Hotel2020 Thepersonalizationparadox 120403061112 Phpapp02

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IBM Global Business ServicesExecutive Report

IBM Institute for Business Value

Travel and Transportation

Hotel 2020:The personalization paradoxDriving intimacy, consistency and efciency for protable growth



IBM Institute for Business ValueIBM Global Business Services, through the IBM Institute for Business Value, developsfact-based strategic insights for senior executives around critical public and privatesector issues. This executive report is based on an in-depth study by the Institute’sresearch team. It is part of an ongoing commitment by IBM Global Business Services

to provide analysis and viewpoints that help companies realize business value. You may contact the author or send an e-mail to [email protected] for more information. Additional studies from the IBM Institute for Business Value can be found atibm.com/iibv



Introduction

Buoyed by signs of global economic recovery and optimisticgrowth forecasts in developing economies, hotel chains will continue their rapidexpansion in the coming decade. At the same time, intense competition in key guestsegments, ever-increasing guest expectations and more diverse traveler needs will apply

pressure to keep room rates down. To maintain prot margins, hoteliers will need torenew emphasis on cost reduction and break through the consumer perception ofcommoditization. Paradoxically, it is standardization that will pave the way not only tocontrol costs, but also to provide the differentiated customer experience guests crave.

Hotel executives have frequently been chastened to “knowtheir guests” – what they want and when they want it. Onlyrecently, however, have advances in customer interactiontechnologies enabled the industry to deliver on this maxim. Intoday’s highly competitive environment, knowledge of guest

preferences is becoming more important than ever. Even as theindustry renews its plans for expansion in the wake of globaleconomic recovery, intense competition and increasinglydemanding consumer expectations will force hotels to maintaincompetitive room rates, often at the cost of margin.

Along with other dynamics within the industry, these pricingpressures will require hoteliers worldwide to look for alterna-tive sources of revenue and maintain due diligence in costcontrol. Gaining a better understanding of customer needs andpreferences – or guest intimacy – can enable the delivery ofpersonalized services that will help increase customer satisfac-

tion, lower service costs and improve guest loyalty. Ultimately,personalization can result in the development of specializedservices – delivered according to current preferences – for which guests will be willing to pay a premium.

By Steve Peterson

Over the past several decades, the hotel industry has becomeincreasingly commoditized, with consumers seeing littledifference between the offerings of one major hotel chain versus another. To break through this perceived sameness,hotel providers must implement solutions that provide unique

insight into guest preferences and apply this knowledge todeliver increasingly differentiated and delightful services.Providers should empower guests to personalize their own stayand communicate their preferences with the hotel in themanner with which they are most comfortable -- which often varies from trip to trip or even from day to day.

“Our job is to identify personalizedcharacteristics (e.g., temperature of the room,

dietary preferences, TV programming ofchoice, language choice), capture thatinformation and provide it to the guestregardless of which hotel they visit.”Nick Price, Chief Information Of cer, Mandarin Oriental Group



2 Hotel 2020: The personalization paradox

While personalization can provide opportunities to increaserevenue, standardization of operations in hotel chains canreduce costs. Although less transformational than personaliza-tion, standardization – the management of guest operations with principles, processes and systems consistent from hotel tohotel within each property, brand and chain – is an equallyimportant imperative for global hotel chains. If rapid growth isnot coupled with stringent controls on the processes, proce-

dures and systems that support that expansion, hotel chains runthe risk of creating a level of complexity that their current costsstructures cannot support.

Hotel chains that embrace standardization will move forwardinto the next decade with a plan to implement commonplatforms, tools and standard work programs. They will workto eliminate duplicate systems and will use systems andsolutions that leverage common data sources to capture moreconsistent guest information across enterprise touch points.

Properly implemented, the combination of personalization andstandardization can provide transformational results over thelong term and, ultimately, serve to delight guests and share-holders alike in the decade ahead.

Personalization: Paying “the premiums” forrevenue growth A number of market forces – commoditization, fragmentation,competition and guest expectations – are among the catalyststhat will drive increased guest personalization over the nextdecade (see Figure ). These forces will require hotels to look

at the services they provide through a transformational lens, orrisk being rendered irrelevant.

