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HSMAI 2017 HOTEL CHIEF MARKETING OFFICER ROUNDTABLE:Dealing with Digital Travelers, Loyalty and Innovation In a Tumultuous Time

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HSMAI 2017 Hotel Chief Marketing Officer Roundtable:Dealing with Digital Travelers, Loyalty and Innovation In a Tumultuous Time

HSMAI’s seventh annual Chief Marketing Officer Roundtable welcomed over a dozen executives from a broad spectrum of lodging companies ranging from small collections to mega-brands. HSMAI Executive Roundtables provide senior executives access to experts and an opportunity to interact with their peers. The association brings together: Chief Marketing Officers, Chief Digital Marketing Officers, Chief Sales Officers, Chief Revenue Officers, and Hotel Management Company Sales & Marketing Executives through the year.

This all-day CMO event, held in New York, featured the following sessions:

` Economist’s Outlook: A Year of Great Opportunity and Grave Risks – a presentation by Bernard Baumohl, chief global economist for the Economic Outlook Group.

` Executive Insight: An interview with Ted Teng, President & CEO of Leading Hotels of the World.

` Engaging Today’s Digital Travelers: A discussion led by Hari

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Lalia Rach, founder of Rach Enterprises, who facilitated the roundtable, advised participants, “We must be forthright. You must elevate your thinking. The minute you start talking about tactics or only about your organizations, it will not work. This is an industry event. If there is one thing I know is that this industry has so much mental talent but we tend to get into our silos and put up more concrete around those solos. Today is about stopping yourself and saying, ‘Oh, that’s just the company line.’ The one thing that happened to remember in 2016 is the Chicago Cubs won the World Series for the first time since 1908. Regardless of what you think about politics and the economy, think about how long they

persevered and all the things they tried. Like the Cubs, today is about reframing.”

Rach asked panelists if they were having active discussions in their companies about the pace of change in marketing. One said “We are always asking what we didn’t think about yet. We launched a new website and even though it’s new we’re already asking what’s next.”

She also told them that one travel company has started a “shadow committee” to listen to the under35- generation. “If you do not hear the voices of 35 and under in your company then your marketing will be useless. You can’t depend on your ideas about that

Nair, a global senior vice president for Expedia Media Solutions.

` The Future of Loyalty: A review of the loyalty landscape and how it has evolved in hospitality and travel.

Roundtable Introduction


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generation. I’m a Baby Boomer and we told people who tried to tell us what we thought.

Rach suggested two actions to the panel:

1. Go to the Consumer Electronics Show in Las Vegas to see how fast the pace of change is in another industry and how that might apply to hospitality.

2. Start looking at the generation after the millennials, sometimes called the iGen, who are as vastly different from millennials as millennials are from Boomers. They are 21 and 22 now. They are taking on adulthood much later but what has speeded up is their desire to be in the marketplace as buyers and consumers.

In a broad overview of the domestic and global economies, Bernard Baumohl, chief global economist for the Economic Outlook Group, took note of the dramatic events of 2016 and discussed how they might affect the general economy, as well as lodging and travel.

The New Administration

Bauhmohl had these observations about the new administration in Washington D.C. and what may emerge from it:

` It’s difficult to make predictions because these times are bizarre, fascinating and unsettling -- and can be dangerous. There is a real paradox under way. We

are dealing with a presidency with so many uncertainties.

` Wall Street, which is supposed to abhor uncertainty, is hitting record after record.

` We’re getting to a stage where investors and business leaders will say we’re getting close to ‘show me time.’ There will be changes on a global scale.

` Personal and corporate tax cuts are on the way. We don’t know the shape of these tax cuts.

` There will be additional spending on de-fense and a pullback on regulations.

` Immediate and full expensing by com-panies is in the works, which will enable

Outlook 2017: “A Year of Great Opportunity and Great Risks”


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companies to expense right away with-out the previous depreciation schedule.

` Easier repatriation of foreign profits. There is $2 trillion resting overseas that can now get taxed at 35%. It you elim-inate or reduce that it can bring in for-eign capital.

` Repeal of Obamacare – with uncertainty of what will replace it.

` Consumer and business confidence are up.

