Tag Archives: ROI

A Greek Lesson

I think that one of the overwhelmingly consequential stories of 2011, was that of the Greek financial and social issues. The topic has been covered very thoroughly by the world media, so I am guessing that just like me, you will have mixed emotions about my fellow countrymen as a whole.

On the one hand, the irregularities (ranging anywhere from innocent mistakes all the way to blatant stealing – from both Europe, but also from the poor to give to the rich) have happened within the country itself. Unquestionably it has been the Greeks making their own bed (albeit messing up everyone else’s as a result) and that apportions blame squarely and wholly somewhere within the country.

On the other hand, under several very misguided and very unfair governments for almost 30 years now, it is typically the “non-thieving” hard-working type of Greek (majority) that is paying a very disproportionate price for all the irregularities that went on. Which is also hard to forget…

To use some culinary parallels to explain my views: whatever your position on the matter, I believe that the whole mess can be boiled down to a few key ingredients that have been cooked by certain people (from what in Greece is now called “the elite”) for almost three decades; unfortunately these were the same people that also happened to be in control of the books which were also thoroughly cooked.

From these few ingredients, the one that is very easily underestimated is complacency. And in my experience complacency is a very contagious disease.

“The Greek physics law of Inertia” – AKA the Greek version of “mañana”

The one thing for which I will dare to “throw a stone” to my countrymen is that us Greeks are pretty much governed by some cultural imperative, similar to the physics law describing inertia. When we aren’t doing anything, we are very likely to maintain our state and continue not doing much. (Incidentally, although much more rarely, the opposite also applies: when we somehow find ourselves in motion, we can find it difficult to stop). All this can make us relaxed company and great party friends, but in business it can be a disadvantage…

During the autumn of 2007, when our BABEL Multilingual product was still in its infancy, I was starting talking to hotels about multilingual versions of their websites, and international marketing packages. Knowing that Greece attracts people speaking foreign languages in their millions every year, I did some research in new hotels in the country that were more likely to use and benefit from our services.

Amongst many potentials, I remember finding a wonderful candidate. It was a five star property with some 450 rooms, in a prime location in Crete, near an airport (but far enough) and by a superb sandy beach. The hotel was independently owned, and only on the second year of its operation – which to me it meant that there would normally be a lot of room for growth of business. To cut a long story short, this property’s vital statistics made them an excellent candidate. According to my guestimations at the time, they could find themselves generating some pretty impressive profits within the first season of using us. I couldn’t wait to talk to them..

Unfortunately, my initial enthusiasm quickly evaporated by the hotel’s lack of a booking engine on their website. In fact, there was no way to make a reservation at that hotel, other than calling them, or emailing them and hoping for the best. Obviously there is very little point in pursuing, finding and getting visitors to your website from abroad if you don’t have a way to convert them to customers!

For those of you that aren’t familiar with the issue of booking engines, I should briefly highlight here that for such a property having a booking engine is an absolute necessity. I don’t want to send anyone to sleep talking about a the different pricing models of agencies and the comparative costs; so let’s just say that in a country like Greece, a decent-sized independent hotel of this type on its second year of operation, would easily pay the equivalent of 30% for a reservation in commissions to all manner of agencies. Forgetting about the numerous benefits that further enhance the argument and necessity for a booking engine, I will just mention that when someone books a hotel on the hotel’s own website, the commission costs for that hotel would drop to anywhere between one and five per cent. It is relevant to mention here that agencies already squeeze hotels as much as they can, and as hotels have costs associated with servicing a room, bookings over the hotel’s own website represent a staggering benefit in  profit levels – a 25% reduction in commission payments could be very nearly the entire profit on a room sold!

So why on earth would anyone not have a booking engine – I hear you ask. I didn’t know either and I was too curious to let this go, so I decided to find out. I picked up the phone, got through to the General Manager, and basically asked the question.

Well, someone would have to manage it..” – came the answer.

[What? As opposed to bookings from agencies that are OK to be left unmanaged?!!]

I was shocked. That was a prime example of (these days already hard to find) old-style Greek public-sector complacency having permeated the private sector. Of all the people to show such lack of interest in the hotel’s well being, to hear such a blatant statement of laziness from a General Manager… To me, that was just wrong.

A year after this conversation took place, the financial world imploded. Today travel agents control the business for that hotel (and so many other hotels like it) and have forced the General Manager to drop her prices and increase the commission she pays to them. The owners were probably far too removed from the day-to-day decisions to identify the missed opportunity, and have now fully blamed the Greek corrupt elite for their misfortunes. Complacency and lack of understanding are a poisonous mixture for a business.

Following that incident (and a few more like it), and seeing the  suffering of Greek hotels in these trying times for Greece, I have quickly developed a strong aversion to complacency. It is therefore with considerable worry that I share with you my suspicion that this affinity to a “mañana” approach to life is not entirely alien to Britons either…

Having worked with hotels from all over the world [and aware that I have no other evidence than our own contacts with the markets (hardly a statistically acceptable sample)] I would suggest that British hoteliers are on average less keen to move forward with international marketing than their international counterparts.

