Heightened competition in a multi-channel environment, the pressing need for brand differentiation, and emerging market opportunities and challenges highlight strategic considerations that companies in the hospitality sector face in the evolving marketplace.
Looking to the year ahead, cautious optimism permeates the discussion. Travel, hospitality and leisure (THL) companies may have reason to be optimistic for renewed growth domestically, for the power of technology to transform the consumer experience and for the opportunity to capitalize on emerging market growth. Adam Weissenberg, vice chairman and U.S. THL leader, Deloitte LLP, shares his perspective on the THL industry, as well as some thoughts around managing and innovating in the face of strategic issues such as heightened competition and eroding consumer loyalty.
What are some of the key issues facing the THL sector in 2013?
Heightened competition in a multi-channel environment, the pressing need for brand differentiation, and emerging market opportunities and challenges highlight strategic considerations that companies in the THL sector face in the evolving marketplace.
Heightened domestic and global competition: Sector players face a fierce level of competition. And, existing firms face the prospect of even higher competition given the relative ease with which new players may enter the marketplace.
Differentiation through the 'upturn': Businesses competing fiercely for market share may be forced to incur expenses to differentiate their offerings. If the economic recovery is less than robust, customer pushback may induce pricing pressures. The result may be a greater likelihood of declining revenue and lower profits.
Global expansion and growth in emerging markets: Business climate improvements in established markets appear positive for industry players. Still, many THL companies continue to focus on increasing their presence in less saturated, faster growing emerging markets to expand customer reach. As broadband connections and credit card penetration grow in these developing markets, online travel bookings are likely to increase, driving the need to access consumers in these new markets through online branding and marketing.
What are some steps THL companies can take to manage through the current climate of economic uncertainty?
Attack business complexities to improve cost structure amid heightened competition: Many companies have reduced their operational costs through a combination of shared services, offshoring and outsourcing. But to cut costs further, THL companies should also consider simplifying the underlying organizational, portfolio, process and information infrastructure complexities.
Enhance the consumer experience and build true loyalty: A weaker job market will likely lead to lower consumer spending. Greater transparency means the consumer can research and book directly through suppliers, search engines, comparison sites, affiliates, agents and more. The increasing availability of online gaming is likely to siphon off some demand from physical facilities. But delivering a better customer experience will likely continue to be a key differentiator. Companies may need to have an efficient multi-channel distribution strategy and focus on consumer loyalty to sustain their top-lines through a valued customer experience despite a less-attractive location or higher price.
Realize the growth potential of new markets and market opportunities: Emerging markets - such as those in Asia and South America - will likely experience greater inbound travel. This is especially the case in heretofore closed or underutilized markets such as Burma, Cambodia, Vietnam and Belize. Companies should consider planning their market entry strategies as new markets open up. Additionally, new market opportunities in legalized gambling may be taking place in countries such as Japan and Vietnam. Should such opportunities materialize, companies should consider adopting strategies to build out the appropriate infrastructure.
Harness technology to improve operations: Successful industry operators may adopt new technologies for the purpose of information, promotions, bookings and reservations, and general management-control systems. Technical innovations can ease the business process and increase hassle-free experiences for the customers. Digital innovations and social media play an increasingly important role as tools to attract travelers.
What are high-performing companies doing to foster innovation and growth?
In the current challenging economic environment, leading THL companies are leveraging social media and business analytic platforms to gain insight into customer preferences and drivers of customer loyalty.
A number of THL companies are using their cash balances toward consolidation to improve their market share and sustain profits. Sustainability is gaining increased importance — while airlines are working toward fuel efficiency, many hotels and restaurants are re-engineering their menus to focus on organic, low-calorie food to build consumer confidence and reinforce their brand image.
These innovation and growth strategies are likely compelling THL companies to examine their legacy structures and processes in the evolving marketplace.
Related Link: Deloitte