` Is there a trade war going to happen with Mexico, China and others? That is a concern among many.

` How many allies will Trump insult? That can have an impact.

` What major geopolitical risks are likely to erupt and how will Trump react?

` Finally, will the White House become paralyzed by all the investigations in Congress and the Department of Jus-tice about family business ties and com-munications with Russians. All of this is brewing and could become problematic.

Economic Concerns:

` Mortgage rates are rising

` Home prices are increasing significantly – at twice the rate of inflation.

` Still seeing moderate income growth – real growth but not as much as we would like to see at this stage of the business cycle; that could be a drag on housing.

` There is an undercurrent of angst – not showing up yet in a palpable sense but it is a topic of conversation. If it gets worst, there will be an impact on spend-ing as doubts grow about what’s likely to come out of Congress.

Possible Dangers:

` DC politics – a sense of turmoil and a potential constitutional crisis.

` If rift widens between Trump and Re-publicans on at least a half a dozen issues that rift could pose considerable problems.

` Geopolitical risks, like other countries leaving the European Union. If there is a breakup of the EU that would have an impact.

` It’s a lot easier to get out of trade agree-ments than to negotiate a new one. It will be difficult with this president to ne-gotiate deals because he does not like multilateral agreements. He is a unilater-alist and wants one on one negotiations. That approach may not be workable and may precipitate a trade war.


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Economic Positives:

` Energy industry is coming back and prices are up. This industry had been completely absent but coming back because they see opportunities for profits. Energy prices should be steady and more production will come.

` Sequestration is over. There will be a pickup in government spending on defense, infrastructure and other areas. The president wants to spend $1 trillion in the next few years to improve the flow of goods and services.

` The dollar will continue to appreciate this year as interest rates go up. Tough times in Europe and Japan mean more foreign capital coming to U.S.

` If you put together increases in consum-

er, business and government spending, there will be fairly substantial rates of growth in GDP – which increase de-mand in the hotel industry.

Economic Projections:

This is the 8th straight year of growth. The average is less than five years but this one may be longer because growth has been more gradual. There are several growth scenarios. Among them:

` The worst is a trade war; if there is one, there will be no growth.

` A presidency burdened by investigations.

` There is a 60% chance of moderate growth and a 25% chance of recession, something we have to be aware of. That projection is based on the next three years though in some respects it is impossible to draw out any projections beyond 2017.

` The fed will probably raise rates twice this year. They do see inflation picking up and full employment.

` It’s a different environment for anyone forecasting the economy.

` Consumers will lead the charge. They are in pretty good financial shape. There are good sales numbers and record auto sales. The job market is doing much better and unemployment is lower. People are more confident about jobs.

“We need to go from who are we competing with to who

are we competing for?”


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` Household debt has been increasing but has not reached the troublesome level. Households have been able to easily service debts; bankruptcy and foreclosure rates are the lowest in 18 years.

` Household wealth is increasing because of the rise in the stock market and a rise in the value of homes. Pay is rising

faster than inflation but the line between inflation and growth is getting narrower.

` All of these factors should stimulate consumer spending this year and next.

Ted Teng, president and CEO of Leading Hotels of the World, was interviewed by Rach about his outlook on today’s market-ing. Teng made the following points:

` I am a lot less optimistic about 2017 after what has been a long streak of positive news. Maybe there are things to be optimistic about like tax cuts and less regulations, but I am very cautious because we have been on a run for so long. Where will the spark come from?

` I am optimistic about the industry for the long run despite current disruptions be-cause of growth in both leisure time and business travel. In fact, I have no trouble recommending that anyone go into our industry or to become travel agents.

` When I look at the industry I ask where is the money going? In the past it flowed to hotel owners, then in the 70’s and 80’s to management companies. Then the OTA’s shifted market share. They hired a lot of people but not ho-teliers. My concern is that over the last several decades, money has flowed out of product enhancement and train-ing, which is not good in the longer term. Where is the money going next?

` We need to invest in people. Is cut-ting room service good for a hotel? We need to talk about these big pic-ture issues, not just profit margins or tactical issues. We need to play stra-tegic leadership roles.

