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Battle lines

01 January 2000
Battle lines

"When we started to look at what was happening to hotel revenues from customer phone use, we were taken by surprise," says Kevin Maine, senior consultant for Interconnections, a telecommunications consultancy. "Income levels from telephones are fairly steady, which may come as a surprise for hoteliers - we've all been predicting the death of room phone premiums since the advent of mobiles, chargecards and the Internet."

But it is the fact that revenues are static that is causing concern. Maine's research on hotel phone usage for the British Hospitality Association (BHA) shows that hoteliers are losing out on sales through not understanding what their customers really want, and losing profits through not appreciating how to give it to them.

"If you overlay those steady revenues on the increase in telecoms and phone usage, the real decline is really significant," Main says. "Static phone revenues mean you're losing sales. Given that the profits from phone use have traditionally been a hotelier's third-highest source of revenue, this is cause for concern."

Customers have changed the type of calls they are making, and although hoteliers are picking up on the coarse details of those changes - that more guests are using mobiles and chargecards - others are hard for hoteliers to spot, although they significantly affect revenues.

"The proportion of data calls was traditionally around 10%," says Maine, "but it's growing rapidly. One chain worked out that 30% of its calls are now less than 30 seconds long." Maine attributes that to guests checking their e-mail and notes that, for hoteliers using BT, it leaves their profits exposed to BT's per-call connection charge. If you're charging customers by the minute while BT charges you by the call, your margins are being eroded. "But there's an opportunity there," Maine says. "Other carriers will supply per-second billing from the first millisecond of the call."

For some hoteliers, alternatives to BT would be welcome. David Hume, manager at Wainstones Hotel in Stokesley, near Middlesbrough, wrote to Caterer in May following an incident at his hotel. A guest handed him a copy of the local newspaper containing an advert for BT chargecards, which said the card could help them save 55% against hotel rates. It claimed that the average hotel phone-call bill is £38 and compared the VAT-exclusive chargecard costs with the VAT-inclusive "average" hotel phone charge.

"Because of the image of hotel bills," says Hume, "people do tend to call home and be called back, but our charges are not so high compared to the 35p-40p per minute some are charging."

Outraged

Outraged hoteliers complained to the BHA (Caterer, 4 June, page 7) and BT agreed not to run the campaign again. For Hume's part, he does not occupy an area where rival telecoms companies operate, but the hotel has taken action to reduce customer bills by switching to a tone system over the past 12 months, allowing customers to enter chargecard ID numbers.

The study from Interconnections has shown some imaginative approaches.

Alongside his original premium rate service, one Scottish hotelier has installed a second, low-call-cost phone service, where guests key in a 15-digit code to access a cheaper line, and the results of giving guests the choice are fascinating. "Only 25% of guests use the low-cost one," he says, "because they can't be bothered to type in all the numbers."

Another hotel chain has switched to a different carrier while retaining the difference in profit from customers' calls.

Travel Inns, the Whitbread-owned budget hotel group, previously had corridor phones but has now installed chargecard phones in the rooms of its London hotels. This is because women are loath to leave their rooms to make a call once they are in what they perceive as the more dangerous environment of the capital.

"It's a standard phone, but only works with one chargecard that you buy from reception," says Maine. "But you can use it anywhere outside. For once, someone's building customer loyalty with the telephone system rather than losing it."

Whitbread confirms it makes a "tiny, tiny" profit on card sales but points out that it doesn't want income from telephones. "We're in the room-rate business," says a spokesman. "But, in London, customers want it, so we do it."

That view would find favour with Bill O'Hara, who is unfazed by the impact of chargecards on phone revenues at the 18-bedroom Brown Trout Golf & Country Inn in Aghadowey, County Londonderry.

"It hits revenue marginally," he says, "but we look on it as that we're selling them a package and they appreciate it. Phone revenue gets a bit silly - it's like charging them for complimentary soap."

What O'Hara has recognised, Maine is proving by survey: many of the 500 customers he has interviewed are angry because they expect their room rate to cover everything, full stop.

O'Hara says he doesn't charge customers who use chargecards because explaining how the system works is too time-consuming. Now in the process of adding eight new rooms, he has opted to put in extra sockets for laptop-lugging visitors, to give them choice and independence.

That many customers are technophiles, Maine agrees. His report is likely to recommend that hoteliers consider the money-saving implications of digital phone technology - automatic wake-up call setting, direct dial-in and guest voicemail. But what concerns him is that hoteliers don't always understand what is driving customer resentment, and therefore how to profit from it.

Misperception

So, for example, the majority of the 100 hoteliers interviewed told him that company finance directors are limiting hotel phone spend, and that merely cutting phone premiums would therefore make little difference. In fact, says Maine, finance directors were behind very few of his 500 customers' decisions not to use hotel phones, and most would use them more often if only they were cheaper. Hume's and the Scottish hotelier's experience suggest this is true, but that kind of misperception is rife, Maine says.

For example, he cites the contrast between hoteliers' perception of static phone revenues and their view of the future. "Ask hoteliers for their projection of the way people will use phones and hotel phones, and they predict more will switch to mobiles and to chargecards," he says. "So actually the financial expectation of what guests are going to do is not consistent with a belief that revenues will remain static."

When you point this out to hoteliers, Maine adds, they say they're just carrying forward last year's projection. "So what they're really saying is, ‘we're asleep'," he surmises. Hoteliers, of course, would disagree, and the evidence from Hume and O'Hara suggests they are well aware of the issues influencing phone revenue and don't need a wake-up call.

We won't know how true that is until September, when Interconnections publishes suggestions for improving revenues, along with the results of its research. Only then will you be able to measure your opinions on your phone charges against the opinions of your customers.

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