Winning Back Lost Revenue with an Engaged Staff

By Ken Heymann

Many hospitality organizations find themselves in uncharted waters today and yesterday’s wisdom no longer applies. Still, there is general consensus that hoteliers who make the right moves now will not only protect profitability but benefit the most when the economy rebounds. That’s why it’s not a good idea to arbitrarily jettison consideration of staff, guest or meeting planner feedback systems. The lack thereof might lead to disastrous outcomes for your business later on, leaving you clueless about what went wrong.

However, let’s face it: when cash flow is tight, everything comes under rigorous ROI review.

What better ROI is there than when your guests not only keep coming back but recommend to others? And employees are your most important asset for driving guest satisfaction and building loyalty, even more so during uncertain economic conditions. As the only critical touch point, your staff has the greatest influence upon guest perception and, most importantly, whether or not they choose to return and/or recommend to others. So gleaning actionable knowledge about your staff is therefore critical.

There is also a strong financial case to be made for survey analytics that focus on the probability of a guest or meeting planner returning and recommending—then engaging your staff to win that repeat business. Returning customers help mitigate the high cost of acquiring new ones. Conversely, dissatisfied customers drive up the cost of keeping them. According to a 2005 study by the Customer Care Alliance, 70% of American consumers reported feeling “customer rage” as a result of the poor service they experienced. Even more illuminating is that after the fact, 46% said they were dissatisfied with how companies handled their complaints. That’s more than lost revenue: in the age of blogs and twittering, dissatisfied customers can tell a thousand times more than 20 people.

So—the question that begs for an answer—what is the ROI on feedback? The actual numbers might surprise you: we’re talking about millions of dollars walking out the door. But recovered revenue is the only quantifiable that really counts. And only a two-pronged strategy can bring the requisite return on investment. First, identify customers most likely to respond to recovery efforts so that energy is well spent. Secondly, focus upon minimizing problem incidence, and then maximizing effective resolution. Finally, to achieve these objectives it is absolutely imperative that employees be active participants.

Engage Employees to “Wow” Your Customers and Beat the Competition: The Raison d’être of Survey Feedback Systems

Although service recovery and effective problem resolution efforts can and often do bring back lost revenue, this can only be true within the context of the complete service experience. If customer-facing staff make a good first impression, guests are more likely to be forgiving later on if something goes amiss. Nevertheless, they will still expect a hassle-free stay when checking into a hotel; this is particularly true in upscale properties. But despite those expectations, at any given time 25% of customers are dissatisfied—yet only some will complain, based upon research findings from the Technical Assistance Research Program (TARP). The rest simply go elsewhere. When meetings and events revenue are factored in, it’s clear that significant blocks of revenue are at risk.

The simple fact of the matter is that anything less than a problem-free service experience is simply unacceptable. But knowing this is worthless without a real-time system that can ask the right questions and glean actionable feedback from guests and meeting planners. Gaining insight about customers with regard to what matters most in their service experience is invaluable to your business; and when that knowledge is shared with your associates, it can be converted into increased profitability. Remember, Pareto’s Principle still holds true: 80% of revenues come from 20% of your customers.

In the final analysis it is that initial impression your staff makes that will stay with your guests and meeting planners. Remember that satisfied employees make satisfied guests, so their feedback is critical too. It doesn’t take much to cause a customer to abandon a brand: 68% of customers defect because of a single worker’s indifference, as cited by Sheila Kessler in her book, Measuring and Managing Customer Satisfaction. That’s why it is vital to expend effort first on utilizing valid survey analytics to engage front-line personnel rather than the more costly, but necessary, problem resolution process on the backend. Recovery efforts are far more likely to succeed within the context of the overall workforce culture.

The Two-Pronged Strategy for Success

A balanced approach by your associates to delight the customer on the very first contact, coupled with a strong service recovery response (because we live in an imperfect world), is the best strategy for success in today’s tough economic environment. Having a system in place for measuring guest and meeting planner satisfaction gets your staff more involved, increasing the likelihood that they will make a positive connection to guests on the first contact and thereafter. Survey analytics can be utilized to create actionable intelligence by correlating the data points with other key performance indicators, enabling hospitality organizations to make meaningful changes that impact the bottom line.

There are two critical capabilities essential to any feedback system for getting measurable ROI; these correspond to our two-pronged strategy for success. The first one is proactive and relates to the ability to identify those guests with a higher propensity to return and recommend to others. This enables you to not only lower the cost of customer acquisition but focus on efforts more likely to yield profitable results. The second capability relates to problem resolution efforts that address dissatisfaction; real-time knowledge enables you to make successful service recovery efforts and bring back revenue at risk.

It is important to understand where a personalized response to problem incidents might have the most value. The guests who are most likely to respond are ’convertibles’ who typically fall around the neutral zone of guest satisfaction; they can easily be identified and targeted for guest recovery. Depending upon the amount of effort spent to keep the ’convertible’ guests, the ROI could be as high as 300% on recovered room revenue. This fact alone more than warrants such an investment in feedback systems.

It’s more than just Feedback: It’s Business Intelligence

The utilization of survey feedback as a business intelligence tool is invaluable: hoteliers can assess perception of value based upon rate and length of stay as well as room type and total spend. With extensive drill-down analytical capabilities, a property can understand the “why” behind the perception and how to generate higher intent to recommend and return. Online analytical processing capabilities can also reveal opportunities for improvement or help executives make critical capital expenditure decisions.

According to Dr. Daniel Mount, Associate Professor in the School of Hospitality Management at Penn State University, having a reputable guest and meeting planner feedback system in place is critical for protecting profitability during the present economic downturn:

“The greatest danger to any hospitality organization is a presumption that they know their guests and what they expect in the way of service delivery,” said Mount. “That’s why all of the major successful hotels have some type of feedback system already in place utilizing statistically valid sample sizes. The purpose of this system is to produce genuine research about your guests that enables you to understand what’s important to them and how well (or not) your organization is delivering that level of service, and whether or not your standards reflect those expectations.”

