HOSPACE: What keeps hoteliers up at night?

We were at HOSPACE 2014 to pick up on the Spotlight session entitled “What keeps us up at night? The issues? How to trade coming out of a recession.” Hosted by the effervescent Carl Weldon, and chaired by Russell Kett, Chairman, HVS and panelists: Paul Nisbett – Finance and Commercial Director, The Hotel Collection; Bryan Steele –  Head of IT, Royal Automobile Club; Rajesh Vohra – Sales and Marketing Director, Sales and Marketing Director, Sarova Hotels, Jim Gee – Head of Forensic and Counter Fraud Services, PKF Littlejohn LLP and Derek Picot, Formerly VP and Regional General Manager, Jumeirah

Offering the audience some food for thought, Russell highlighted some areas that had been voiced by panelists prior to the session to be discussed: the economy moves back into recession; OTA’s and distribution; utilities; fraud – when it is and is not; PCI – payment card industry compliance; mobile technology and investment – life after wifi, and finance and cashflow management.

Coming out of recession

Paul Nisbett, previously with Red Carnation Hotels and ex Commercial and Finance Director, Malmaison and Hotel du Vin kicked off saying that he was convinced hotel revenue professionals were “not ready to deal wth coming out of recession” in that they were still adopting a risk averse mentality towards pricing and more – “you’ve got to be strong, and it is difficult to think big enough. Don’t forget, there are expectations of shareholders, bankers and advisors, and for many people don’t know how to deal with recession, this is the norm for lots of people.” At this point, Russell asked the audience for a show of hands based on “who lived through the last recession” of the early 1990’s? For a relatively large number of delegates the start of the 2008 recession was the first they could remember, supporting Paul’s comments. Russell moved the conversation onto the pace and projections of hotel room and MICE pricing decisions using predictive analysis, and asking the audience “who has already priced in the Rugby World Cup and at what premium?” There was a slightly uneasy dumbfoundedness amongst the audience, maybe because the event won’t affect every hotelier and the audience included service providers too, and the general consensus was there are 10 – 30% price increases built in.

Credit card payment fraud

Russell then moved onto PCI (payment card industry) compliance and Bryan Steele outlined the penalties for those hotel businesses that don’t take the security and storage of hotel guest data and credit card information seriously. He said Trustwave estimate that the average fine is $500 USD per single credit card information stolen, and that if the fraud is sizeable one’s whole hotel business is under threat for survival. Bryan continued, “the penalties are severe. the hotel receives a huge fine and has to pay the cost of cancelling all credit cards affected and 12 months identity theft protection for all holders. 10,000 cards wipes a 30 – 40 hotel room out. It’s not an information technology issue, it’s operational, and if you have the personal contact details of celebrities affected it’s worse!” He encouraged hoteliers to understand the potentail financial impact and reputational risk to their business.

Hotel distribution and OTA pressures

Rajesh Vohra outlined his concerns with keeping up with hotel room distribution models – “it’s moving fast, and you don’t want to get caught with your pants down” he said. Metasearch was also highlighted as a potential gamechanger with Google hotel finder very close to being classified as an OTA, and Amazon World rumoured to be entering the online hotel booking sector. “Trip Advisor is no longer a review website, it’s now a booking website. I don’t think we talk enough about new disruptors within the sector, and there’s going to be new entrants that approach hotel distribution from a different dynamic. We don’t understand how to work with them.”

When pressed, Derek Picot and Paul Nisbitt confirmed the proportion of bookings achieved through OTA channels for Jumeirah and The Hotel Collection was 22% and 24% respectively, and the general advice was to use OTA’s as ‘top-up’ business, particularly as many of the brands have management and franchise fees on top. The panel felt OTA commissions will come under pressure over time as a result of new market entrants competing on availability, inventory and pricing, “you need to know the cost of transacting” said Paul.

Who owns the guest

If you’re looking to reduce the amount of business through OTA channels, Derek suggested one’s offering “needs to be different – a must have buy. If you’re less distinctive, your product is easily commoditised (by OTA’s).” Reflecting on how hotels had allowed OTA’s a growing presence within the sector, Rajesh commented that OTA’s are “20 times better at taking the booking than hoteliers,” and he continued highlighting the heightened knowledge OTA’s have with localisation, accepting the most popular payment methods specific to the booker’s location for example.

“OTA’s only merchandise the sale, hotels are not particularly good at closing the sale,” he said.

Hotel fraud

Jim Gee outlined that hotel fraud can happen within 3 main areas: suppliers, staff and customers where goods and supplies are either undersupplied or overcharged. Staff are paid for work not done, and customerspaying when they’re not leaving an outstanding balance (which could be a hidden cost too).

Jim said he’s worked with multi million pound businesses that have discovered fraud ranging from 3% – 18% of total revenues, and said that fraud is a ” clinical virus – it mutates and changes quickly” and offered hoteliers tips on safeguarding one’s business: be alert; acknowledge the problem; have an anti-fraud culture; have a ‘deterrent effect’ culture and aim to pre-empt the problem.

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