The hidden opportunity behind "low hotel occupancy" in China

As hotel companies continue the unprecedented rush to develop properties in China, new analysis shows that the hotel occupancy rate in China to be among the lowest in Asia.

“Hotels in some markets of China are clearly oversupplied in the next three to five years, and they won’t be generating good returns,” said Nigel Summers, Hong Kong-based director at Horwath Asia Pacific, which tracks the hospitality industry. “China has had a very strong demand. The question is whether the increase in demand is going to be big enough to handle all the new hotels.”

Sixty-one percent occupancy is not a strong indicator, however it is must be taken in context. 

According to USA Today, China had 14,100 recognized hotels (those with at least one-star rating) in 2008, nearly double the 7,400 recognized hotels in 2001. By the end of 2012, the number of recognized hotels in China is expected to top 18,000. 

Given the rapid supply expansion and downward economic indicators, it's quite remarkable that the country was able to maintain its 61% occupancy rate so far in 2011 – flat to the previous year.

And therein lies the hidden opportunity behind the "low" hotel occupancy numbers in China.

Hoteliers were able to expand supply at a pace roughly equal to the increase in demand. In other words, expansion in China has done nothing to dilute the market. To the contrary, international brands are reporting 23% growth in RevPAR, with continued upward pressure on both occupancy and rate.

Despite the shock value of "low occupancy" headlining the Bloomberg News report, this RevPAR growth speaks volumes to the hidden opportunity presented by both international and domestic travel in China and why so many are bullish on China. 

 

 

 

 

The Unparalleled Importance of a Crisis Management Plan

As the stories of the Casa Monica Hotel firing an employee for wearing a US flag pin began to break this weekend, I was struck by just how unprepared the hotel and Kessler Collection were for the public relations firestorm which erupted in response to the media coverage. 

(DISCLOSURE: I once worked in Sales & Marketing for the Kessler Collection and, as I said on Twitter this weekend, it was troubling to see former colleagues in such a position.) 

Instead of arguing the merits of uniform policy versus patriotism versus two-year history of wearing the pin, it's important for hoteliers (and businesses in general) to take note of how this incident escalated from a policy decision to an immeasurable public relations incident.

Buoyed by (literally) tens of thousands of tweets, facebook posts, and hotel reviews through social media channels, the story grew from a local Jacksonville story on Thursday into a top five feature on nearly every broadcast and cable news channel in just two days time.

As this groundswell grew against the Casa Monica Hotel's decision, the Kessler Collection was notably silent on the issue. Neither the hotel nor the company responded to requests for comment by the local and national media. Neither the company nor the hotel made any posts to their official websites or social media pages to address the questions. In fact, the only tangible response the company seemed to undertake was to attempt to delete a number of strongly worded posts and comments from the hotel's Facebook page.

The Casa Monica Hotel finds itself at the center of a textbook public relations crisis – albeit one that it should have reasonably anticipated and managed – that threatens to damage its brand. The lack of preparedness and response beg the question: Does the hotel or company have a crisis management plan? 

Crisis management is not and never should be an extemporaneous endeavor. It involves forethought, resources, planning and practice. There are thousands of books, blogs, degree programs, etc to pull from but to briefly summarize, there are three active stages in a crisis – all of which need management:

  1. Before all hell breaks loose
  2. All hell breaks loose
  3. After the crisis

Before all hell breaks loose is the "simple" phase, although it is the one that requires the most work. The "voice" of the company must to be defined. Rules around when different members of the organization will be made available to the media must be written. Responses to reasonably anticipated situations (accidents, acts of God, etc) should be drafted. The channels by which the responses will be routed should be tested. And – most importantly – the entire act of responding to a crisis must be simulated and practiced by the entire organization. 

Once all hell breaks loose, which is where the Casa Monica currently finds itself, the work investing in stage one will begin to bear fruit. The most critical elements are the seemingly contradictory goals of speed and calm. Timely statements and media responses must be effectively managed to turn (and eventually tame) the crisis. 

After the crisis, there are two parallel, urgent paths – reputation management and response review. The company must review the root cause of the crisis and how it was responded to by the public relations team. Efforts must be undertaken to repair the brand's image both internally and externally. 

