It's all up to data
Forget revpars, now it is revpacs that hoteliers should be talking about. Revpar, or revenue per available room, has been the yield indicator of average achieved room rate taking occupancy into account. But now, according to Cindy Estis Green, senior vice-president of Pegasus Systems: "Revpac, or revenue per available customer, is the latest buzz word in the industry."
This is the lifetime value of a potential customer for your business, and the key is to identify how many potential customers there are and how many you as a hotelier can attract to your business.
Green was talking about database marketing at Eurhotec 1999, the pan-European technology conference for the hospitality industry organised by the International Hotel & Restaurant Association. Today's property management systems (PMS) can collect data which, when inserted into a database and mixed with psychographic or lifestyle information, gives an accurate picture of a hotel's current guests. This facilitates further targeted marketing.
For example, Green worked with a midmarket London hotel looking for further corporate business. By analysing existing data on the hotel's PMS, Green was able to identify 500 companies in the area which matched the profile of the hotel's current corporate guests. Cross-checked against the hotel's existing database of 750 companies there were only six matches, showing the huge potential to be exploited. The hotel proceeded to close deals with 15 new companies within two weeks and generated contracts for 4,000 room nights at rates £40 higher than its average achieved rate.
Costs for data warehousing - the process of collecting and refining data and then turning it into something the hotelier can use - may range from $7,500 (£4,610) in the London hotel's case or $250,000 (£153,675) for a chain of hotels but, as Green pointed out, the cost is rapidly recouped.
The theme of developing knowledge about the customer was picked up by Alex Kyriakidis, partner in charge at Arthur Andersen UK. "Knowledge is the name of the game, and hotels must own their customers," he said. Kyriakidis also warned hoteliers they are not the only ones fighting for knowledge about their customers. He pointed to companies like American Express which have such large loyalty schemes that they can dictate the way in which their customers spend. "American Express could force hotels to sell rooms en masse because Amex owns the customer loyalty [through its loyalty programme]," said Kyriakidis. Those looking to corporate finance to invest in hotels will also need to prove they are able to target customers.
"Wall Street analysts are interested in ‘time to knowledge'," said Scott Anderson, executive vice-president of marketing, Cendant Corporation, franchisor of brands such as Howard Johnson and Super 8 in the USA. "This is the time it takes you to turn the data collected into an active response. It is something the retail and grocery industry is very good at, but the hotel industry has been slow to pick up on."
Information technology is no longer an isolated department buried in the back office. Today the gathering of data and the ability to interpret and use that data is the marketing department's best tool. And it is not just the big hotels that can benefit; small hoteliers take note.
Year 2000 and the millennium bug
With nine months to go, the so-called millennium bug, or the problems caused when computer chips fail to recognise the dates encoded by two digits (eg, 00 for 2000), was still high on the agenda. Bass has been planning for four years, but Terry Critchley, head of the Y2K team at Bass, still has concerns. "With some of our brewing operations in the Czech Republic we are concerned when the government there says they have no plan for Y2K - and they have no plan to have a plan," said Critchley. Other areas of concern are the Middle East, former Eastern Bloc countries, China and even some Western European nations such as Germany and France, although to a lesser extent.
Critchley said Bass, which should be "year 2000-ready" by April, will spend the rest of the year carefully monitoring systems to ensure they do not revert to non-compliant status. The company will be on "amber alert" from November 1999 until mid-December, when no changes to business systems or operational procedures can be made without the express approval of its Y2K steering group. From mid-December to mid-January there will be no changes whatsoever and everyone will be on "red alert". From February to April 6, when the UK tax year changes, there will be another period of little change in procedures, before it returns to business as usual. "I see the Y2K problem like an onion: the more layers you peel back the more you cry," he said.
A prime example is one of Bass's meat suppliers, which at first glance was thought to pose no threat. Routine enquiries revealed the company had an 80% share of the UK market and Bass and Whitbread between them took 40% of that company's business. In the event of a supply failure, there would not be an adequate alternative supplier. When the meat-supply chain was traced back to Australia, with all the inherent problems of shipping, customs and refrigerated vans to the outlets, Bass realised one meat supplier had the potential to seriously affect its business. In this instance Bass has worked with the company to ensure it meets Y2K compliance, but Critchley admitted that Bass had considered buying the company at one point to ensure a smooth transition.
For those still trying to get to grips with it all, Critchley said it was still possible to get ready for the millennium bug, but operators should focus on the systems that are essential for the day-to-day running of the business. The key was contingency planning. He suggested preparing information brochures for guest bedrooms outlining procedures to follow if the lights should fail, for example. In addition, hoteliers should be aware of the risks, such as water and sewage difficulties, telecommunication failures, and what contingency plans are being made by Government bodies. Furthermore, there should be contingency plans for dealing with millennium cults which may try to interfere with the smooth operating of business. n