Figure 1: Four industry forces will require more personalization of guest services.

Fragmentation A larger and more diverse group of hotel guests will result in more fragmented preferences. Personalization

Source: IBM Institute for Business Value analysis.

CommoditizationGuests know what they want and are not willing to

pay for generic services; many guests see hotels ascommodities.

ExpectationsHotel guests will increasingly nd that their experiencesdo not compare favorably to other, more technologyenabled sectors.

CompetitionCompeting hotels will continue to expand their presence

in high-growth emerging markets.

Study methodologyTo understand the issues and the consumer dynamics thatwill shape the hotel industry over the next ten years, theIBM Institute for Business Value surveyed a mix of 2,400business and leisure travelers from both developed andemerging economies Once initial conclusions were derived,supplemental external research was conducted and in-

depth interviews with subject-matter experts werecompleted to review and validate the main hypothesis andconclusions in the Hotel 2020 study.



IBM Global Business Services 3

CommoditizationHotels have been ghting the specter of commoditization fordecades, but research suggests the situation is getting worse.Sixty-eight percent of travelers we surveyed said they saw littleto no noticeable difference between hotel chains. And onlyslightly over half of consumers said they were willing to pay a

percent premium to stay in their favorite hotel. Evenairlines, where commoditization has been a long-standing

issue, rank above hotels: percent of consumers see signi-cant differences among airlines, compared to only percent who say the offerings of hotels are signicantly differentiated.

These gures should trigger alarms in the halls of globalhoteliers. This suggests that, like other commodities, pricesupplants experience and other factors as the primary driver ofhotel selection. Commoditization provides an explanation for why so many guests spend so much time searching the Internetfor the best possible price. Fifty-ve percent of leisure travelersspend more than two hours searching for the various compo-

Source: IBM Institute for Business Value .United Nations World Travel Barometer, June 2010, World Travel & Tourism Council Data Extract, 2011.

Figure 2: Global travel growth continues to fuel the expansion of hotel chains beyond the markets that de ned competition inprevious decades.

I n t e r n a t i o n a l a r r i v a l s ( m i l l i o n s )

1990 1995 2000 2005 2006 2007 2008 2009 2010 2020E

1600

1400

1200

1000

800

600

400

200

0

Total international tourist arrivalsEmerging economies’ share of international arrivals

E m

er gi n g

e c on omi e s ’ s h

ar e

of

i n t er n a t i on al ar r i v al s

60%

50%

40%

30%

20%

10%

0%

nents of their travel journey. More than percent ofconsumers dedicate eight or more hours to this seeminglysimple task. These gures indicate that travelers are willing todevote an inordinate time to research to avoid paying even aslightly higher price for what they perceive as undifferentiatedofferings.

Fragmentation

Fortunately, other forces at work in the travel industry willactually make it easier to address commoditization. As bothpopulation and discretionary income increase, particularly inemerging markets, more people from a wider range of social,geographic and economic origins will be travelling (see Figure

). As the travel population expands and becomes moreheterogeneous, the preferences of travelers will come to mirrorthose of the population at large. As a result, the traditional“one-size-ts-all” business model common among many hotelbrands will make it increasingly difcult to meet customerexpectations.

Travel growth forecast for emerging economies




The logic of ever-increasing service expectations also applies tpersonalization services. Today, a few of the most sophisticatedonline shopping web sites construct highly customizedrecommendations from customer data. Merchandise retailersand online movie rental companies, for example, compilepersonalized suggestions for shoppers based on past purchasinhabits. If shoppers on these sites nd the recommendationsuseful and accurate, they may well spend less time searching

and will be, therefore, less likely to extend their search to other web sites and/or competitors. When predictive analytics areapplied to individual customer preferences, a win-win scenariois created for both providers and consumers. In the decadeahead, customers will grow to expect these innovations as partof their regular guest experience.

