency denominations of Rs.100 and Rs.500. I did not have Rs.40 to buy a cup of coffee. Simple advertising at the gates and check-in counters, making notes of small denominations available at the gates would have gone a long way to raise my awareness as well as ensuring I was positively influenced to make an on-board purchase. A cup of coffee at the airport was cost me Rs.90. If I knew I would get a drink on-board, I would have exercised discretion.

In these difficult times, where Airlines are constantly battling unpredictable demands with wildly fluctuating oil prices, it makes sense for them to get creative about inflight retailing. Break it down, map the customer journey, re-invent the entire experience, make it enjoyable and creating a new revenue stream for themselves while improving the overall flight experience for the passenger, seems like the need of the hour for most Airlines.... I hope someone is listening, more importantly thinking about.....

Reinvent your inflight retailing to differentiate your customer experience, the time is now is all that I can say to the Airlines of today....

March 18, 2013

Guest Personalization or Social Media Stalking: Where does a hotelier draw the line?

Guest Personalization is the ability to utilize all known customer elements about travelers to drive personalized offers and product offerings.  The goal is to generate customer loyalty, and ultimately increase revenue in the current trip and/or future travels.  This is not a new technique.  However, with the evolution of Big Data, Social Media, and business analytics, travel providers are improving the data consolidation and rapidly advancing the automated personalized experience.  As this becomes more common practice, providers NOT personalizing will be left to the wayside as guests drift to the providers that know them, making them comfortable with the experience and end product.
But what are the risks?  How close to a fully personalized experience can the system get without crossing the line to offending the guest?
Use of Social Media data to personalize the guest is highly desirable for the travel provider.  Retailers are doing it currently on many sites.  A company can offer and achieve incremental revenue beyond the basic product offering, through a little social media intelligence, revealing interests, past travel experiences, personal contacts, etc.  For example, a guest's profile including favorable pictures of a previous cruise to the Caribbean, with positive remarks, and conversational exchanges with friends can lead to offering other similar trips and/or packages that could extend to friends as well.  However, mentioning the actual names of friends may cross the traditional line of personal space boundary.  Does the guest get "creeped out" that a business knows the names of their friends?
How about the example of a hotel placing a framed family picture of a business traveler's family, found on his FaceBook page, in his room when he is away on Father's Day?  Does the guest want to know that you've accessed pictures of his children?  It might depend...  If the guest is a frequent repeat guest, who is very congenial with hotel staff, then it might be fine.  If it is a first-time or very private guest, then it may be offensive.
Yes, Social Media is by definition public data.  However, the general public doesn't want to acknowledge that they have been totally open to world, nor do they want it to be placed in front of them that they have opened themselves up to automated scrutiny.
Is there a clear line of demarcation between a fully customized, highly personalized traveler's experience and Social Media stalking?  No, I suggest it is more of a gray zone that needs to be tread on thoughtfully and carefully.
Very interested in your ideas in this thought provoking and emerging area...

March 13, 2013

Dynamic Pricing: What are the barriers to the perceived revenue optimization holy grail?

Dynamic pricing...a highly desirable capability that hoteliers believe will lead to the ultimate in revenue production and drive REVPAR upwards. What is it? Is it a shopping cart capability, allowing guests to plug and play with their purchases, creating customized packages? Not really...creating customized packages is dynamic packaging. Dynamic pricing is the ability to generate a price, in real-time, for travel products a guest purchases based upon many revenue management input factors, including forecasted occupancy, projected hurdle rates, projected demand, city events, group bookings, guest attributes, products requested, etc. The price generated at 1pm may be different from the price generated at 1:05pm in a truly dynamic system.
The key to truly dynamic pricing is the real time factor of the equation. Today's travel consumer expects instantaneous responses to pricing requests for travel products. In order for travel suppliers to respond to the thousands of requests hitting their systems per minute, the technology needs to be able to compute and respond with sub second response time to the traveler's request. Hence, technology has been a major inhibitor to delivering the desired functionality.
Traditional monolithic Central Reservation Systems (aka CRS) have been designed with rate databases that store room rates and related rate data in static flat file structures. As hotel companies strive to move rates onto relational database structures in conjunction with major technology moves, they open up the possibilities to move towards dynamic pricing capabilities. However, the database rate storage structure is not the only barrier.
Operationally, major hotel companies have Revenue Managers, who manually peruse the system to analyze the factors leading to the opening and closing of rates at any point in time for future stay dates. Several of the major companies have already or are in the process of moving to varying levels of Yield Management automation, systems that use scientific analytic formulas to recommend rates for future dates. Note that even with these systems, the rates are recommended, and not in all cases actually accepted and stored. There is still a level of evaluation of the recommended rates prior to pure usage in the CRS. The cost of these systems and the needed integration is not trivial. Hence, the population of hotels utilizing this level of automation tends to be focused in high volume, higher end properties. There is a large population of mid-level and transient hotels that have not made this level of investment. These properties rely on manual methods of defining and storing static rates in the CRS. Manual definition of static rates cannot support a truly dynamic pricing request in real-time.
Coupled with the manual rate definition, inputs to the Revenue Management systems are in many cases relatively manual. Inputs include city events, STAR reports, and year-over-year occupancy levels. The more manual inputs to derive the optimal rate at any point in time contribute to the difficulty in delivering full rate automation. In addition to the input, the systems must have the inherent intelligence to act accordingly to the inputs, integrating into the Yield Management systems, and subsequently deriving rates based upon all of the relevant data points.
Lastly, the evolution of high "look to book" ratios driven by travel distribution shopping engines in distant locales has magnified the "real time" technology challenges. As shopping traffic increases beyond what the CRS technology and networks can support, hotel companies are forced to deliver a set of cached rates to these shopping engines, thereby reducing traffic on the CRS to the booking side of the transaction rather than the full shopping experience. Cached rates, by definition, are not computed in real-time unless a complex set of business rules were to be developed and distributed to support dynamic rate calculation.
Is there a hotel company delivering true dynamic pricing in today's industry? No, but many are talking about it...