 

For those of us who are not involved in the Casa Monica / Flag Pin debate, it's important that use this opportunity to learn the unparalleled importance of having an effective crisis management plan. The inability to deliver timely statements and respond to requests for comment can do immeasurable harm to your business.

We will all have crises to face. The key is to remember the old Boy Scout motto: "Be Prepared."

 

 

Guests for Life: It's how you make them feel

The one fundamental truth in providing a luxury travel experience is best summarized by Dr. Maya Angelou's famous quote:

"People will forget what you said, people will forget what you did, but people will never forget how you made them feel."

In creating guests for life, our overarching mission must be to ensure that guests have an experience that captures their emotions and stays with them long after they have checked-out.

In the end, it's how you make them feel. 

 

The State of the Chinese Luxury Market

Affinity China has unveiled some amazing statistics in a recent study of the Chinese luxury consumer that point to not just the growth of the luxury sector in China, but also the global reach of the affluent Chinese. 

Among them:

  • The average age of the Chinese luxury consumer is 20 years younger than consumers in the US or Japan
  • In 2010 there were over 1 million millionaires in China, up from just 300,000 just four years before
  • In 2010, Chinese travelers made 57 million trips abroad. That number is expected to be 100 million by 2015
  • More than 50% of the luxury goods purchased by Chinese are bought while they are traveling overseas
  • On average, Chinese travelers spend $7,000 each when traveling

There are more fascinating factoids contained in this short video overview of the Chinese market. 

 

 

For more on Chinese luxury travel market, including how to target and host this growing demographic at your hotel, please read my previous post "Travel Trends for Chinese Millionaires". 

Behind-the-Scenes: How Ritz-Carlton trains it Ladies & Gentlemen

Great insight on the selection process and behind-the-scenes training of employees at The Ritz-Carlton hotels. 

The making of Ladies and Gentlemen

The philosophies and lessons being taught are ones that we could all do with 
taking on board, not just in our professional lives, but in our personal ones as well.

But the most important thing I discovered was that the Ritz-Carlton experience — its methods, its quirks — are 100% genuine.

 

Tipping Guidelines: How much to tip

Have you ever wondered if you should tip a service worker or how much is an appropriate tip? You're not alone. Ask a group of ten friends what an appropriate tip would be for service and you'll likely get ten different answers. 

Especially when traveling, there are many situations when tipping comes into question. It is most important to remember that while tipping is meant to be a sign of appreciation for a particular service, it should first and foremost be accompanied by respectful treatment.

 

– Tip if someone serves you personally.

– Tips go up according to circumstance, such as a delivery in bad weather, or if a customer sits for a long time at a table, preventing a server from seating another diner and getting a second tip.

– A tip may be warranted in what's normally a no-tip situation if a job is extra tough and done well, such as a snowplower who has carefully cleared a long, steep, curvy driveway.

– If you don't want a service, don't be afraid to say so: "Thanks, I'll get my own bag."

– If you do use a service, tip.

– It's OK not to tip if tips aren't a large part of a person's earnings; coming back is tip enough.

– Traditionally, business owners aren't tipped, but it's OK to offer a tip if they wait on you personally; they can refuse. Small gifts are an alternative.

– If you are unsure whether to tip, speak up; it's OK to ask what's customary.

 

As for how much to tip, I use the following industry guidelines in determining how much to tip:

Taxi drivers: 10 percent to 15 percent

Beauty professionals: 15 percent to 20 percent

Restaurant servers: 15 percent for good service, 20 percent for great service, 10 percent for poor service

Pizza deliverers: $2 a pie is generous

Concierge: $5 for special service

Valet: $2 when you pick up a car, more if extra services are requested

Room-service waiter: 15 percent of the bill

Bartender: 15 percent of the tab, no less than $1

Sommelier: 15 percent of the cost of a recommended bottle

Housekeeping: $2 to $5 per night. Leave the tip on the pillow, in a labeled envelope or at the front desk. It's important to indicate that the money left is a tip, as housekeepers are often trained not to accept anything not specifically indicated as a gratuity. 

Hotel Bellman: $1 per bag, no less than $2

Spa technician: 15 to 20 percent

You don't have to tip in a free shuttle, but tip the driver $1 per bag if he or she helps you with your luggage.

 

Finally, always treat servers and staff with respect. A tip, even a generous tip, is never an excuse to disrespect someone or to treat them dismissively. Showing kindness to servers is just as important as adding a gratuity.

