The UK arm of a large international hospitality chain was facing increasing competition with resulting pressures on its margins. The industry’s ‘normal’ approach was to cut costs and match the competition on price. However, our client was not the lowest cost provider and rightly rejected this approach but what was the alternative?
We thoroughly reviewed the market, especially present and future customer needs, and the competitive landscape. The knowledge gained by this review allowed us to consider strategic options through a series of workshops. Working with the client we identified critical factors, assessed alternatives and tested them against the evidence.
The evidence showed us that using industry standard metrics had led managers to try and maximise hotel occupancy throughout the year. This often resulted in customers from incompatible segments staying at the same hotel at the same time, causing significant problems for customer service. The workshop process identified strategic alternatives and the client decided to focus on a single market segment. Their offer was then tailored to the needs of that segment. This strategy removed the client from a price war, focused managers on profits rather than occupancy and ultimately led to a leadership position.
What We Learned
Even when the bottom line seems under threat, to behave contrary to industry conventional wisdom needs very strong and compelling customer evidence.