Executive Insights from Ted Teng, President & CEO of Leading Hotels of the World


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` There is another similar concern – cus-tomer acquisition. There used to be a fairly stable funnel in terms of creating awareness. We are not investing in the top of the funnels. We only look at transactions and what’s what showed up and makes the budget. When I worked for Barry Sternlicht, I learned that that loyalty was about people will-ing to suffer to enjoy a product. Apple is terrible at doing some things but they have the power of people being willing to suffer so they can get the benefits of Apple products.

` There has been a huge shift from being product-centric to customer centric, but not necessarily customer-friendly. Most hoteliers think about the services they provide but the progressive ones think about experiences, about what we cre-ate for our customers. Very few hoteliers think about how customers experience a hotel. For us, it’s shifting from being a transaction company to a relationships company. We need to go from who are we competing with to who we are com-peting for?

` In our industry, what’s called loyalty is many things – retention, reward, etc. None of those are really loyalty. Custom-er loyalty is not about being loyal to a company, but about companies being loyal to customers. That was a founda-tion for us to rethink loyalty but what we doesn’t make sense for every compa-ny. You have to decide what’s the right fit for you. We at LHW identify a target market that we call the curious traveler that travels often, doesn’t repeat desti-nations and has many years of travel to go. They really like our hotels because they’re different and worth discovering.

` Our managers love to personalize their stays. Most hotel managers don’t find that efficient but our hoteliers are artists and love to personalize experiences. This means we don’t have to go out and spend a lot of money acquiring our customers. What we do need is a tech-nology platform to put it all together.

` Said Rach: Hotels used to be innovators with the first elevators, etc. You can go to any small town and find a building that was the most magnificent hotel 100 years ago. Hotels have relinquished thought leadership to financial investors.

“We need to go from who are we competing with to who

are we competing for?”


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Hari Nar, global senior vice president for Expedia Media Solutions, which sponsored the roundtable, made the following points about how travelers now book their trips:

` Travel is a complex and considered purchase – more stressful than buying shoes. It’s hard and time consuming.

` The average American consumer makes over 100 visits to web sites in the days leading to a trip and there is a unique opportunity to influence the customer during that period. People are hungry for the right level of information.

` Customers are brand agnostic. OTA’s are dominant but there has been a good increase in booking direct. Very few people search for a hotel by its name.

` Travel advertising can be made relevant and useful and can get results. When you have a customer considering more than one destination, there is a large percentage of them who say advertising helped them make a decision. When you go deeper on the recall rate, that number if substantially bigger. If you do advertis-ing right you can make it memorable.

` 37% of travelers show a high degree of loyalty to a brand. The average house-hold has 29 loyalty memberships – from groceries to gas and there is a lot of clutter. Simple loyalty plans seem bet-ter – like Orbitz’s Orbuck where a dollar spent earns 1 Orbuck toward rewards.

` One panelists said that offering free breakfast on his own site does not move the market share needle because people are going to the hotel anyway. But if they put it on an OTA site it does move business.

The Future of Loyalty

Rach offered a history of loyalty programs dating back to the early days of America and coming of age with programs like green stamps in the late 19th century and the Betty Crocker Points Program from Gener-al Mills which, she said, “brought emotion, connectivity and engagement of the family.” She said that some current programs are counter-productive because they have time limits for earned points; or have so many elite members that it becomes meaningless. As an example of the latter, she said that on a flight from a tertiary airport, there were 61

Engaging with today’s digital travelers


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diamond level members waiting for the flight so there was no perk to being at that level.

Saying she’s not sure what the 2020’s will bring, Rach said it might be an age of prox-imity when loyalty is rewarded by benefits available locally, where a member lives, works or shops. “The deepest craving in human nature is to be appreciated. But we need to think differently about it, to reframe how we think about these old problems and issues. Don’t go back to what has been or you will end up with the same stuff.”

Rach broke the roundtable into four teams and asked them to come up with best prac-tices as far as approaches to loyalty. Among their conclusions:

` Meaningfulness. You have to show people they matter.

` Guests must be recognized with au-thenticity and compassion.

` Hotels must connect the digital with the actual.

` Hotels must get away from generic rewards and recognition.

` Localize – don’t have a canned re-sponse.