Standardization: Connect with customersthrough differentiated consistencyIn addition to the market forces that make personalization apriority for hotel chains, a number of industry factors will

combine to increase the need for standardization (see Figure). Four issues, in particular, stand out as relevant and deningfor hotels over the next ten years: operational complexity, costpressures, the need for consistency, and the overall speed ofinnovation in the sector. Hotels that recognize these forces andtake the necessary steps to increase standardization in theiroperations are likely to outperform those implementing themore incremental approach to standardization common amongglobal hoteliers.

This fragmentation of guest preferences – increasingly diverseneeds from more numerous but smaller traveler segments– can provide a foundation for hotels to differentiate theirofferings. Hoteliers should seek to harvest, understand andserve these diverse needs. Unusual preferences must besatised with correspondingly special products and services.Hotels that manage to identify and tap these preferences anddevelop specialized offerings for smaller target segments are

likely to nd guests with a greater inclination to pay premiumrates.

Competition The increase in traveler diversity is likely to spur competitionfor every guest night and every room charge, yet anotherreason to move forward with programs to offer more guestpersonalization. Collectively the ve largest hotel chains planto add over , properties to their worldwide portfolios inthe next ve years. Pacesetting hotel chains will understandthese new consumers bring their own unique preferences tothe purchase process. They will realize that, by empoweringthese people to customize their hotel experiences, they willhave the opportunity to convert shoppers into loyal guests.Ultimately, personalization will not be an option for manyhotels in the near future; it will be a requirement to stay in thegame.

Customer expectations Yet another force that will accelerate the implementation ofpersonalized solutions across global hotel chains is the increas-ingly demanding expectations customers import from otherindustries. Global consumers are exposed to leading-edgeservices on a daily basis. Over time, these experiences translateinto expectations, or minimum standards of performance. Adecade ago, few hotels offered in-room, low-cost, high-speedInternet services. Today, most hotels have incorporated a widerange of wired and wireless service into their offerings becauseguests have come to see this as a requirement, not a luxury.

Predictive analytics create the potential for win-win scenario for both providers andcustomers.




Complexity Most global hotel chains already endure the challenges ofcomplex operating environments (see Figure ). Large chainshave grown rapidly through a process of mergers with smallerchains and acquisitions of independent properties.

The resulting patchwork of systems, processes and solutions,from guest greetings in the hotel lobby to property manage-ment systems across properties and brands, has workedagainst efforts to institute unifying standards.

Figure 3: While implementing more personalized guest service, hotels will also be pressured to adopt standardized methods for managinghotel operations.

Cost pressure

Hotels will struggle to contain cost and will see standardization as a solution to cost increases.

Standardization


Operational complexityGlobalization will increase the already complex operatingenvironments in place at most hotels today.

ExpectationsInnovation will be essential in the next decade, but non-

standard environments will slow the pace of change.

CompetitionConsistent service delivery is desirable to hotel guests,

but consistency is hampered by inconsistent operating systems.

Source: IBM Institute for Business Value; hospitality company web sites.

Figure 4: Global expansion of both owned and franchised properties will continue to complicate the operating environment atmany global hotel chains.

N u m b e r o f p r o p e r t i e s p e r g l o b a l

h o t e l c h a i n

1950 1960 1970 1980 1990 200 2010 2020

+4000

2001-4000

501-2000

51-500

20-50

Number of properties per global hotel chainComplexity level of hotel chain management

C om pl exi t yl ev el of h

o t el ch ai n

m an a g em en t

High

Medium

Low

Increasing complexity as global reach and scale continue to expand




Unfortunately, without signicant efforts to standardize,operational complexity at hotels is likely to increase signi-cantly in the years ahead. As global chains add properties totheir networks from diverse geographies and cultures, they willhave to deal with new and different operating systems,management procedures and operational tools. To expediteexecution, many of these newly acquired operations will beintegrated into the existing hotel networks in a piecemealfashion, further exacerbating operational complexity.