Despite us being a firmly UK based company, today only 23% of our clients are located in the UK – the rest are based pretty much everywhere else around the world. The hoteliers around the world to whom we sell our services seem to be much more aware that hoteliers sell to travellers and that these days travellers don’t come from the hotel’s neighbourhood, and they don’t always speak the neighbourhood’s language.

Looking at the flickering lights of the world economy today, I am strongly advising hoteliers to go after international business even if they do well domestically. Every incremental demand point is of benefit not only to the hotel’s pricing and yielding flexibility. It is also another point of safety in an unsafe world.

If the pessimists of this world are correct, there is a lot of pressure for everyone in the not too distant future, and it will be only those who are prepared that will stand a chance to thrive.

Thank you for reading,

Yannis Anastasakis

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Filed under eCommerce, Hotels, International, Marketing, Multilingual, Return On Investment, Sales Strategies

ROI? ROI on what?

Before internet campaigns were popular, ROI started being used for hotel sales activities to help decision makers justify investment in one particular sales activity over another. This can fairly easily work well with certain traditional activities and it has been used successfully by most major chains’ sales teams over the last 10 years. I therefore want to make clear that my problem with it is not all-encompassing. In fact, it sits firmly outside this meaningful way of choosing investment and evaluating opportunity costs.

The reason the subject is making it to this page is ROI’s over-use, especially as a tool for hotels which select suppliers, at a time in the sales cycle when any talk of ROI is not – and can physically never be – anything more than a rough estimation (and in many cases, something someone pickes straight out of thin air).

So you are an e-marketing professional. You have identified the larger issues with your potential customer, managed to arrange an appointment and you have travelled to their offices to see them. You have presented your case, and with the use of solid arguments and facts, you are well on your way to convincing them that something needs to be done. Then, with almost mathematical precision, the man who is funding the operation (or he who has to do the justifying on the funds needed) will ask the inevitable question. “What is my ROI if I do this, and can you guarantee it”?

With time, I have come to believe that these people know the answer (they are far too intelligent not to), and they are only asking for two reasons. First, to see how I will respond. I am suspecting that if I were to come up with too aggressive figures, I would be dismissed as less serious than the next person bidding for the job.

The second reason is that if they like the number quoted back to them, they will hold it as a solid promise. This can be a major issue if you like to only give information that is accurate and you are not in the habit of letting people down.

Personally, I give my customers an honest view of my thoughts (as a proud cynic I have to say that I am amazed by how many potential clients appreciate honesty more than empty promises). Establishing an accurate ROI to my customer’s campaign before we start the work, would require a lot of work itself – man-hours that I am not prepared to offer for free. The only case where I w

When a hotelier asks about Return On his/her Investment, I now answer "that depends on you".

ill indulge in guaranteed figures without having done paid-for research is when I am fairly confident I know the potential, it is a major need for my client (they have bosses too) and if (and only if) I have reasonable control of their revenue management, sales and marketing efforts, as well as web development.

Why? Because it is only fair. And because once, before I knew about CentralR, I was caught out.

You see, even if you know how much an 800 room three star hotel in Kensington should and could generate from a three thousand a month PPC, they could be working against you and themselves. They could for example be giving CentralR (in my view the arch enemy of hoteliers everywhere) better rates than they do on their own website. They could even allow CentralR to have a site that is – for all intents and purposes – a clone of the hotel’s own site, which they are also advertising on PPC using proprietary keywords. Keywords for which they are charging the hotel by the way (at which point you have to start admiring their bravado and wonder how they have been getting away with it all this time).

Or – to take a less visible example – the property may be giving a wholesale agency FIT rates WITH permission for them to be published on the agent’s website unpackaged. These static rates will always create problems when the hotel is working with the BAR model on their own website – unless they are very sharp with their lowest rate management.

All in all, it is actually unreasonable to be asked to guarantee something over which you have no control. Revenue decisions, sales decisions, and even PR activities can have a massive effect on a hotels’ performance and conversions for a specific campaign, if that campaign is approached in isolation. Taking on guaranteed work without control – or at least a reasonable amount of say – in the aforementioned areas, is a gamble which (from experience) I do not recommend.

ROI is absolutely the primary, most important ratio attached to any investment, and each campaign’s main success measurement. Although there are proven tactics which allow for greater RevPAR through diminishing ROI, its improvement should be any campaign’s main focus and overall modus operandi. We should just keep in mind that it only becomes the all important figure once the campaign has started.

Before work has started it is no more than an estimation; and when it is based on gut feeling only (without any research and analysis work) it is nothing more than a direction, mostly useful as a method of finding out information about the professional that you have in front of you presenting their solution, rather than something on which you should be setting your expectations and rateplans for next year.

Yannis Anastasakis

eHotelworks

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