Hilton is considering ways that revenue management techniques could be used to improve customer satisfaction, and there are opportunities for airlines too. Tom Bacon reports
Many service-focused organisations identify opportunities to ‘surprise and delight’ customers as a key vehicle for driving increased customer satisfaction and loyalty.
Revenue management and pricing in both hotels and airlines, however, sometimes seems to go in the opposite direction ie. ‘Surprise… by charging a new fee!’
Resort fees, bag fees, cancellation fees, seat fees – travel companies are now, unfortunately, better known for ‘hidden fees’ than their ability to ‘surprise and delight’.
With the move to fees for ancillary services, travel companies must communicate more and more clearly their value proposition, rather than contemplating how to increase customer loyalty.
Questions they could be asking include:
· What exactly does this hotel rate or airfare entail?
· What does this extra $25 offer?
Indeed, with such a focus on ‘pay for what you use’ there is little room for surprises that come without a fee. In this world, choice is supposed to be a customer benefit but is often regarded as confusing or ‘nickel and diming’ or a race to the bottom in customer service and product quality.
How Hilton is doing it
It doesn’t have to be this way. At a recent Eyefortravel conference, Jeff Borman of Hilton Hotels talked of various initiatives that Hilton RM has pursued. Using some of the same RM forecasting and optimisation techniques that are used to drive revenue, instead it focused on increased customer satisfaction and proved that yes, RM can support ‘surprise and delight’!
Borman explained how, as one example, Hilton leverages the installation of exercise equipment in a subset of its rooms at some locations. RM is therefore helping to maximise the value of that investment by forecasting how many rooms are optimal, which customers value that new feature and, finally, by properly allocating the equipped rooms.
The relatively small investment in exercise equipment is used, not to drive more revenue, but to drive customer satisfaction through surprising and delighting certain important customers. Interestingly, the benefits of the programme are measured in customer loyalty as opposed to direct revenue.
Hilton RM remains highly focused on growing revenues but also partners with other parts of the business on such ‘non-revenue’, customer service-oriented opportunities.
View from the air
Airlines, too, have a number of opportunities to drive increased loyalty with RM-type demand forecasting and optimisation.
· Bag fees. With the introduction of checked bag fees, many airlines experience flights with insufficient carry-on space. A typical solution here is to call for bags at the gate, where they collect the bags at the last minute without a fee. But this is hardly a way to ‘surprise and delight’ but it could be. For example, instead of managing the process at the gate, airlines could forecast the number of carry-on bags and, ahead of time, offer free bags to targeted customers. These should be customers that have already demonstrated loyalty, and may value checked bags. This could turn into a win-win – albeit not measured in incremental revenue.
· Big seats or unused business class seats. Upgrading passengers from a standard coach used to be fairly common but not anymore, although programmes have been introduced to auction off seats. Still, given the volatility of demand, higher value seats can still go empty or are filled with untargeted passengers. RM could work with marketing/CRM to both forecast the number of seats that will go unfilled and to target the ‘right’ passengers for an upgrade.
· Access to the lounge. Of course, this is a tremendous perk available only to premium passengers or Club members or those who pay for a daily pass. Lounge access, however, represents another opportunity to ‘surprise and delight’ select customers who don’t qualify under current rules. Lounge access during off-peak hours made available to key customers would certainly impress many regular Economy passengers.
Initiatives need to ensure that any individual customer receives the perk unexpectedly
Of course, when such ‘surprises’ become too common they turn into entitlements. This is how seat upgrades evolved over time, so these initiatives need to ensure that any individual customer receives the perk unexpectedly. The amenity shouldn’t be transactional, not a direct quid pro quo for a particular action or activity.
Fundamentally, RM’s big data/analytics could be applied to customer satisfaction with potentially dramatic results. RM’s analytical expertise could identify low or no-cost initiatives that would drive new customer satisfaction. The same analytical power that optimises revenue and develops and implements new ancillary service fees could, therefore, be directed towards meeting customer needs and desires. And who knows, this could even result in driving customer loyalty, which all too often is elusive in hotels and airlines.
Tom Bacon has been in the business for 25 years, as an airline veteran and industry consultant in revenue optimisation. He leads audit teams for airline commercial activities including revenue management, scheduling and fleet planning. Email Tom or visit his website
November 2017, Amsterdam