 

March 4, 2013

Understanding Your Customers: Know who they are and what they want... both now and in the future

In my last blog, I wrote about how significant customer service is to the success of a business.  In this one, I want to be more forward thinking and hit on the importance of both understanding what your customers want now and more importantly, what customers are going to want in the future.  I will also touch on the how vital it is to be aware of the trends that are active in the industry and how that relates to the ever-evolving customers' needs.  
It's essential to know your customers (and markets) to continue to generate growth.  Nowadays, a number of tools are available for companies to use to do just this.  One such tool, big data, has been mentioned quite a bit recently to describe the potential for capturing vast amounts of customer information both internally and externally, and using it along with advanced analytics to identify customers' needs and wants (ie: their behavior).   Wide ranges of industries recognize that knowing your customer leads to improved service for the buyer and results in a more loyal customer.  I would agree with this, but I would say that businesses must also analyze industry "trends" (and how these trends have evolved over time) to better forecast customer demand for products and services. 
There is certainly rich customer information available in different forms of media like email, call transcripts, and social media outlets.  Advanced analytics has the potential to fundamentally change how hospitality companies relate to their customers along with enabling better price optimization, demand forecasting, etc.  Businesses can and should leverage this information to grow relationships with customers. 
Hotels have always lowered prices to stimulate sales when demand is weak and raised prices during peak demand periods.  Hotels can now update prices for all future arrival dates to match market demands each day via advanced market intelligence applications.  Likewise, revenue management is going to all new levels with a focus on demand optimization utilizing big data and more and more hotels look to social media as a way of generating revenue and bookings.   Plus, it has already become more of a key component of Search Engine Results Page (SERP) algorithms.  As pointed out in Rauch's article in hotelmarketing.com, "Facebook's posts are already integrated into Bing search and Google+ emerged with native integration into Google search.  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."
What do we do with this detailed knowledge of our customers you ask?  Well, we must identify what trends are taking place in the hospitality industry so that we can better forecast demand.  If we know what our customers want and how that has changed over time, we can better forecast how that will continue to change.  Knowing our customer's behavior is only half the battle.  As a business, we must then leverage the trends taking place that will spike the interest of our customers.  What capital improvements should we make?  Should we begin to cater more towards families?  Should we offer all inclusive pricing or a la carte? 
One major trend taking over the hospitality industry is mobile. The majority of all hotel and travel bookings will be done online over the next few years.  Information made available from Google states that in 2010, this # was practically 0, and in 2011 it was up to 20%.  Likewise, guests are using aps on their smart phones and social media to shop and book hotel stays.  Hoteliers need to leverage social media outlets like Facebook to see how their customers shop for hotels.  The question here is do customers like your hotel chain...and do their friends like it?
Another trend in the hotel industry is that guests now want more comfortable, "home-like" hotel rooms. They want better service, a nicer meal, employees that know them by their name when they arrive.   These additional services can mean everything from better furniture to up-to-date technology (ie: WiFi, newer fitness equipment with machines equipped with Apple and Nike hook-ups, apps, etc.).  These aren't easy requests, but these are customers' expectations, and hotels must do whatever they can to accommodate if they want to stay competitive. In a recent Wall Street Journal article, some hoteliers are offering top-shelf experiences that go beyond the typical tennis lesson or cooking class. Hoteliers are finding that they can't just offer a nice spa or a great restaurant. "To stay competitive, properties say they need to give guests access to activities--and people--travelers wouldn't have otherwise.  The activities don't usually generate big profits themselves, hotels say. But as a marketing move, the programs--particularly the most extravagant ones--can create buzz on social media."   As we've learned, a 'buzz' on social media can mean great rewards for your business.

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