Impact on Recovered Room Revenue

Despite the intrinsic value of staff, guest and meeting planner feedback for the overall business, hoteliers often become more enthusiastic when they see the “money shot” —especially true in today’s volatile market environment. To put it all in perspective, UniFocus conducted research studies at several properties to determine how much revenue was at risk. Let’s assume that only 25% of this revenue is recovered at any particular property (a very conservative number compared to historical patterns). Based upon a simple investment in an advanced scientifically proven feedback system, the return on investment would be 126 times the original investment, an extraordinary ROI by any measure!

According to Dr. Mount, approximately 15-30% of hotel guests experiences a problem. This percentage falls in line with the research cited earlier. Hotels will lose about 15% of the guests who experience a problem, regardless of the resolution. Mount has been able to quantify the effects of problems and states that, on average, hotels will lose $1,500 per available room per year due to problems, or $600,000 a year for a 400-room hotel. This is the revenue that is at risk solely from problem incidence and makes a strong case for a thorough review of systems to provide a more reliable, problem-free stay.

But mistakes do happen and that means revenue is at risk. According to Mount, 30-45% of hotel guests will not report the problem. The first challenge is to solicit and encourage problem reporting. The recovery effort is difficult and many guests can’t be recovered, but there is no hope unless they do report the problem. The remaining 55-70% of those who experience problems do report their problems, putting the revenue back into the hands of the hotel. Only a recovery effort that is generally considered to be above average or above expectations will begin to restore guest loyalty. Therefore, staff members need to be more involved so that concerted efforts can be made to recover lost room revenue due to problems through timely personalized, targeted communication.

These figures demonstrate the importance of having a proactive customer feedback system in place.

In today’s volatile market, the opportunity to keep business can be a significant indicator of sustainable profitability. At the point where a problem is reported, the onus is on management to keep the revenue that is “still in play,” which in the above instance is approximately $400,000 per hotel. This depends greatly upon your associates making a good first impression, providing a memorable experience and making service recovery efforts that exceed expectations. To win back lost revenue, it is vital that all these characteristics are present in the service culture so that employees take ownership.

All of these numbers bear out the fact that survey data, used in tandem with sterling service on the front-end and exemplary recovery efforts on the back-end, does translate into significant blocks of revenue.

The Peabody Orlando: A Workforce Trained to Perform as an Engaged Team

Another example of how hospitality organizations are recovering revenue through better survey analytics is The Peabody Orlando. This AAA Four-Diamond property continues to win major awards and accolades because of their Peabody Service Excellence®, a patented hotel service delivery culture. Their associates’ performance rivals the best of any hotel workforce because they are trained to perform daily as a team, with flair and style, to their guests’ total satisfaction.

The Peabody Orlando tracks their guest revenue at risk through feedback analytics. As mentioned above, guests who are ranked as “convertibles” are more likely to respond to recovery efforts; additional survey questions identify those guests with a high probability to return and recommend. Using this process they were able to recover $100,000 in room revenue in the last calendar year. This is revenue that would have otherwise been lost had they not had a feedback system in place to glean critical intelligence.

“One of the advantages to our feedback system is the ability for us to respond to guest comments via a personalized email in a timely fashion,” said Marshall Kelberman, Director of Rooms for the Peabody Orlando. “The UniFocus guest response system compliments our service delivery culture by enabling us to let them know not only that we care, but will act upon what they think. We believe that the recovery of a dissatisfied customer should be one of the goals of any quality assurance program. Our system streamlines that process so that we can make these service recovery efforts in real-time.”

Conclusion

The intelligent utilization of guest and meeting planner feedback systems by an engaged staff can play a significant role in winning back lost revenue due to dissatisfaction. Nonetheless, it is also true that guests who experience a problem are fundamentally less satisfied and not as likely to return or recommend the property. This holds true even if service recovery exceeds expectations, which tends to happen rarely. If such efforts are to succeed, it must be within the context of a service culture that encourages staff to proactively deliver excellence starting with initial contact and throughout the entire customer experience.

When properly executed, service recovery efforts can often bring back lost revenue. TARP’s research indicates that 17% of customers who are dissatisfied will buy again, while 73% of satisfied complainers will buy again. In today’s market environment, what distinguishes financially successful hospitality organizations from those that fail is a “passion for excellence.” Typically that kind of concern expresses itself through listening to employees, paying attention to your customers and ultimately delivering a quality of service that delights the customer (the “wow” factor) and keeps them returning.

To ensure that your property delivers the kind of exemplary service that builds loyalty, it’s critical to use a sophisticated, scientifically-based measurement methodology. In addition, an empirically based analysis based upon observable outcomes yields insight that can diagnose and enhance the guest and meeting planner experience. Ultimately customer survey data is a catalyst for increasing satisfaction, intent to return and recommend, and instantaneous service recovery, which together translate into profitability.

In a soft market environment it is vital to understand your customers better to win the business—and to keep it. Increasingly, the gap between consumer expectation and the experience delivered by front-line employees is where the battle over customer experience will be won or lost. Your business depends upon knowing what counts the most with your guests and meeting planners. Whether or not you have that kind of intelligence—and the right kind of staff—can be the difference between success and failure.

Remember, as the old adage says, that which gets measured, gets managed.

Ken Heymann is Chief Operating Officer for Dallas-based UniFocus, a global pioneer in advanced technology solutions for the hospitality industry. He can be reached via email at kheymann@unifocus.com or by phone at 972-512-5102.