Through our blog co-sponsor, the Cornell Center for Hospitality Research (CHR), we had the opportunity to interact with some of the research faculty at the Cornell School of Hotel Administration at the end of 2013 to find out what they’ve been working on, and how they see things shaping up for the hospitality industry in 2014 and beyond. If you are interested in learning more about these individuals, I’ve provided a link to their bios through a hyperlink on their names.
Since the economy has been such a huge factor in industry predictions recently, I asked for another lesson in economics and finance from Pamela Moulton (see my blog on her research into “post earnings announcement drift” from earlier in 2013), who described the conditions in 2013 that will lead to continued confidence (and economic growth) in 2014. Pamela told me that 2013 was a record year for issuance of corporate bonds (debt, for those of us unfamiliar with this instrument), and this is projected to continue into 2014. The reason for this record breaking performance is twofold. Corporations are taking advantage of the relatively low interest rates to raise capital through issuing debt. Investors like corporate bonds because they tend to have a higher yield than treasury bonds, and they are willing to invest in corporate bonds because signs are pointing to an improving economy, so corporations are not likely to default on these obligations. The Federal Reserve may raise interest rates slightly in 2014, but not by much, so this condition is likely to continue through 2014, (although Pamela doesn’t think that 2014 will break 2013’s records). These same signals that the economy is strengthening are making the market more attractive for companies to raise capital by issuing stocks (equity) as well. 2013 was the busiest year for IPOs since the downturn (including several major hotel IPOs, with more on the way). With all this activity continuing into 2014, hospitality companies are well positioned to raise capital for new projects, so we can expect to see some continued activity in this area through 2014.
By all accounts the recovering global economy in 2013 has prompted a return to optimism, and also accelerated trends that will impact the industry well into 2014. The faculty identified three areas to watch in 2014: technology, guest experience, and human resource management.
Bill Carroll suggests three areas of technology impact: “(1) the relentless migration of dreaming, shopping, booking, and modifying travel arrangements on mobile devices; (2) the merger of search and social in the planning and buying of travel services; and (3) relentless improvement in the prospects of cloud based support of travel and hospitality applications for hospitality service consumers, suppliers and intermediaries.” He suggests that this activity will result in some sizeable mergers and acquisitions in the search, meta-search and social marketing areas - “the big will get bigger!”
Mike McCall has seen diverse firms across hospitality and travel embracing technology, and integrating it into their daily operations – from mobile apps to providing iPads in airport waiting areas (with a customer-friendly interface to airport services). These advances in technology are creating an explosion in the amount of customer data firms can collect and use to develop better relationships with our guests. Mike predicts that Big Data will continue to be a topic of discussion, and a competitive advantage for those firms that can take advantage of it.
Rohit Verma with Glenn Withiam from the CHR talked about several technology trends in their outlook article for the Hotel Yearbook. They predict the industry will continue to be impacted by the evolution of distribution channels, and the crucial importance of SEO. Web analytics, and in particular social sentiment mining will be an important method to understanding guest attitudes towards hotel properties and brands. They also suggest that the industry keep an eye on the expansion of mobile proximity and GPS-based services – they predict that the mobile phone will soon become the gateway to accessing services across the hotel – and wonder if this will mean that the best service is no personal service at all? This provides a good segue into the next area to watch – the guest experience.
Stephani Robson predicts trends in guest experience that will also be influenced by advances in technology and the hyper-connected consumer: “Guests do not want cookie-cutter in any form – not in design, service, or amenities – which means each hotel is going to have to identify features or services that offer a strong sense of place, and provide a flexible environment to support them. Lobbies will need to become not only social spaces for guests to work “alone together” but need to be designed in ways that allow hotels to engage in guests in ways that are not transactional such as cooking demonstrations, flash-style fundraisers, gadget test drives, or fitness coaching. I predict that this will translate into bigger lobbies at all price points.”
Rob Kwortnik also talked about the intersection of technology and the guest experience. He is interested to see how the move towards personalization driven by the SoLoMo (social, local and mobile) movement will actually be received by the consumer: “[There’s] the fundamental question: …. Do guests really want to provide hotel companies—or have hotel companies gather this information from social media—such personal information as demographic characteristics, likes, preferences, behaviors, purchase history, etc.? Do guests really want to be followed via geo-location devices when they check-in to a hotel using a mobile app? Do guests really want push-marketing offers sent to them via their mobile phones? I’ve yet to see hotel companies effectively execute a Social-Local-Mobile (SoLoMo) program that engages guests and drives business—without making guests wary.”