Rach concluded with these points:

` A loyalty program should be simple, easy to learn and burn on the cus-tomer’s terms. A physical or electronic record of the stay – photo albums, etc.

` Loyalty should be personalized. You need to look at customers in a lifetime value type of way.

` People on vacation have a need to connect with other people and there may be a way to convert that need into loyalty.

` Amazon has trained consumers in how a company deals with people. If there’s anybody to follow in developing loyalty, it’s Amazon and the way they have been able to win time and again. Ability to purchase the entire experience – furni-ture, etc. ”Retail the experience.”


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but coming along. We will be talking about it more.

2. Surprisingly strong year-over-year growth for one company despite a rebranding.

3. 40% increase year over year for Airbnb.

4. Affect being felt already on interna-tional inbound travel because of the change of administrations. Will it be a blip or a change we’ll have to live with?

5. Explosion in mobile reserva-tions.“Owners have become much more interested in their properties. Their involvement is frequently refresh-ing but sometimes frustrating.”

6. The fact that the Starwood and Mar-riott merger closed and that the Chi-nese buyers did not prevail.

7. Continuing growth of inventory in New York City which makes it challenging to carve out a niche.

8. The pace of change on the marketing side.

9. Digital’s early days are over so there

is much more accountability; the shift now is to own the customer experi-ence in every way.

10. Hiring of so many people from other industries – bringing in people with ex-pertise in digital to help the company change more quickly.

11. How much marketers are using data.

12. The general sense of optimism. De-spite a tough year in 2016, many peo-ple are optimistic despite the chaotic transition for the new administration.

13. Dearth of hungry people wanting to move up in their companies – a lot of smart people but lacking the passion to climb the corporate ladder.

14. More informed marketers willing to put media plans in place proactively rather than being reactionary

15. Short-term bookings for long-haul trips – people going on safaris in 2 months from booking; or to the Maldives in 4- days.

16. Travel agents still strong and industry needs to be educated on working with them.

17. Pressure to get metrics right.

CMO’s saw these surprising trends:

SURPRISES in 2017

After a tumultuous year, nothing should be surprising. But for a group of Chief Marketing Officers who

gathered for the seventh annual Chief Marketing Officer Executive Roundtable organized by HSMAI,

there are trends that have surprised them as 2017 began. Lalia Rach, founder of Rach Enterprises and

the facilitator for the discussion, asked: “What is one trend you are seeing from your vantage point

that is surprising you?” While a full report on the roundtable will be available shortly, HSMAI wanted to

quickly share these “surprising trends” with members so other marketing executives, as well as their

colleagues in hospitality, could compare notes to see if their experiences are comparable.


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Conclusions:

Rach concluded with these comments:

` You all listened to each other and that’s a home run because it what you should be doing.

` I encourage you to think about how you are going to reposition and reshape in-stead of resorting to the same old same old. I urge you to break down the silos that exist.

` Lastly, I encourage you to become fully engaged with HSMAI. There is no better way to make connections.

The full report on the roundtable will also include what the CMOs and the experts who spoke to them said about:

` The outlook for the economy from a top economist.

` How one luxury hotel leader sees the future of marketing.

` A look at how marketers can engage today’s digital travelers.

` The future of hospitality loyalty programs.

` What CMO’s see coming next.

Look for the full report soon.


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The session was sponsored by Expedia Media Solutions. Hotel companies represented at the Roundtable included Aqua – Aston Hospitality; Best Western International; Denihan Hospitality Group; Interstate Hotels Corporation; Kerzner International; KSL Resorts; Leading Hotels of the World, Ltd.; Marriott International; Red Lion Hotels; Red Roof Inn, Two Roads Hospitality; WoodSpring Hotels; and Wyndham Hotel Group.

HSMAI Executive Roundtables provide senior executives access to experts and an opportunity to interact with their peers. HSMAI brings together Chief Marketing Officers, Chief Digital Marketing Officers, Chief Sales Officers, Chief Revenue Officers, and Hotel Management Company Sales & Marketing Executives through the year.

This HSMAI Foundation Special Leadership Insights was produced for the Foundation by Freelance Writer Harvey Chipkin.


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