Cost pressuresCost pressures are also expected to make standardization moreimportant to global hoteliers in the next decade. A recentbenchmarking study by IBM reveals that hotels have highertotal SG&A costs and lower revenue per employee than othercompanies in the service sector. This nding suggests thathotels support relatively cumbersome back-ofce operations.From this, it is reasonable to conclude that the most successfulhoteliers will focus on reducing the costs associated with theseareas in the next decade. When they look to consolidate thesesystems, hoteliers are likely to nd redundant systems, infor-

mation silos across the enterprise and duplicate solutions.

Consistency Standardization is not just about less complex, more efcientoperations. It is also critical to improving guest interaction.Consistency is important to any company that trades on thestrength of its brand. Eighty-nine percent of hotel guests wesurveyed indicated that they value consistency in their hotelstays. However, fewer than half of all guests said they seeconsistency between hotels of the same brand. Consideringthe challenges of delivering consistent service when opera-tional systems are not integrated, increased standardization can

go a long way toward providing the consistency guests increas-ingly demand.

Speed of innovationNon-standardized systems, process and solutions not only limia hotel’s ability to consistently deliver services, but they alsodull the company’s ability to introduce innovation. Bringingnew innovations to the guest experience is a perennialchallenge in the hotel industry. But hotel chains that havestandard processes will be able to increase effectiveness byeliminating operational uniqueness from property to propertyand implementing new solutions quickly and more consis-

tently. Hotels that understand the importance of innovating inthe next decade will recognize that standardized operations wiact as a multiplier on the positive effects that innovation willhave on both customers and the bottom line.

It is clear that the forces driving change in the hotel industry will make personalization and standardization more importantin the decade ahead. Hotels that embrace these realities willaggressively implement programs to increase the level ofpersonalization their guests enjoy and will simultaneouslymove forward with plans to standardize their operations.

Hotels that standardize operations will be ato implement new solutions quickly and moconsistently.




From room service to room design:Delivering “standardized” guestpersonalization To the casual observer, the concept of personalization may beat odds with the concept of standardization. But to theseasoned hotel executive, the two objectives t togetherperfectly. Experienced hoteliers know that standardizedsolutions actually complement the delivery of personalizedservices. By freeing front-line employees from the mechanicsof processes and systems that currently burden them, hotelscan enable a more intimate guest interaction. Hotels can signif-icantly increase guest personalization and advance theirstandardization agendas by adopting three simple recommen-dations (see Figure ).

First and foremost, hotels should embrace the idea of servingmore narrow segments. This is a break from the current modelof guest interaction that aims to simplify guests down to a fewsimple types. Instead, it recognizes that each segment has itsown unique set of preferences and needs.

Recognizing that each segment is unique is not enough,however. Systems, processes and solutions must be put in placethat “give guests the keys” to further personalize their hotel

experience by adjusting aspects of service formerly controlledexclusively by the hotel. For example, hotels can let guestschoose such services as the location for food service delivery orshuttle van pick-up. Giving guests the keys is likely not only totransform hotel experience for each empowered guest, but alsoresult in the ability to make proactive service changes by hotelsthat are fully engaged in what consumers desire and demand.

Figure 5: Three strategic recommendations will help hotels achieve the right balance between personalization and standardization.

Serve markets of meOptimize each guest interaction according to unique

segment-speci c needs.


Give guests the keysEmpower guests to customize their experience beyondthe segment level.

Be unique…every timeDeliver consistent products and services despite unique

guest needs.

• Improves the guest experience by more closely aligning hotel offerings to

segment-speci c desires• Results in even more unique brands and properties

• Increases marketing return, revenue and pro tability

• Reduces operating expenses by automating services

• Differentiates the hotel experience according to guest-speci c preferences

• Increases ef ciency, loyalty, revenue, and intimacy

• Improves the guest experience by delivering services that are inline withguest expectations

• Reinforces brands by con rming service standards

• Increases ef ciency, loyalty and revenue

Strategic recommendations Anticipated benefts




Finally, hotels that have done the utmost to empower guests will be in position to be differentiated . . . every time. Thisrecommendation is the heart of both personalization andstandardization – as it simultaneously recognizes customizedservice delivery while acknowledging the practical necessity ofdelivering guest-specic services in a repeatable manner acrossboth properties and brands. Getting the guest-specic serviceequation right once is not enough; hotels must put the systemsand procedures in place to deliver in this special way time andtime again (see Figure ).

