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Masterclass Worldwide Hospitality Awards – Hospitality Leaders : “I am very surprised with how fast things have changed outside our hotels”, David Kong

Christophe Alaux, Chairman of the management board & CEO, VACANCESELECT, Georges Azouze, CEO France, COSTA CROISIÈRES, Maud Bailly, Chief Digital Officer, ACCOR HOTELS GROUP, Frédéric le Guen, CEO BELAMBRA CLUBS, David Kong, President & CEO, BEST WESTERN talk about their vision and analyse of the hospitality sector.

Best Western is a broadly distributed historic brand from our industry, what has been inspiring you over the last twelve months?

David Kong: “I am very surprised with how fast things have changed outside our hotels. With OTAs, distribution has changed, we don’t sell our product the same way. They have taken away our ability to use our relationships as leverage in the business. OTAs are fighting to win market shares. Expedia for instance has spent 6 billion dollars this year in advertising, Booking 5.6 billion dollars. How could we compete? By spending that much money they get a bigger share of our market and thus have more leverage on the hoteliers.”

To which extent do you believe OTAs are protected from the GAFAs? If you take the value of a hotel group that could reach around 40 billion dollars and compare it with Priceline which is around 90 billion and Apple, Amazon and so on are so much bigger. Will they be able to react when Google decides to enter tourism and leisure?

DK: “If you look at the figures, I think OTAs are afraid of GAFAs. In the USA, 70% of the richest households have Amazon Prime. If you look at the whole country one out of two households have Amazon Prime. You can then imagine how powerful they are. If they choose to enter the hotel market and become a market place they could easily do it. So, I think it’s not if Amazon goes in but when Amazon goes in. Their CEO has already said: they want to sell everything.”

In the cruise market there is something hoteliers are really interested in, you have direct access to your customers. Did you look at the hotel industry before designing your marketing and distribution strategy?

Georges Azouze: "The penetration rate of the cruise market in Europe and especially in France is really low. Less than 1% of French citizens go on cruise holidays. It is 3.5% in USA, 2.4% in UK, 1.4% in Italy, 1.3% in Spain. Our biggest challenge is to touch as many prospective consumers as possible. So we are not segmenting our marketing, but using very powerful media to reach as many people as possible. If we don’t, the market will remain about 500,000 passengers a year. Regarding distribution, we are distributed in France through 3,800 agencies and we try to meet with them at least once a year to develop strong relationships with them. There is strong consolidation on all the networks that create tension and inflates distribution costs. At the time, direct sales are really minor in our distribution. So we have to have strong contracts and relationships with the agencies, to train travel agents. We also have to deal with specialized OTAs which are brokers for 1/3 of the cruise market. In the USA, which is a more mature market, cruise companies manage to reach around 50% of their clientele directly, but every direct sale has a cost. And it costs a lot to reach a client directly. Our current issue is to create the traffic and to create the need.”

Frédéric Le Guen, you were working at Amazon before taking the helm at Belambra, how was your discovery of the leisure industry?

Frédéric Le Guen: “I think that the key element for players like Amazon is not necessarily the technology they use, but more the effort they put into focusing on customers. Every company says “we care about customers”, “customers are important” and so on. But at Amazon every single decision is driven by the customer. We all work with the same tools, customer surveys, and so on, but the difference is how you use these tools and how much you use them to improve your customer relationship management tool.
Sometimes, things don’t work the way we would like them to, so when there is an issue with an accommodation, customer services has the power to withdraw it from the market. We created a customer squad that is responsible for finding a way to solve the problem, but in the end, only one person can put it back on sale and that’s me. No one else has the possibility to do that because I want to make sure that the accommodation fits customer expectations.”

Christophe Alaux, we all agree that staff is very important for customer satisfaction. I have learned that you have adopted a new recruitment strategy. Where do you find staff and how do you manage to keep them?

Christophe Alaux “This is a critical question because we have a very seasonal activity that lasts from 6 to 8 weeks during the high season in July and August. It means that we have to recruit something like 2,000 staff in a couple of weeks from now to February so that we can integrate them. We are very cost centric, so we cannot spend too much time training our employees. That’s why we really try to select people with soft skills. We also need to differentiate ourselves, with campsites and mobile homes, with no fancy product design as you might find in resort, cruise or hotel products; so differentiation relies a great deal on services. We have a training centre and have launched digital tools using Q&A so we can easily select and keep the best profiles.

We also differentiate ourselves in terms of branding for employees. The job is quite difficult, employees live at the campsite throughout the season along with the guests from whom they cannot escape even when they are on their day off. Our job is to sell holidays, happiness. We do not have a MICE offer so we need to ensure that the magic is perfect between guests and our employees.”

Maud Bailly, how do you design love? At the end of the day, we need to give authenticity, sincerity, to empower people within the organization so we are talking about spreading love here, so that relationships with the customer really come from the heart.

Maud Bailly: “It is interesting to observe the expectations of guests regarding loyalty. They are moving pretty fast, they see our loyalty program as something which is sometimes classic. Customers want something more and something immediate, people don’t want to wait to see the benefits of a loyalty program anymore. They also want experience, emotion, a connection.

