GLOBAL HOSPITALITY SCENARIO The hospitality industry being highly sensitive to economic and competitive market conditions will need to address six important issues in couple of years, cost controlling, branding, new expansion strategies, head count management, eco-friendly initiatives and technological innovations / adaptations. The important issues can be addressed by understanding and establishing strategy to address, consumer trends, economic conditions, technology, competition and concerns for public safety. 1 COST CONTROLLING   The Global Economic Slowdown (GES) has triggered a tug of war between the hotel owner and manager; power struggle has swung in favour of the owners as managers started to face lower revPARs during the current financial crisis. With the current economic climate targets were often became unachievable for the hotel managers. The industry started to have lower average rates creating a bigger challenge to deliver a bottom line for the owner. Here the Hotel Manager must understand a basic concept, i.e.,   a) In the good times of reasonable growth of commercial trade, the general formulae followed was                    Cost + Profit = Sales     These were times of certainties of trade in low choice of products with reasonable projected growth.   b) As the market developed and competition increased with wider choice of products and more disposable income, the cost perspective changed to                  Sales (-) Cost = Profit     Herein, sales were given priority to increase the sales thereby reducing the cost per item and achieve profit through higher turnover.   c) In the present times not only the competition has become severe with the world having become a village and widest choice of available products but the level of uncertainties is also high due to fund flows, exchange fluctuation, environmental disaster and political uncertainties.   In the present times of such volatile nature, important is to create a sustainable value creation. This requires refocus on to the                  Sales (-) Profit = Cost   As can be seen, herein, if cost is what is maximum allowable cost to insure profit at particular levels of Sales.   Cost Management has 2 components   i) Cost Control This is a budgetary mechanism to ensure that the costs are within the budget in value terms and percentage terms.   ii) Cost Reduction Cost reduction basically is to question every cost head and evaluate whether the same is required or not and whether is there any change in process that can reduce the cost besides elimination of waste in the system / processes.   One of the established ways of cost reduction is to transfer as many of fixed costs to variable cost. This would attach your variable cost to your sales and not be a permanent regular burden. The approach of allowable cost to insure sales (-) Profit = Allowable cost is the required “mantra” in present uncertain times. 2 BRANDING   As the basic definition of Branding focuses on a "name, term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers, the concept of branding has become much more focused after the GES. Branding has become increasingly important in the hospitality segment. There are, of course, the large hotel brands, which seem to grow larger every day with strategic market segment tiers, and then the well-known, single – entity hotels, which will never be more than “brands of one.” Yet branding must extend beyond sticking a logo on building signage and letterhead. Any brand must tap into the psyche of customers to stimulate the highest level of interactivity. Individual hotel operators must seek to define their properties within their immediate communities or targeted customer bases. This may be achieved either through creating unique service aspects within the hotel or outreach to the community. Full – service hotels can do this easily. An operator can become more creative with food and beverage products or add a spa, fitness center or other lifestyle facility. Lessons for differentiation can be best learned from the boutique hotel segment, which has exploited lifestyle and local stimuli to mirror customer preferences and sensibilities. Even the most rigid of branded operations can extend service aspects to include location connections with which customers may personally identify. This might be implemented through guest services, guest room accessories or other references within the hotel’s product programming. Even limited-service or focused-service operators can tap into local food and beverage specialties to present these as part of breakfast, manager receptions or evening snack hours. Further local references can be established with employee uniforms or available reference periodicals. People do buy brands, but most importantly they buy an extension of themselves. As hotels continue to change names, brand clarity deteriorates, and it will become even more important for individual hotel units to develop methods to ensure they can be recognized above the noise and clutter to establish market penetration. Standing out among the competition or within an individual community should be a continuing priority for all hotel operators and owners. Therefore it makes sense to understand that branding is not about getting your target market to choose you over the competition, but it is about getting your prospects to see you as the only one that provides a solution to their problem.     Delivers the message clearly Confirms your credibility Connects your target prospects emotionally Motivates the buyer Concretes User Loyalty   To succeed in branding you must understand the needs and wants of your customers and prospects. You do this by integrating your brand strategies through your company at every point of public contact. The brand resides within the hearts and minds of customers, clients, and prospects. It is the sum total of their experiences and perceptions, some of which you can influence, and some that you cannot. A strong brand is invaluable as the battle for customers intensifies day by day. It's important to spend time investing in researching, defining, and building your brand. After all, brand is the source of a promise to consumer. It's a foundational piece in marketing communication and one does not want to be without. Today, virtually all travelers consider location to be “extremely influential” in hotel choices, compared with slightly more than half being influenced by the brand. “Customers expect the brand promise to cover every interaction with the organization—pre-stay, stay and post-stay. If the hotel gets it right, they can expect improved customer loyalty, and guests who are loyal to their preferred brand are likely to stay more and spend more. It is estimated that an upscale hotel chain has up to 200 million guest touch points annually, creating challenges in consistent delivery of the brand promise, customer relationship management and talent management. 3 CHINA, INDIA AND THE GULF STATES TO EXPERIENCE SUBSTANTIAL GROWTH   In China, India and the Gulf States, both domestic and international travel is booming, due to lower airfares and emerging middle classes keen to travel for the first time. Between India, China & Gulf States, it is estimated that a total of 500,000 additional hotel rooms will be required to reach the same penetration as in more developed countries, and the majority of these will be positioned in the economy and mid-market segments. These new markets pose unique challenges in politics and ownership, as well as in recruiting, training and retention of local staff. While these emerging markets offer exceptional growth opportunities, the world’s largest tourism market—the United States – still has a way to go. Total travel and tourism spend in the US, both domestic and outbound, is predicted to double from $830 billion to a staggering $1.6 trillion by 2015, leaving room for growth, particularly at the luxury end of the market. 4 AGING CONSUMERS WILL CHANGE THE GAME   The Baby Boomers in the United States and Europe are a huge demographic with enormous amounts of disposable income. They are expected to live longer, be more active, travel more and desire new experiences both in terms of cultural and event-based tourism. The percentage of the population aged 65 and over in Europe is projected to increase from 15 percent in 2000 to nearly 25 percent by 2015 and increased travel by the ‘silver’ segment is likely to maintain Europe’s position as the number one tourism exporting region, delivering some 730 million travelers by 2020. In addition to addressing the needs of aging consumers/travelers, the hospitality industry will need to address talent management issues, as aging populations hamper the ability to find sufficient staff in some regions. 5 TECHNOLOGY IS THE KEY !!   The industry is historically in the lowest quartile of technology spending within the consumer businesses; however, all the executives interviewed expect to increase IT investments, particularly in reservations, distribution, loyalty programs, and customer relationship management. In the US and Western Europe, more people relied on the Internet for travel information last year than relied on friends and acquaintances, posing significant challenges and opportunities for the industry. In addition, more demanding customers have come to expect more personalized service, and in the future hospitality suppliers will need to consider online room selection and check-in, personalized bed (variable firmness), and personalized in-room food and beverage offering. Historically, the airline industry has led the way in loyalty programs, with travelers showing greater preference for airline miles than hotel points and making conscious decisions to fly the same carrier despite inconvenient schedules. All CEOs are willing to spend more on IT and pursue efforts to interact directly with guests to maximize revenue and avoid merchant intermediary costs, which can be as high as 25 percent of room revenue. We are committed to promoting the highest quality of professional consulting standards and practices for hospitality and leisure clients.