Serve segments of “me”For hotel executives that have reached the inescapable conclu-sion that personalization and standardization are goals worthpursuing, the next challenge will be to nd the right set ofstrategic and tactical actions to bring this vision to life. Servingnarrow segments requires a comprehensive program ofconsistently capturing and retaining guest preferences at everyguest touch point.

Figure 6: Examples of personalization in the travel industry abound, but providers are struggling to implement comprehensive programs toaddress all interactions.


Multichannel self-service• Pervasive devices• Multi-channel self-service• Roaming check-in/check-out• End of meeting alert• Voice response check-in options

Personalized guestexperience

Personalized shopping• Intelligent search using personal

history and web context• Custom offers based on guest usage• Hotel stays based on air bookings• Group sales driven by social media

Post-stay support• Integration with social media to make

hotel stay part of guest lifestyle• Electronic bill access via multiple

channels Journey integration• Blurring the travel ribbon• Super PNR• Multi-use self-service• Multi channel check-in• Luggage management

Personalized service and support• Guest recognition at every touch point• Expedited room service based on guest

priority, loyalty, etc.• Improved onsite F&B service based on

expected arrivals and preferences• Check-out incentives according to guest

pro le• Segment-speci c support lines for

complaints and feedback

Customized room options• Customizable guestroom layouts and

entertainment/technology options• Multi-use guestrooms• Multi-media interface to control

preferences• Non-key keys




Today, many hotels nd one key limiting factor in the deliveryof personalized service is the ability to know what eachsegment wants at the time the personalized service is required.Each guest touch point should be designed to both serve guestneeds and collect information about their preferences. Suchinterfaces should harvest these preferences in a passive wayand store them in a manner that facilitates easy access andanalysis later on. For example, if a frequent business traveler

declines the parking option on arrival each time he visits theproperty, the check-in function should detect this pattern ofbehavior and replace this offer with something more relevantto this specic guest, such as round-trip shuttle service to arestaurant of his or her choosing in the evening.

The fact that sub-brands and boutique hotels have explodedover the past ten years is strong evidence that global hoteliersrecognize the need to serve narrower guest segments. But thereal promise of personalization is that hotels can now usetechnology to satisfy even the most unique guest needs withineach sub-brand. To cater to these specic preferences, hotelsmust acquire a robust information picture of each guest.Personalization complements the proliferation of sub-brandsby enabling the delivery of unique services likely to appeal toeach guest

An emerging and increasingly powerful source of informationabout guests and their unique preferences is social media. Inall its forms, social media is a mechanism by which individualconsumers share opinions and information that reveal theirpreferences. The dual challenges for hotels is collecting thisinformation with the permission of the consumer andanalyzing the collected data fragments to form a comprehen-sive picture of their hotel-relevant preferences.

Fortunately, many hotel guests are eager to share their viewsabout hotels, properties, brands and services. Forty-nine percentof leisure guests and percent of business guests in our surveyindicated they regularly share views about the most recent travelexperiences on social media. These expressed views are a goldmine of information about guest preferences. No hotelier canafford to ignore the tweets, blogs and posts that dene the socialmedia domain.

Give guests the keysFew hotels are doing enough to give guests the metaphoricalkeys to control their hotel experiences. Hotels that elect to giveguests the tools to customize their stays according to preference will take a bold and important step toward true differentiation.Giving guests the keys is about more than just delivering person-alized service and increasing guest control at the hotel; trueempowerment begins at the very moment guests initiate theirshopping process. The Internet is becoming the preferredchannel for travel bookings. Unfortunately, most hotels fail tostand out in this arena. Travelers dedicate a large amount of timeto shopping and booking, with almost percent spending veor more hours on their most recent trip (see Figure ). A morepersonalized shopping experience – one informed by a time-relevant and comprehensive understanding of guest preferencesand needs – could help reduce the time guests spent onlineshopping for a hotel and increase the odds that they quicklyselect a hotel that satises their needs. The best examples of howintelligent recommendation engines can ease the onlineshopping experience are currently found in the retail sector.Unfortunately, such tools are almost nonexistent in the travelindustry today.