That’s why for the beginning of 2018 we have been implementing a digital tool called ACDC Accor Customer Digital Card which is a worldwide database allowing our hotels and staff to share guests’ preferences. The tool is, of course, completely digital. It is important to know that 83% of our clients are willing to share their personal information, provided we offer them a more personalized experience during their stay. I often organize dinner with our loyal members, they want to feel recognized. Guests just want to feel known and recognized.

On the staff side, I work toward care symmetry: if you want your staff to treat your guests well, you’d better treat your staff well. So, if you want your digital transformation to succeed, you have to make sure it is fully understood, powered and implemented by people who understand it. Our Heartist program (heart+artist) is meant to make sure that people are also in power. Digital cannot be a top-down solution written by a CEO in a “tower” and sent to the hotel with the obligation to comply. For instance, the ACDC tool has been completely co-designed with the hotel staff and fully implemented. The result is not only did we increase guest satisfaction but we also increased employee satisfaction.

It created unexpected initiatives, for instance at ibis Singapore, the management team decided to give each employee a little bit of money to create sparkle stories for the guests. This program allows us to make the guests happier but also the staff happier.

Providing emotion is our only way to truly differentiate ourselves from OTAs, we have a direct connection to hotel guests.”

Christophe Alaux: “I would add that in our industry, the digital tool is only an enabler, it allows us to shift and to channel processes; it is not the end solution, just a tool. For instance, we can use them to solve problems such as something to fix in a unit. Before, housekeeping had to tick a box on a form to report a problem and then the problem was transmitted to technical services and it took at least 10 to 15 minutes to start taking care of it. Now, with digital, information reaches the technical team immediately. This obviously increases guest satisfaction.”

David, what have you implemented in the Best Western network to try to change the Best Western experience a little bit. Now every company is designing experience, what about Best Western?

David Kong: “I remember that 25 years ago direct marketing was just a foreign language for hoteliers, so we have come a long way. We have been doing direct marketing for five years and what I have learned is that it is tremendously expensive to be really effective in Customer Relationship Management (CRM). On top of that, the people at the hotel are the ones delivering that service and to get them equipped and eventually use that information and to deliver it properly is extremely difficult.

What is the lifetime value of a guest who stays at the hotel?  How much money can you make from that person per stay or throughout a year. Well, it’s not a lot because we don’t charge 2,000 dollars for the package or 5,000 dollars for the cruise. That transactional profit is not very big. It is very difficult to reach the right cost-benefit balance.

You have to use technology to deliver an experience. There is an exchange of messages and information and then they arrive at the hotel and that is where the magic begins thanks to customized communications and services.  This is one big advantage we have regarding OTAs. If you create a magical experience, you can retain the guest and that guest becomes loyal to you. I think the most important thing is to create the experience but nevertheless all those other touchpoints are important.”

Frédéric Le Guen: “The battle will be won in terms of satisfaction, of course the business has to be run seamlessly. Customer acquisition costs are going to increase because of all the stakeholders: OTAs, mobiles, GAFAs… what we can do is make sure that customers are thrilled by their experience. We are working on maximizing our return rates through the booking platform because we have the leverage as customers experience our products. The customer will only return if you exceed his or her expectations. The battle will be won by exceeding expectations.”

It is not always easy. For instance you have more possibilities to exceed expectations in upscale products. How do you manage with the families you welcome at your resorts?

Frédéric Le Guen: “It is very hard indeed and every day is harder than the last one. Let’s face it, in the tourism industry, we cannot keep up with how fast customer expectations are increasing. I believe we are late and we need to catch up at a much faster pace.

For instance, in the retail industry ten years ago it was normal to queue for half an hour when doing your grocery shopping on Saturday. That doesn’t happen anymore thanks to Amazon, self-cashiers… Not so long ago it was also normal to wait 20 minutes for a taxi, now with Uber if you wait more than 7 minutes, it drives you crazy. It is not easy to keep up with growing expectations, but we have the tools to help us catch up.”

There has been a great shift in how the approach the way we produce the service and it is possible to be in a position to provide more satisfaction.

Frédéric Le Guen: “We are working in an industry with very tight margins so it’s difficult. On the one hand, if you don’t have processes, you fail to deliver your service or you fail to do it cost efficiently. At the same time, you have to make sure that these processes don’t kill the magic. We must ensure that most of our time is spent in front of the customer. Smiling at the computer is good but smiling at the customer is much better. We make sure our staff takes care of our customers.

How do you explain the success of the cruise ship industry nowadays?

Georges Azouze: “Our industry has been booming for twenty years. We can explain it by the change in our products’ image. 30 years ago, when you talked about cruises, people thought of old people, of wealthy ones. Nowadays, the gap between tour operators and cruise operators has been reduced considerably. The cruise product offers a great value for money for couples or families. We have a lot of possibilities to accommodate children on board, so for the families it is very convenient to spend their holidays on cruises.

At the same time there have been huge changes in the architecture of the boats with ships that can offer a bigger capacity and are virtually becoming resorts. They are full of possibilities for entertainment. Just remember that before 2000 there were no ships with balconies on the Mediterranean Sea.