 

 

 

 

Study: 61% of smartphone users would book travel on mobile devices

A new Mojiva study being reported by EyeforTravel reveals that 61% of smartphone users would be comforable booking travel on their iPhone or Android.

 

Purchasing_travel_on_mobile

The study, which was based on responses from almost 200 mobile users on the Mojiva network, shows that while 64% of users would be comfortable spending up to $500 dollars via their phones for travel, nearly forty percent of smartphone users would be comfortable booking travel in excess of $500. 

 

Source: Eyefortravel

 

 

How reliable are TripAdvisor reviews?

Since its launch in February 2000, travelers and hoteliers have attempted to better understand just how accurate the reviews at TripAdvisor truly are. 

Jonathan Barksy and Robert Honeycutt of Market Metrix, who's specialty happens to be hospitality feedback, compared 12-months of TripAdvisor reviews against their firm's proprietary index to find that – generally speaking – aggregate TripAdvisor review scores tend to be accurate

The hotels used in this comparison were selected on the basis of their location, brand and type to achieve a diverse mix. Each hotel also must have received a sufficient number of responses. Statistical analysis was conducted to compare the similarity of scores for each hotel, the distribution of the data, and the change in scores.

The most significant conclusion of this study is that the mean scores of hotels track very consistently and closely between TripAdvisor (CSI) and MMHI. This indicates that, when taken as a whole, the reviews for a particular hotel are a reliable measure of average customer satisfaction of that hotel, given adequate sample size. However, the variability of scores was found to be slightly greater among TripAdvisor hotels. TripAdvisor reviews were more spread out with more high scores and more low scores. While some persons may appreciate reading a wider range of reviews about a hotel, extreme observations may be distracting or even distort consumer perception.

(emphasis added above)

In other words, there are some reviews on TripAdvisor that – regardless of the hotel – simply aren't accurate. Individual reviews can skew negative or positive as a byproduct of an emotional experience. For example, receiving an amenity from the hotel to mark a special visit may elicit a more positive reaction on TripAdvisor than having a hotel misplace a guest's laundry.

On the whole, however, the median score for an individual hotel tends to be accurate and in line with established industry metrics for guest satisfaction.

 

Travel Trends for China's Millionaires

The Hurun Research Institute has released The Chinese Luxury Travel White Paper, giving insight into the preferences of China's luxury consumers.

The study, which was created from one-on-one interviews with 463 Chinese millionaires and billionaires, sheds new light onto how the wealthiest Chinese make travel decisions.

I found several details to particularly interesting, including:

  • Chinese millionaires average 15 days of vacation annually, including three trips abroad. One-third will take more than 20 days of vacation per year and 20% will travel abroad five or more every year.
  • France is now the top travel destination, followed by the United State (which had been #1 in 2009 and 2010), Australia, Japan, and the Maldives. 
  • 4 out of 5 millionaires consider sending their children overseas for education, with the US, UK and Canada topping the list. 
  • 80% of Chinese millionaires prefer to travel on their own rather than with a tour group.
  • 57% of the ultra-wealthy make their own travel arrgangements using a travel agent or professional website.
  • Only 11% of Chinese millionaires book travel through a hotel website. 
  • When choosing where to stay, brand is the most important factor, followed by service, facilities, and location.
  • The preferred hotel brands of Chinese millionaires are Shangri-La, Hilton, Park Hyatt and The Ritz-Carlton. 

For US hotel companies seeking to gain a toe-hold in the Asian travel market, this study gives actionable insight in how to market to ultra-wealthy Chinese. 

For example, with such a large number of Chinese considering an overseas education for their children, do you think proximity to major universities would be a consideration for the guest? If so, do your professional travel agents have a list of area universities? Is this information detailed on the top-performing international travel websites? 

With such a high percentage of millionaires preferring to travel without a group, is your hotel prepared to host a single Chinese family? Without a group guide as a primary communicator for the guests, are your facilities and staff prepared to service a Chinese guest? For example, do you have community maps and guides printed in simplified Chinese? Are your restaurant and in-room dining menus availble in multiple languages? Do you provide multiple Mandarin television channels? Do you provide currency exhange services? 

I think this study is truly fasciniating. Hotels and brands that implement these insights in their service standards and marketing stand to gain marketshare in this rapidly emerging market.