Other travel intermediaries also recognize the gap, and manyhave emerged to meet the demands of customers who either want more from their online shopping experience, or aresimply disappointed with the amount of time it takes to booktravel online. Specialty booking sites, such as hipmunk.com,promise to cut through the clutter on competing hotel bookingsites and focus on the factors that matter most to theircustomers. The emergence of these sites should send a clearmessage to hoteliers: the current distribution mechanism is not working well for all guests, and competing providers are ready

and willing to ll these unmet needs.

Fortunately, for hotels, solutions exist that allow them to usestandardized systems, process, and tools to improve the searchexperience of potential guests. Using information published insocial media channels, harvested from web search engines andprovided by other travel providers, hotels can deliver targetedoffers customized to current customer searches. Search enginesdeliver ad content in this way, and online retailers leveragesimilar methods to make highly relevant purchase suggestions. While some consumers are not motivated by these mecha-nisms, many nd this form of personalization both relevantand useful.

Another method hotels can use to more effectively serveselected segments is to communicate using guests’ preferredcommunication devices and timing (see Figure ). Some guest will prefer to use their mobile phones exclusively to interact, while others will elect to perform check-in activities in personand will wish to purchase on-site services over the phone.Because most hotels have a diverse array of communicationstools available, the ability to reach guests according to theircommunications preferences should not be an issue.

One hotel executive interviewed said personalization eventu-ally will extend beyond service delivery and will encompasscustomization of the physical room in accordance with guestpreferences. Manual adjustment of room congurations,layouts and media interfaces will in the not-too-distant futuregive way to technologies that automate these changes. Guests will then have not only hotel services delivered according totheir specic needs and preferences, but also will enjoy roomscustom-designed to their specications.

Source: IBM Institute for Business Value Analysis, IBM-Oxford Economics Global TravelSurvey September 2010.

Figure 7: In the absence of more narrowly de ned segments andwithout simpli ed search tools, guests will continue to dedicatesigni cant time to travel search.

P e r c e n t a g e o f t r a v e l e r s

1-2 3-4 5-6 7-8 >8

70%

60%

50%

40%

30%20%

10%

0%

Leisure traveler Business traveler

Number of hours

Hotels can use standardized systems, proceand tools to improve the search experience

potential guests.

Average number of hours spent shopping and/or booking travel




Of course, personalization does not have to be limited to thehotel-related aspects of a guest’s journey. Closer integration with other travel providers in the next decade will provideopportunities to deliver more personalized end-to-end journeys. Travelers have long expressed frustration with thedisjointed nature of their journeys and are mostly left to fendfor themselves when circumstances alter their planned itinerarymid-journey.

As part of our research, we conducted an online focus group totest customer receptivity to a more integrated journey manage-ment solution. Participants spoke with a clear voice about their willingness to pay a premium for integrated journey services. Travelers in this study were not particular about which type oftravel service provider delivered these services; hotels would bein just as strong a position to reap the benets of such anarrangement as other partners in the travel value chain.

Another area of the travel lifecycle that vexes customers todayis post-travel processes, such as managing expenses andreporting service failures. Guest personalization can helpimprove service delivery in these areas, too. By keepingmeticulous records of post-stay patterns, such as which gueststypically request multiple copies of their hotel invoice, hotelscan proactively deliver against these preferences to turnperennial annoyances into sources of satisfaction.