The major strength of our product is that you can discover another place each day, and your hotel room goes with you.

All these factors contribute to a new image and to expanding our clientele.

Regarding quality, we are obsessed with quality as is everyone here. We evaluate it every day and at the end of each cruise. Our NPS is 52% which is quite high for the hospitality business and among newcomer it is 62%. We decided to get back to the origins of the company which comes from Genoa, Italy. We are repositioning our brand into “The best of Italianity” with gastronomy, of course, but also with the design of our ships.

Regarding digital.

Christophe Alaux: “Something I wanted to share with you is that often in the hospitality industry, people are product centric.  But if you open your product on the territory you can offer a lot more to your customers. It is not just a campsite with a pool and tennis courts, It becomes a 360° experience and guests can go out and explore the towns or seaside nearby. If you open up your scope and think customer and not merely product, suddenly everything changes.

Every day, I look at Booking and Amazon and so on and think to myself: “why did they think about it first? I should have.” It reminds me of several years ago, when I was working at Carrefour and this company named Amazon was selling books. People around me told me: “Christophe, it’s not retail, it’s IT”. At that time Carrefour Market was 80 Billion euros, today it’s 50. And the same for Booking: I was told by CEOs at hotel groups: “No Christophe, it’s not hotels, it’s IT.” And we made the same mistake with Airbnb a few years later. So, I told my team that we have to protect our brand and direct access to our customers, if not we are dead. We were just thinking about the product and for Carrefour it was books and yet Amazon is much more now.”

Maud Bailly: “This is one of my strongest convictions; it’s quite a paradox and I am sure you all share the same conviction. Acquiring a guest is a cost, we have to maximize our retention capacity. Let’s have a look at Apple’s strategy, they manage to make their customers captive because Apple technology and software are not compatible with other technology. Should you want to change your device, it is really hard to get back your music, your apps and so on.

At AccorHotels, we are trying to create a “sticky” environment to improve our retention capacity. To do that, we are trying to sell -which is a big paradox- far more than just a room. We are trying to enrich our range of services. When you look at Rakuten or Ali Baba ecosystems, they offer far more than their core business: insurance, banking, health… Meanwhile we have moved from 12 to 30 brands and at the same time we allow our loyalty members to acquire and use their points at airlines, car rentals, for a concert and so on. This is what we call “augmented hospitality” because offering just a room or a campsite is not enough. People want a 360° experience, they enjoy cruises as floating hotels that allow them to visit the world. For me digital means acceleration, consolidation -scale matters- and diversification. If you want to survive, you’d better sell far more than just your core business.”

What do you all believe is going to be the game changer within the next five years?

Maud Bailly: “Artificial Intelligence. Nowadays, the way we are booking a room comes from a process where we ask a search engine (Google or whatever) and we get some answers. Tomorrow with all the connected devices, companies will gather more and more data on their customers and we are going to proactively push some offers. This is going to change everything, search, metasearch, web traffic acquisition. Conversational era, proactive and predictive tools are going to change the game.

David Kong: “A lot of things are going to happen to us. Artificial Intelligence, I totally agree, is going to be a game changer. We are all testing a lot of things currently on digital, artificial intelligence… I focus on what we can actually control, because we can “make that happen”. Whereas outside things – we cannot protect that. We can spend a lot of money on technology, sales, marketing… so hotels can do things more quickly, more effectively and make more investments. Scale brings a tremendous amount of advantages.
The other important topic is the experience of the guest in our hotels, we are talking about NPS which is a tremendously important indicator: how loyal is a customer?
The business is so complex, there is not just one thing we need to focus on.

Georges Azouze: “We are about to inaugurate a new ship – the Costa Esmeralda – that will be first ship powered by liquified natural gas propulsion in response to a very clear issue which is sustainability and environmental issues. Holidays and travel is about exchange and we have to be very careful about how we operate in different destinations and how we want to share these kinds of opportunities. The cruise is also a fantastic way to promote destinations and to encourage economic development. There are geopolitical issues that can prevent us from growing our catalogue. Energy is a key issue for us because a ship consumes fuel and so we need to reach capacity. Each year we produce a sustainability report about what we do each day to promote responsibility. We are currently fighting against food waste with the “taste but not waste campaign”, by providing the surplus of food to associations.”

Frédéric le Guen: “France is a great destination and will remain one. We have geopolitical stability, much geographic diversity and we are lucky to operate 28 resorts in France.”

Christophe Alaux: “Although we are all competitors, we do share the same issues. My dream would be that in five years I can be part of a bigger ecosystem with hotels, resorts, cruises, entertainment and we can create a network like alliances in the airline industry. A guest can go to Accor or Best Western on a business trip and go for a cruise, or to a campground in the summer and a resort in the winter to go skiing. If we can manage to work all together around that table, then we can create an ecosystem that nobody can compete with. If we are strong in our core business, if our NPS is good, then our brands are strong. If our operational skills are at their highest, if we can create this ecosystem and share the data, then nobody can defeat us.”

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