Human Resource Management
Increasing demands for improvements in guest experience will put pressure on the hospitality workforce as well. Bruce Tracey suggests that aggressive growth plans many of the top hospitality companies have been publicizing will make effective HR management practices, particularly recruitment and training, crucial for driving business results. “This is an especially salient concern in highly competitive markets. Similarly, meeting and exceeding the ever-evolving customer expectations will require substantial investments in training and development. As such, it is imperative that focused attention and substantive resources be dedicated to implementing rigorous procedures and systems for finding top talent, and offering a wide-array of learning and development efforts to facilitate consistent and high-quality service performance.”
Kate Walsh, along with Cathy Enz and Susan Fleming, worked on a Women in Leadership Study in 2013, sponsored by Carlson Hotels. They suggests that organizations are going to have to pay more attention to long term career development for their top talent. “We recommend that executives protect their organization’s distinct advantage by re-examining their succession planning programs and plans. It’s critical that they have conversations with their up and coming talent to identify the types of support and challenges they need as they move through various career and family stages. Surprisingly organizations do not have long term development plans (for their professional talent) tied to their top-level succession plans. To keep crucial organizational talent (and client knowledge) from walking out the door, executives need to take a harder look at this softer issue, especially for their female professionals.”
Michael Sturman suggests that even though the economy is improving, organizations will be maintaining a sharp focus on costs – particularly in labor costs. “Small salary increases, with raised budgets at or under 2 percent, are the new normal. To motivate staff, companies will be increasingly adopting other pay-for-performance systems—bonuses, scorecards, profit sharing, and so forth—that limit fixed costs but still provide extrinsic incentives. These incentives are becoming increasing common at all levels of organizations, but how employees respond to these incentives is not well understood. Companies will need to see if putting an increasing amount of pay at risk has the sort of effects on performance and turnover they are hoping to see.”
Several researchers previewed projects they are excited about working on in 2014:
- Michael Giebelhausen will be looking at sustainability in 2014. He thinks the conversation about sustainability is shifting. “Until recently, the discussion has primarily focused on developing green standards and figuring out the best ways to reduce a property’s carbon footprint. It seems to me that forward thinking hospitality organizations are now focusing on how these efforts should be integrated with the brand and presented to guests. This is a challenging task.”
- Kate Walsh will continue work inspired by the Women in Leadership study, expanding it to look more broadly at what career management means for organizational longevity. The Women in Leadership study will be available through the CHR in 2014.
- Rob Kwortnik- is excited to study the role of guest-facing technology – how far are guest going to allow hotels to go in collecting and using their information to personalize the stay experience before we cross the line into creepy…
- Stephani Robson has been working with Breffni Noone at Penn State on a project about how guests balance firm-generated content (property descriptions, images, local area information) and user-generated content (ratings, reviews, and uploaded photos) against price during the online hotel purchase decision. (the findings from their initial exploratory study will be available through the CHR in the coming year)
- Andrey Ukov will continue a research project on the Preferred Stock issued by Real Estate Investment Trusts (REITs), and the role this asset class plays in investor portfolios.
- Mike McCall is looking forward to continuing his work on loyalty programs, leveraging “big data” sets to gain insights into what makes loyalty programs effective, and how companies should design their loyalty programs for maximum value.
- Pamela Moulton is continuing her investigation of behavior of the stock markets. She’s going to look at how investors react when they get “early” (legal!) access to information, such as changes in ratings from analysts. Her assumption is that certain investors who pay for access to analysts receive information about ratings changes several days before the analyst issues a press release. Those that do not pay for the information would receive it via the press release. She wants to look at trading behavior, understanding who trades (institutions or individuals) and when they trade (before, at or after public release).
So, what will set up our Hospitality Executives for success in 2014? Bill Carroll suggests helping educational institutions like Cornell deliver knowledge to your current and potential management staff. “We will need more analytically and digitally competent managers to cope with an increasingly complex marketing and service experience creating industry.” Along these lines, Michael Sturman advocates for using evidenced-based management. There is a lot of research out there that can inform your business operations, like that produced by the Center for Hospitality Research. Mike McCall agrees, most companies are sitting on vast amounts of data, but lack the resources to turn that data into meaningful actionable information. He says itis past time for the industry to invest in analytic talent and the technology to support them. Maybe 2014 will be the year of the hospitality analyst?? I think that is good news for our Analytic Hospitality Executives.
Stay tuned throughout 2014 for more research from Cornell!