May 2015, Singapore
Why labour is Asia Pacific’s big issue
With new hotels going up across APAC, the dearth of revenue management professionals is a concern. Pamela Whitby reports
It is impossible to talk about growth in online travel, especially in Asia Pacific, without factoring in one of the world’s fastest growing hospitality markets – China.
Despite growth slowing to its lowest levels in over two decades, the number of outbound Chinese travellers is forecast to rise to 200 million within five years.
And domestic travel, too, is still on the up – the market expanded by 11% in 2014.
But China, alongside many other countries in the region, has a problem – labour.
Melinda Yeoh, head of revenue management and analytics at The Ascott Group Limited, says: “The key challenge faced in APAC stems from a shortfall in the supply of RM (revenue management) talent. “An issue exacerbated by the fact that the hotel industry here has grown at an unprecedented rate in the recent years, fuelled largely by the growth in China.”
According to a STR-Global Construction Pipeline Report, there are 2,398 hotels totalling 543,378 rooms currently under construction in the region. Yet it’s China that tops the list with Shanghai reporting the largest number (7,230) of hotel rooms under construction.
Of the four other markets with over 5,000 hotel rooms in the pipeline, one of them is also in the Chinese city of Chengdu.
The resulting likely shortage of RM professionals has set the rumour mill whirring, with some serious questions being raised.
• Given the huge boom in hotel builds in China, can RM still be done at the hotel level or will the industry have to move to a more centralised approach?
• With the dearth of skilled professionals, could an online travel agent be positioning itself as a consolidator that offers hotels everything from property management to room inventory and food and beverage systems?
While that may be interesting from an ownership perspective, as it could signal a greater return on investment, many hotels may baulk at the idea.
Pan Pacific Hotels is one, with vice president of revenue performance, Jurgen Ortelee, claiming: “As a chain hotel I would never have my revenue management run by an OTA. I would hire a professional revenue management company like IDeaS to run it for me, if I was not able to run it internally.”
Breaking down silos
One of the big discussions of the past few years has been the need to move to total hotel revenue management. But while everybody wants to do it, very often politics gets in the way of breaking down silos, explains Kimes.
Jesper Hansson, a pricing consultant and president of not-for-profit organisation Asia Pricing Professionals goes a step further, arguing that in many places there is a lack of understanding of what total hotel RM means.
This may have something to do with education and training, but it could also be down to low wages. In a city like Bangkok, for example, which has upwards of 1500 hotels, it’s a massive challenge to hire educated staff and then hang onto those employees, he says.
One of the challenges is that all countries require work permits, and due to the small size of some countries, the pool of available people is that much smaller.
Pan Pacific’s first way of addressing this is to pay the high-end of the scale, especially in Singapore and Australia. Also, unlike other companies, revenue managers report to the GM rather than the director of sales and marketing, says Ortolee, adding that another cautionary step in key markets is to appoint assistant revenue managers that are groomed to take over should there be turn over of staff.
In hotels where salaries are low, service-levels can suffer and employees have no incentive to upsell, something that Hansson has experienced.
Hansson says: “When I check into a hotel and stand at the front desk of staff in Asia, nobody ever tries to sell me anything like a special offer in the restaurant.”
So could hotels be missing a trick?
Research from Cornell University, which demonstrates a significant increase in property revenue as a result of a boost in online reputation, backs up the idea that an effective front desk strategy is crucial.
One brand that has proved the importance of the upselling is Shrangri-La Hotels and Resorts. Working with TSA Solutions, a provider of RM enhancing solutions and Brand Karma to assess the impact of an upselling programme on the number and quality of guest reviews, Shangri-La saw results, not least that many reviews mentioned an upgrade.
What Brand Karma found was that paid upgrades led to a 25% higher satisfaction rate for guests with no upgrades.
Interestingly, the satisfaction of those offered a complimentary upgrade was just 33%, a marginal gain in satisfaction considering the loss of revenue opportunity. Lowest satisfaction rates came from guests who rejected an upsell.
Upselling boosts room revenues, claims Ortelee: “In our case we can gain as much as 2% with an effective upselling programme.”
Another opportunity for hotels in the region is in F&B, which accounts for a much higher percentage of revenue than in Europe and North America.
While in the US, locals rarely go to a hotel for dinner, yet in destinations such as Hong Kong and Singapore many non-hotel guests frequent a hotel’s restaurant.
At Pan Pacific Hotels, for example, 75% of guests are locals.
What hotels need to be thinking about, says Kimes, is how to get more locals through the door. That means making it super easy to make a reservation and having a strong presence on local food blogs like Singapore’s HungryGoWhere as well as global platforms like Yelp.
Proper incentives and training
In the end it’s about providing the right incentives, paying fair wages and appropriate training.
Ortelee says: “There is still an old school thinking about RM in Asia, especially with regards to its position within the organisation, pay and incentive structures and the benefits it can bring.”
According to Hansson, one common mistake across all sectors in the region is that more often not the sales force is rewarded by revenue.
This approach leads sales people to drop prices, simply because they want to sell. But if you want to improve profitability, you have to have a healthy mix of key performance indicators.
One risk is that hotels struggling with profitability outsource the gym or food and beverage outlets to a third party.
In the end it’s about training, and constantly reviewing training management programmes, says Yeoh, while ensuring that an RM culture is nurtured through all departments, and at all levels, of the organisation.
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