The evidence suggests that personalization works. Over percent of hotel guests we surveyed report having positiveexperiences with personalization. Remarkably, respondentsgave equally high marks to both on-property personalizationefforts and those that were delivered via web sites and otheronline channels

Travel agent

Travel provider web site

Online travel agency

Travel agency web site

Consumer feedback siteTravel blog

Social networking sites

Travel related mobile applications

Personal experience

The opinion of others

Travel guidebooks

Some other sourcesOnlineOf ine

49%

49%

39%

38%

27%20%

18%

6%

51%

33%

30%

4%

Figure 8: Travelers refer to a wide variety of travel search tools, including a balanced mix of both on and of ine content.

Source: IBM Institute for Business Value; IBM-Frost & Sullivan Global Hotel Survey January 2011.

Most common channels used to decide where to stay




Finally, giving guests the keys extends beyond the serviceshotels provide at the time of stay. Social media and theproliferation of online suggestions and comments from gueststo hotels provide ample evidence that guests have something tosay about improving services in the future. Hotels shouldembrace these suggestions by quickly implementing feasiblehigh-prole changes. Hotels can use online forums and socialmedia to celebrate guests and guest ideas that result in hotelimprovements. In turn, guests will recognize that hoteliers value their feedback. This helps engender a sense of consumerloyalty and brand identication that reward point schemes failto achieve.

Be unique… every timeHotel employees, it seems, are often encouraged to be likeswans: cool and collected above the water, but paddling likemad to make things work below the surface. In our view,anything that can be done to reduce this frantic activity willtranslate into better, more personalized service delivery toguests. In other words, hotels that embrace standard solutionsand put the right emphasis on training and consistency willtake personalized service delivery to the next level. On theother hand, hotels that allow complex operational systems topersist will make it harder for employees to meet aggressivetargets for the effective delivery of personalized services. Beingunique every time requires simplication and training, along with a measure of trial and error.

To begin with, hotels must set an expectation that personaliza-tion is a top priority for front-line staff. Staff should beencouraged to identify and overcome challenges to under-

standing guest desires and the delivery of unique services onthe basis of these preferences. Complex operating systems andintricate process requirements require attention and training– time that could be dedicated to improving personalization ifoperational requirements were simplied.

Task specialization often has a direct correlation with efciencyfor many front-line functions. In many hotels, however,front-line staff spends time working in multiple departmentsand properties over the course of their employment. Thesefrequent transitions from one function to the next are oftenencouraged by hotel chains that wish to develop employees with a broad understanding of overall hotel operations.Standardization among properties can ease the training anddevelopment employees encounter at a new property. Equallyimportant, standardization can mitigate the differencesemployees face between operational systems that supportadjacent functions. Staff transitioning from sales to check-in,

for example, would have an easier time if operational systemsfor both functions were more closely aligned.

“Hyatt’s goal is to provide a personalizedexperience for each guest. Automated solutioare used for functions that free up staff to spemore time with guests. We aim for moreheads-up time (interacting with customers)than heads down (focused on computer inpu

It’s a matter of having the right tools in placeenable our staff members to give a personaliexperience to our guests. This liberates them

from processes the technology can handle to spend more time with the guests.”

Cliff Tamplin, Vice President, Operations & Infrastructure, Hyatt Hotels Corporation




Similarly, efforts should be made to standardize the mecha-nisms and means for personalization at each guest touch point.Despite the best efforts of application developers and systemdesigners, leading-edge customer technologies are oftenaccompanied by thick user-manuals. Guests should not need amanual to help congure their location-based check-in service. To the extent possible, hoteliers should keep these interfaces assimilar as possible, from area to area and property to property.

To be unique every time, many global hotel chains will need todedicate more resources to the technologies that enable guestinteractions, as well as the systems that support these touchpoints. Compared to their counterparts in other industries,hotel executives dedicate a relatively small portion of theiroverall operating budgets to information technology. In ,

hotels spent just $ , per employee, or about percent ofrevenue, on IT. Other information- intensive businesses spendbetween and percent of revenue on information tech-nology (see Figure ). On a relative basis, this is a strongindicator of why hotels have struggled to advance theirpersonalization and standardization agendas.

Finally, as guest needs evolve, and as markets call for moreinnovative solutions and more change, hotels that haveimplemented standardized systems will be in the best positionto quickly bring new products and services to market. This isthe nal frontier of standardization because it will not onlyenable personalization, but will also accelerate the delivery ofnew forms of personalization that have yet to be developed.

