**Article originally published in HotelExecutive.

Can you feel the winds of change? Optimism is in the air! A recent CNBC article stated “The US hotel industry is booming” and the United States is the “poster child of optimism!”  However, hoteliers do have some concerns. In a HotelNewsNow article asking operators their top concerns for 2013, they felt low average daily rate, steadily increasing costs and increased commoditization were some of the challenges that could not be ignored.⁸

The last issue, commoditization, is a critical hurdle hotels want to overcome. Addressing it can also make strides toward improving low ADR and rising expenses.  A concerted effort toward differentiating your product from the competition can be very beneficial for business-not that you need me to tell you this. According to the HBR article “Wyndham International: Fostering High-Touch with High-Tech,” brand erosion is a challenge. Hotel brands have been increasingly mimicking each other thus diluting their value.  “If the [lodging] industry continues to see itself primarily as a provider of hotel accommodations-competing on price-the move to commoditization will be unstoppable…To avoid the threat of commoditization, firms must develop inimitable and sustainable differentiators and know their customers intimately.”⁶ How exactly is that done in a long term sustainable way though? Consider the concepts of Core Competency and Competitive Advantage to help you define your strategy.

Core Competency is the “unique ability that a company…develops that cannot be easily imitated.” A core competency gives an organization its competitive advantage(s).⁴

Competitive Advantage is “the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment.”⁵

Having a Competitive Strategy allows your hotel to stand out from the crowd. You are “deliberately choosing a different set of activities to deliver a unique mix of value.”² 

It is important to note that your hotel’s core competency is not the end product/service it delivers but the unique way in which it is delivered - which, in theory, none of your competitor’s can easily duplicate. A successful example of this concept is Honda who manufactures cars, lawn mowers and generators. On the periphery, those products look unrelated. However, if you understand that their core competency is “engines and power trains” ¹ then we understand the method to their madness.

An example that sits closer to home is Harrah’s. Harrah’s developed a laser-like focus on their core customers-slot machine players. All revenue building activity at the casinos focused on the task of making those clients; especially those considered high value “friends” of Harrah’s extremely loyal. Although that segment is only 26% of the visitors, they generate 82% of the revenue. Additionally, Harrah’s maintains that the patrons who were “very happy with the Harrah’s experience increased their spending on gambling by 24% per year.”⁷ However, the trade-off they have chosen for that laser focus is they do not look for other revenue sources such as shopping malls and hotel reservations.

How did Harrah’s manage this? Business Intelligence. They collected data on their “customers’ behaviors and preferences,” analyzed it and made marketing decisions based on the results.

Identifying core competencies at your hotel:

• A core competence provides potential access to a wide variety of markets.¹
• A core competence should make a significant contribution to the perceived customer benefits of the end product. ¹ i.e. Harrah’s and their keen knowledge of slot machine players’ buying habits which increased loyalty and thus spending.
• A core competence should be difficult for competitors to imitate. This is the Golden Egg. We all strive for this. The goal is for it to be a “complex harmonization” of specific processes or technologies that are impossible to duplicate. ¹ Take note this means multiple strategies are being utilized. Implementing only one idea will probably be easy for your competitor to adopt. However, multiple strategies mixed together to create one strong outcome is much harder to imitate.

A failed example of this is Continental Airline’s attempt to imitate Southwest Airlines. The Continental Lite program tried to ride on the coattail of Southwest’s success by imitating their activity system. Their mistake was in trying to keep their current strategy and incorporate only bits and pieces of Southwest’s mix.²

How can you apply this to your service business?

The creator of the Core Competency theory C.K. Prahalad recommends that a corporation compile a list of all perceived strengths and capabilities. ¹ For example, a boutique hotel might feel their breakfast is unmatched. A beach-side resort may feel their guest interaction campaign is unbeatable. These aggregate strengths can then be examined as building blocks. What else does your hotel do that sets it apart? Continue to build your list.

Prahalad does admonish Western companies for focusing too much on price/performance as it can erode an organization’s core competency. The publication offers a technology example. In the mid 80’s, Chrysler became heavily dependent on Mitsubishi and Hyundai to manufacture their engines. ¹ Why? They decided it would save them money. However, the engine is a critical component of a car. As a result of decisions like this, corporations like Honda (which are not focused solely on price as the main driver) continue to dominate the market.

In the HotelNewsNow article mentioned above, it states that an “opportunity to increase (revenue per available room) exists in 2013 through driving ADR. Intelligent analysis and thorough understanding of booking patterns will be key to decreasing reliance on third-party OTAs, helping to significantly boost top-line revenue.” Go back to my Harrah’s example. Harrah’s used business intelligence to identify their customer’s buying patterns. That is exactly what is being recommended here. The Wyndham article I reference mentions that Wyndham wanted to consolidate all guest data throughout their organization in order to better “know their customers intimately” and offer a consistent service regardless which property a ByRequest member chooses. ⁷ Make a point of intimately understanding your guest’s needs and wants and see your profits soar.

In another HBR article focused specifically on service firms and their core competencies, the author Tim Davis discusses a research study from 1990 called SERVQUAL (service quality). Findings from this research offer five attributes of service quality that influence customer satisfaction: ⁴

• tangibles (appearance of facilities, equipment, personnel, and materials)
• reliability (ability to perform the service dependably and accurately)
• responsiveness (willingness to help customers and provide prompt service)
• assurance (ability to convey knowledge, trust, and confidence)
• empathy (caring, concern, and individualized attention)

Additionally, the factors above should be integrated with other strategies such as “product differentiation, price, distribution, and promotion.” ⁴

After considering the concepts above, you can begin to reflect on how your hotel will set itself apart. Naturally, this is a fluid strategy. One of the best attributes a company can have is flexibility. The ability and willingness to change directions when you realize a path you are taking is not working-or maybe it’s working but not as well as you like. Allow yourself to “tweak” your plans until it feels right and the results show you’re on the right path.

