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Copyright 1997 Information Access Company,
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Copyright 1997 Advanstar Communications Inc.
Hotel & Motel Management

November 3, 1997

SECTION: No. 19, Vol. 212; Pg. 12; ISSN: 0018-6082

IAC-ACC-NO: 20160989

LENGTH: 1211 words

HEADLINE: Customer service promises advantage; results of studies commissioned by the Cornell University School of Hotel Administration's Hospitality Research Center

BYLINE: Chipkin, Harvey

BODY:
NEW YORK - While luxury hotels continue to be an industry bright spot, there is substantial opportunity to increase profitability even more, according to a series of studies commissioned by the Center for Hospitality research of the Cornell University School of Hotel Administration.

Using a $ 100,000 grant from the New York Palace Hotel, the center solicited proposals for studies on maximizing luxury hotel profitability and provided funding for six studies. Four of those were presented at a symposium in New York in early October under the banner: "Focus 2000: Maximizing Hotel Profitability in a Competitive World of Ever-Increasing Customer Expectations."

"There is a tremendous void among luxury hotels in determining the needs of customers," said Richard Cotter, group managing director, North America for The Palace and the Hotel Bel-Air in Beverly Hills, Calif.

Leo Renaghan, director of the Cornell center, said its mission is to identify profit centers and to attempt to bring universities and industry together.

"Clearly, the industry is changing and needs help answering questions," he said.

Topics of interest

The four studies presented at the seminar were:

* "Competitive Advantage-Luxury Hotels and the Information Superhighway," by Michael Olsen and Daniel Connolly of Virginia Polytechnic Institute and State University.

* "Cross-Cultural Differences in Customer Expectations & Advertising in International Luxury Hotels," presented by Laurette Dube, McGill University.

* "Customer Loyalty in Luxury Hotels," presented by John Bowen and Stowe Shoemaker, University of Nevada at Las Vegas.

* "Visual Corporate Identity in the Luxury Hotel Industry," presented by Bernd Schmitt, Columbia Business School.

Olsen and Connolly asserted that technology will throw out all basic concepts of marketing and that the industry has to do more to drive, rather than react, to change.

The reason, according to the professors, is that strategy plus technology equals competitive advantage.

"Hotels have to allocate resources effectively, but most times don't know how to value investment in technology," Connolly said.

Olsen predicted that Microsoft will beat the airline industry as far as travel booking is concerned. Not only Microsoft, but others, he said, are trying to redefine the industry, working hard to change the way things work.

All this, Connolly said, weakens intermediaries like travel agents. He said the industry could not live with paying 30 percent to 40 percent of revenue to put a head in a bed.

Connolly predicted by 2000, $ 2.5 billion of hotel revenue will come from the Internet, saying the question now is how to get involved.

Luxury hotels tend to be resistant to technology, Connolly said, because of their emphasis on personal service. He said he spoke at a recent Leading Hotels of the World conference where he found such resistance but eventually learned from attendees that corporate presidents themselves are looking at the Internet, then delegating bookings to their secretaries.

According to Connolly, the guest himself will become an integral part of knowledge-based global-distribution systems because the systems will be able to track travel patterns. For example, a person who takes a vacation the same time each year might be e-mailed with notice of a promotion for that time of year.

This involves the concept of marketing to a segment of one-knowing a lot about each potential on-line customer and marketing toward that specific person.

Connolly said that with all the available distribution channels-travel agents, Internet, 800 numbers - the industry has to steer customers to the most cost-effective channels.

Dube's cross cultural study showed luxury guests expect a hotel to be a surrogate mother and business partner rolled into one. She said the business aspect offered fewer cultural differences among countries, but the surrogate mother aspect provided challenges.

Dube surveyed three demographic sets of respondents: North Americans, Asian-Indians and Asian-Chinese.

As an example of cultural differences, she said a friendly smile is a mark of quality in North America, but not in India, where distance between guest and staff is considered the mark of quality.

Dube said physical aspects of the guestroom dominated all customer expectations, with interpersonal service second.

"Business travelers expect luxury hotels to put them in a good state Of mind, to help them save time, to keep their trip worry-free, to make them feel at home, comfortable and relaxed," she said.

But there were distinct differences among cultures. Americans gave priority to the room, while Asian-Chinese respondents favored public spaces. Laundry and bathrooms had a privileged status for American customers compared to Asians, while Asian-Chinese placed high priority on business centers.

Dube said her study showed that luxury hotel advertising often doesn't fit with customer expectations. As an example, she showed ads that emphasized price while her guest surveys showed price low on the list of positive criteria.

Similarly, service-related attributes as used in ads did not reflect their high rank among customer expectations.

Ads sometimes did meet expectations, as with the emphasis on feeling at home for North Americans.

"North American hotel companies show a moderate degree of cultural adaptation to international markets, for instance stressing issues important to Asian-Indian customers in ads for North American hotels targeted to Asian-Indian clientele," she said.

"We observed many instances suggesting that when cultural adaptation is needed, it could be done more effectively," the study concluded.

Customer Loyalty

In a study based on a survey of 892 frequent travelers, Bowen and Shoemaker provided many insights into why frequent upscale travelers remain loyal to hotels. Among their findings:

* Increased loyalty increases profitability because of increased product usage, lower marketing and sales costs and lower transaction costs. A 5 percent increase in customer retention rates increases the value of the average customer by 25 percent to 125 percent.

* Satisfaction may not lead to loyalty because some customers don't return to an area; some shop for price while some like to sample instead.

* The major builders of loyalty are trust and benefits received.

* The elements of trust are: assurance, reliability, integrity and security.

* Benefits that would increase loyalty are upgrades, convenient check-in and check-out times, and ongoing maintenance of guest histories.

* Hotels can do more in the way of benefits without spending much more money. Frequency programs are less important to luxury business travelers.

Schmitt did a study of how travelers respond to visual stimuli in luxury hotels and concluded that luxury hotels could do more with visual stimuli.

He said providing sensory variety within an underlying theme is the best approach, giving as an example Absolut vodka ads which change constantly while always retaining the bottle image.

He also noted cross-cultural differences, saying that Chinese guests prefer a decor that emphasizes round curves, unlike Western travelers.

LANGUAGE: ENGLISH

IAC-CREATE-DATE: January 22, 1998

LOAD-DATE: January 23, 1998