Measuring Productivity & Success in an Automated Era
Updated: Oct 18, 2019
5 years ago, a study was conducted, at the request of then President of France, Nicolas Sarkozy, to determine whether Gross Domestic Product (GDP) was still a reliable way of measuring success, economic stability and social progress. The panel of world-renowned economists, led by Nobel Prize winners Joseph Stiglitz and Amartya Sen, agreed it was not.
What is GDP, then, and why do some argue that it is no longer a viable measure of stability and growth? Basically, GDP measures the volume of stuff that people make. It has been used for about 80 years as a tool for gauging the health of national economies, and for decision and policy making. However, the current argument is that GDP paints a misleading picture of social and economic reality today.
100 or 80 years ago (when the concept of GDP was invented) we had an industrial society. Increased output meant more jobs. GDP was indeed a valuable measurement tool. But with the advent of automation, it is not as meaningful as it used to be. You can increase production without adding any jobs at all… in fact by replacing workers with automation, output and margins will indeed increase, resulting in higher GDP. But is that what we should be measuring?
For hoteliers, the issue of measurement has become an increasingly important challenge over the past 10 years, especially in light of the automation which has had the most profound effect on our businesses… the internet. In fact, I’ve written before about the attribution challenge – for example, how do you measure ROI for ad spend when the customer visits 20 sites before booking?
The challenges don’t end there and increasingly affect pricing decisions and how to define your value proposition. Gone are the days of pouring over spreadsheets. Today we have all kinds of systems that pull data together from multiple sources, crunch the numbers, identify patterns and spit out recommendations.
The growth of UGC (user generated content), particularly in social media and hotel review sites have thrown yet another curve ball into tried and true practices and wrested control of the message and image we want to project away from us and into the hands of our guests.
Recent studies suggest that if your hotel grows its review scores by 1 point you can raise your price anywhere from 4% to 11.2% (depending on the study). But no one tells us exactly how to translate this theory into practice. My own queries to hoteliers asking if anyone has figured out a formula or practice to use these scores to guide pricing decisions resulted in people asking me to share the results I found… but no one actually seems to have found a solution.
I was particularly intrigued, therefore, by a point in the recent Noone and McGuire study which indicated that the score is not as important as the actual reviews and comments – WHATpeople write. The conclusion is that people read the reviews and examine the tone of the review, rather than take a star rating at face value. Among the things that determine the value of a property are particularly comments about service, rather than facilities. This means that how your staff treat the guest (and respond to negative reviews) may mean more than comments about how beautiful the bathroom is.
Sounds subjective, but your perceived value (and consequently your future bookings) may depend on it. So, how do you use it for measuring success, to increase your rates and grow your business?
At HER we recommend to use UGC as an additional tool in your service and pricing meetings. Look not only at your own results and reviews but also at your comp set. Identify where you may have a hole that needs plugging, and where your competitor has one that you can capitalize on. For instance, if your competitor has a number of complaints about a particular service or facility that you excel at, update your content to highlight your excellence in that area.
Another proposal is to slowly adjust your price increases (and thus ADR and REVPar) week by week and gauge the effect on booking pace, until you reach the threshold where bookings are adversely affected.
Hoteliers have a love-hate relationship with review sites. We say they are a useful tool that can help us improve our service, facilities and to identify strengths and weaknesses.
There are lots of other ideas out there as well. We’d like to hear some of yours.
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