Ted Teng of The Leading Hotels of the World (left) said a short-term focus on quarterly earnings has undermined service as Adam Weissenberg of Deloitte & Touche LLP (right) watches on.
ITHACA, New York—While hotel brands and owners might stress the necessity of quality service, the real-world implementation of such efforts is sorely lacking in the global hotel industry, according to CEOs during the opening session at the Cornell Hospitality Research Summit.
The industry’s shortcomings in these regards were a recurring thread throughout the 90-minute discussion—and one that mirrored the conference’s theme: “Service excellence and performance growth in the global hospitality industry.”
To underscore the point, David Peckinpaugh, president of Maritz Travel Company, pointed to the most recent J.D. Power and Associates “2012 North America Hotel Guest Satisfaction Index Study,” which found that overall guest satisfaction declined to a seven-year low.
“When we see those kinds of results in the hotel sector, obviously it gets to be very concerning,” Peckinpaugh said.
He attributed the decline in service and satisfaction to a shift of thinking among owners and public hotel companies. Whereas in the past the focus was on driving long-term relationships with guests, today the focus is on the next quarter’s returns.
Ted Teng, president and CEO of The Leading Hotels of the World, said that focus has led to a short-term mentality.
“I’m not surprised that satisfaction is down. I just think that’s not what we’re preoccupied with. We’re not building something for the long term,” he said. “I think earnings take a much higher priority than guest satisfaction.”
“I think managers today are much more preoccupied with driving (net operating income) and (earnings before interest, taxes, depreciation and amortization) than they are in driving guest satisfaction,” Teng said.
Accountants are driving the hotel industry, not operators, Peckinpaugh added.
However, a certain degree of attention on the balance sheet is understandably justified, the panelists said.
“Let’s be honest. The business is about making money,” said Adam Weissenberg, vice chairman and global leader of the travel, hospitality and leisure segment at Deloitte & Touche LLP.
Or, in the case of the last recession, the business is simply about staying open, said Arthur Adler, managing director and CEO of the Americas for Jones Lang LaSalle Hotels. During the depths of the downturn, when 15% of all properties in the U.S. were in default, “it really was a matter of survival for many, many properties.”
But the panelists agreed the continued focus on quarterly earnings is exacerbating the downward slide in service.
That’s especially true given the short hold periods of many owners. An investor who has a three-year exit strategy is less likely to take the time and use the resources in hiring the best people and training them to perform the job to the best of their abilities, Teng said.
Further amplifying these problems is turnover amid the continuing recovery, Peckinpaugh said. As talented executives and mid-managers jump ship to find opportunities elsewhere, there are less young workers willing to enter the service sector to replace them.
“I don’t think the industry is adapting to how we recruit, grow and train those individuals,” he said.
Numbers from J.D. Power and other data firms underscore a broader emphasis on service-related analytics that increasingly are driving the hotel industry forward.
“How analytics will impact service is a difficult question,” Peckinpaugh said. “What analytics will allow us to do is have a little bit more focused crystal ball to understand what are the paths and trends we’re moving on, where are the consumers moving so we can react accordingly.”
But converting numbers into action is easier said than done, the panelists agreed.
“If you think about the amount of data out there that hotel companies have of all of us, being able to decipher what any of that means is a huge challenge,” Adler said, pointing to the emergent data minefield of social media.
But Teng advised attendees not to put too much weight on insights gleaned from sites such as Facebook or Pinterest.
“For us, analytics is focused on credible sources of information. That is our customers, our interactions with them and their honest feedback to us. That’s where we spend out energy,” he said. “On the social-media (front), I think that’s a whole different world. The first thing we have to sort out is the credibility of the data.”
“I think social media has a lot to sort itself out before it can truly be considered analytics,” Teng added.
But Sebastian Escarrer, former vice chairman and board member for Meliá Hotels International, lauded the channels’ ability to connect hotel companies with consumers.
“Social media is a huge opportunity to listen to our customers and to be able not only to listen but to talk to them,” he said. “This has never happened in any of our companies.”
A more insightful source of data will come from attribution modeling, which will allow hoteliers to understand who in the value chain actually contributes to hotel bookings, Teng said. Once hoteliers can figure that out, they can reward their strongest partners while cutting back on the compounding cost of distribution from “middle men and pirates.”