Source: IBM Institute for Business Value Analysis, IT Spend as Percent of Revenue from Gartner Integrated IT Spending Perspectives 2010, IT Spend per employee fromGartner IT Key metrics report 2011, As of 2010 Gartner Transportation include Hotels.

Figure 9: The hotel industry is even less heavily invested in IT when compared to other service-intensive, information-rich industries.

I T s p e n d a s p e r c e n t o f r e v e n u e

Banking andFinance

7%

6%

5%

4%

3%

2%

1%

0%Education Media and

EntertainmentProfessional

servicesTelecom Transportation

$22,961

$5,078 $15,937 $10,426 $13,278

$7,140

I T s p en d p er em pl o y e e

Average IT spend as percent of revenue - 2008 by industry $25,000

$20,000

$15,000

$10,000

$5,000

$0




“Check-in” to guest intimacy throughpersonalization and standardizationIn a highly commoditized industry, the opportunity exists foraggressive hotel chains to set themselves apart from theircompetition through dedicated efforts to personalize guestservices, increase guest intimacy and standardize operations.For those hotels that wish to join an elite group of pacesetters,personalization and standardization provide a path to progress. To assess and address gaps in capabilities, hotel executives canask themselves the following questions:

Personalization • How do your marketing efforts deliver unique messages to

guests based on their prior experience? • How many unique ways can guests check-in, shop for rooms,

and buy hotel services, and how easy is it for guests to selectthe method that is right for them?

• Do you communicate with guests before, during, and afterthey arrive to your properties using the method of interactionthat is best for your chain, best for the guest, or both?

Standardization • How will global expansion plans increase or decrease

complexity at your hotel chain? • How many different and hard-to-integrate property

management systems (PMSs) does your hotel chain use, andhow many does it need?

• How many sources of customer data are there in yourorganization?

Hotels that embrace personalization and standardization cancreate services and experiences for which many customers wilbe willing to pay a premium. Those without the resolve orresources to transform their operations to provide increaseddifferentiation and guest intimacy risk irrelevance, or even“checking out” completely, in an increasingly competitiveenvironment.

To learn more about this IBM Institute for Business Valuestudy, please contact us at [email protected]. For a full catalogof our research, visit:

ibm.com /iibv

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AuthorSteve Peterson is the global Travel & Transportation leader forIBMs Institute for Business Value. He has worked as a strategyconsultant to airlines and travel companies since and hasfocused on operations, marketing, distribution, and costreduction initiatives across the travel and transport sector.Steve can be reached at [email protected].

ContributorsEric Conrad, Vice President and Partner, IBM Travel and Transportation practice.

Bruce Speechley, IBM Partner and Global Hospitality lead.

Julian Sparkes, IBM Partner and Hospitality lead.

Amitava Chatterjee, Senior Managing Consultant, IBM Traveland Transportation practice.

Tom Liebtag, IBM Industry Marketing Manager for Travel and Transportation.

The right partner for a changing world At IBM, we collaborate with our clients, bringing togetherbusiness insight, advanced research and technology to givethem a distinct advantage in today’s rapidly changing environ-ment. Through our integrated approach to business design andexecution, we help turn strategies into action. And withexpertise in industries and global capabilities that span countries, we can help clients anticipate change and prot fromnew opportunities.




References IBM Institute for Business Value analysis; IBM-Oxford

Economics Global Travel Survey. September .

Ibid.

IBM Institute for Business Value analysis based on informa-tion from hospitality company web sites.

IBM Institute for Business Value analysis based on dataprovided by IBM industry benchmarking.

IBM Institute for Business Value Analysis based on theIBM-Frost & Sullivan Hotel Survey. January

IBM Institute for Business Value Analysis based on theIBM-Frost & Sullivan “seamless travel” online focus group.October

IT Key Metrics Data : Executive Summary. GartnerBenchmark Analytics. Gartner. December , .



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