A few more thoughts/ideas from the Tim Davis article: ⁴

• Consider rotating staff through the various departments in your organization. This will not only give them a greater understanding of the challenges each unit faces but also could spark some innovative ideas that may result in a big payoff for your company.
• Even though Wal-Mart hires mainly part-time employees, they incentivize them to stay because they promote from within. Those hourly, non-degreed workers have the opportunity to advance into management. 60% of managers were formerly hourly employees. Additionally, the behemoth corporation offers profit-sharing. This encourages loyalty and “concern for profitability.”
• Give guests more opportunity to relay feedback while onsite. Then communicate this feedback to the employees either immediately or during reviews. This allows the management to hold staff more accountable for their interactions with your guests. And, allows an incident to be rectified before the guest leaves the property.

Consider too that consumers will gravitate to organizations where they feel their opinion is valued and respected.

• Consider managing “in a more collegial and less hierarchical way than other service firms. Decisions should be based on professional expertise rather than one’s level in the chain of command.” This allows for sharing of expertise and expertise trading. Additionally, it gives the lower level staff a chance to shine which improves staff retention.
• Have a contest and ask staff to submit ideas on how to improve service or reduce costs. Rewards can be economical. For example, have a pizza party or bring in coffee and donuts one morning. Silly awards handed out publicly. Hold lunch by the pool one day. Do not ever stop this contest! Golden nuggets can appear as a result of any experience.
• The benefit to involving staff in your new initiative is you can implement several small ideas which individually are a single part of your competitive strategy but as a “complex harmonization” of processes cannot be easily duplicated by your neighbors.
• Groups are booking their events in shorter time periods. Create a system for addressing this new trend and be proactive about promoting it.
• Hold daily pre-shift staff meetings. What does John Wooden say? “Failing to prepare is preparing to fail.” Dynamic pre-shift meetings give you the capacity to steer or determine the direction of your team’s day. Daily news can be communicated. They take people off auto-pilot before they step out to face your guest and allow for short bursts of continuous training.
• Give staff all a common goal and make it exciting to reach. For example, you want to increase occupancy by 10% and reduce overhead by 5%. Give a deadline and promise to share the change in net income with them.
  Encourage cross-departmental collaboration to make this goal happen. In other words, does Front Desk need an extra hand during the hours of 3pm to 6pm? Can Housekeeping spare a person during that time to assist? Does Housekeeping need help folding laundry after a super busy weekend? Maybe Front Desk can fold during slow times. How else can they work together to reach the goals of increasing sales and reducing costs? Allow them to work it out. Remember that you as the GM care about the destination not necessarily the journey!
• Make the environment safe for staff to experiment and possibly fail. Remember Edison and his light bulbs!

Hotel specific ideas

• Have a contest and ask staff to submit ideas on how to improve service or reduce costs. Rewards can be economical. For example, have a pizza party or bring in coffee and donuts one morning. Silly awards handed out publicly. Hold lunch by the pool one day. Do not ever stop this contest! Golden nuggets can appear as a result of any experience.
• The benefit to involving staff in your new initiative is you can implement several small ideas which individually are a single part of your competitive strategy but as a “complex harmonization” of processes cannot be easily duplicated by your neighbors.
• Groups are booking their events in shorter time periods. Create a system for addressing this new trend and be proactive about promoting it.
• Hold daily pre-shift staff meetings. What does John Wooden say? “Failing to prepare is preparing to fail.” Dynamic pre-shift meetings give you the capacity to steer or determine the direction of your team’s day. Daily news can be communicated. They take people off auto-pilot before they step out to face your guest and allow for short bursts of continuous training.
• Give staff all a common goal and make it exciting to reach. For example, you want to increase occupancy by 10% and reduce overhead by 5%. Give a deadline and promise to share the change in net income with them.
  Encourage cross-departmental collaboration to make this goal happen. In other words, does Front Desk need an extra hand during the hours of 3pm to 6pm? Can Housekeeping spare a person during that time to assist? Does Housekeeping need help folding laundry after a super busy weekend? Maybe Front Desk can fold during slow times. How else can they work together to reach the goals of increasing sales and reducing costs? Allow them to work it out. Remember that you as the GM care about the destination not necessarily the journey!
• Make the environment safe for staff to experiment and possibly fail. Remember Edison and his light bulbs!

As you can see, it is possible to differentiate your hotel. The simple idea that you are motivated to make a change sets you apart. Consider the above concepts then sit down with your staff today and discover what makes your hotel special. Implementing your own Competitive Strategy will not only address the issue of differentiation but also increase ADR by enhancing the value of your hotel in the eyes of prospects. Additionally, costs will be reduced due to your renewed laser focus on daily operations.

1. http://hbr.org/product/core-competence-of-the-corporation/an/90311-PDF-ENG
2. http://hbr.org/product/what-is-strategy/an/96608-PDF-ENG
3. http://hbr.org/product/different-service-firms-different-core-competencie/an/BH038-PDF-ENG
4. http://www.businessdictionary.com/definition/core-competencies.html
5. http://en.wikipedia.org/wiki/Competitive_advantage
6. http://hbr.org/product/wyndham-international-fostering-high-touch-with-hi/an/803092-PDF-ENG
7. www.terry.uga.edu/~hwatson/Harrahs.doc
8. http://www.hotelnewsnow.com/Articles.aspx/9642/Operators-discuss-top-concerns-for-2013