Hotel Industry

I have got a chance to help the hotel team with their marketing efforts. I spent times doing research to understand their terminologies so I didn’t look silly during the process. The more I learn about this industry, the more I feel there are a lot of opportunities to disrupt how the marketing is done.

The major challenge for all hoteliers is OTAs (Online Travel Agents) like Expedia, Booking.com, Agoda. They are like a large shopping center that sells similar product. People of course like to go there because it’s a one stop shop. You can compare prices and there are so many options. Furthermore, those OTAs have invested excessively in technology. They offer a very good personalised experience. Hotels have a love-hate relationship with OTAs. Hotels have to rely on them, pay high commission, and don’t get full control of their own booking data. Worst of all, OTAs drive the room rates down due mainly to a competitive force.

It’s a common knowledge and practice that all hotels want direct bookings. The influence from OTAs is great to the level that hotels can’t even set different prices on their websites. They have to stick to this illusive ‘rate parity’. They are afraid to get punished from those OTAs. Another funny thing about the influence of OTAs is all hotels must have a revenue management team – big or small. This team’s job is to do research about competitors’ rates and customer demand. They then adjust prices up and down depending on the research information. Some hotels put the revenue management function ahead of other functions to drive bookings. And, I don’t really understand this logic. Price is important but you also need to give good reasons to customers to consider your price and to see that your price give good value. By good value, I don’t mean cheap rates.

The marketing function in this industry is quite secondary. I have amused when I learnt about this fact. It is a battle that I intend to take from now. It wouldn’t be easy when OTAs have trained customers to look for the cheap or discounted rates. And, it wouldn’t be easy when the hotels respond to this OTA challenge by focusing on revenue management side.

That’s why it’s intriguing and I am excited to change that.

Apivut

A good leader

A good leader requires one thing, and one thing only. He requires “followers”. Without followers, no one can be a leader. How to get people to follow you? Those people need to “trust” you. They need to know that, by following you, you are taking them somewhere better than where they are now.

In essence, a good leader possesses 2 simple things:

  1. He does things for other’s best interest, not his.
  2. He takes accountability of the situation because he wants to make a difference.

Apivut

The most important skill

I got a Ph.D (Doctor of Philosophy). I spent half of my adult life studying and got a few Master Degrees + a Ph.D degree. I came to Australia and have worked in a hospitality company in the past 15 years. I am the only one who has these many degrees. At one point, I questioned myself if I need those degrees to be successful in my career. I hardly use the knowledge in my degree at work.

Luckily, I mentioned this topic to my boss at the time. He left the company many years ago and we are still in touch. He is my mentor. He told me that one of the key strengths that makes me different from others is “my research skill”. And, he said that was what I got from my degrees. His explanation is very valuable to me because it makes me understand the importance of this skill.

As I mentioned in the previous post, a good strategy has 3 components. One of them, and the starting point, is a diagnosis of the situation. If you don’t understand the challenges you are facing, you will never have a good strategy. And, in order to gain insights about the situation, you need to do a lot research. What Mark (my former boss) told me is exactly the process I go through every time I deal with any challenges. I spend most of my time in the process to understand what is going on.

Academic degrees are one thing. They may not be as useful as you think when it comes to career progression. But, the research skill that comes with it is so valuable, at least to me.

Apivut

Ongoing words of mouth

Do you know that there are 2 types of words of mouth? One is immediate words of month and the other one is ongoing words of mouth. As the names imply, the immediate words of mouth has an immediate effect but it doesn’t last long. They are both important depending on products.

What make words of mouth ongoing then. It would be helpful to have customers talking about your product on an ongoing basis. But is it even possible? Apparently, research says it is. The key ingredient that you need to make it happens is called a ‘trigger’. You need a trigger to keep reminding customers to think and talk about your product.

As an example, when talking about having a break, what product that comes up in your mind? I bet more than half of us would say Kit Kat. This is because Kit Kat relates itself with coffee and having a break. Therefore, when people want to have a break, it ‘triggers’ them to think about Kit Kat.

It sounds simple but I still figure out how I could position my company’s product with a trigger. What’s about your product? Do you associate it with any trigger?

Apivut

Why a financial plan is important to your small business

Do you agree that having a financial plan with forecast is a good thing to do for your small business? If you do, do you have one? My guess is not many small business owners devote their busy schedule to work on a financial plan. One of the reasons of not having a financial plan is about a perception, that it’s time-consuming and boring. Additionally, many small business owners might not know how to do it. In this article, I would like to offer a simple explanation and an easy way to do a financial plan.

Why is it important for small business owners to have a financial plan? Put simply, a good plan would tell you your current financial status and your future business trend, financial wise. A plan doesn’t have to be complicated. It only requires that you spend a few minutes to read and understand this article and you develop some sort of discipline to track your revenue and your expenses, you are good to go. There are two simple concepts that you need to know for your financial plan – one is business cash flow, and the other is a concept of time value of money. Let deep into these 2 concepts.

 Let start with the cash flow. Your cash flow is simply the movement of cash of your business. The major goal of the cash flow management is you need to ensure that you have enough cash to pay all of obligations that keep your business running. You also have to understand that being profitable is not the same thing as having a good cash flow management. This is because even though you are profitable, you may not have enough cash in a particular month to pay suppliers if you don’t plan well. What you should be doing is to create a discipline of recording or tracking your revenue and expenses. The first step is to record all “current” in and out of your cash. It will help you understand your financial status. Then, you have to do a “forecast” of your cash flow. It’s the same practice of having a budget for big corporations. You can use this template to record your cash flow. 

I don’t have to explain much why knowing your cash flow situation – the past, the present, and the future – is very important to your business. You certainly need to know what your spent and whether those expenses were absolutely necessary. You also need to ensure that you have enough cash to fulfil your current and incoming commitments. And, most importantly, having an idea of your future cash flow helps you do business more effectively. The next concept that you should know is “time value of money”.

What is time value of money (let call it TVOM)? It doesn’t sound like fun. I think it’s a good concept for you to know even though you may not have to actually do the calculation like banks or investors. Why? The concept of TVOM tells you that the same amount of money your receive today is worth more than the same amount in the future. This is because the amount in hand today can be invested to turn into more money in the future. The key difference between the today’s and the future’s money is “interest or rate of return”. Suppose that a customer offers to pay you $1,000 today or $1,100 one year from today. This promise comes from the customer that you trust very much, and thus you do not believe there is any risk that you will not be paid. Which option would you choose?

It all depends on the return you can earn on this amount. If you can earn 6% on your money, for instance, then you should accept the $1,000 today. If invested for one year, it would grow to $1,060, beating the option of receiving $1,050 one year from now. However, if you can only earn a 4% return on your money, you should accept the offer of $1,050 paid one year from now. If you accept the $1,000 and invest it at a 4% return, it will only grow to $1,040 in one year, compared to receiving $1,050 after one year from this customer. I cannot talk about the TVOM concept without showing you the formula (sorry).

The basic formula for the time value of money is as follows:

PV = FV ÷ (1+I)^N, where:

PV is the present value

FV is the future value

I is the required return

N is the number of time periods before receiving the money

The good news is you don’t have to do the calculation yourself. When I was studying, I had to do a manual calculation myself and it wasn’t fun. There are a number of websites that offer a TVOM calculator. I suggest this one because it’s simple and straight forward.

I can’t stress enough why being on top of your business’ financial is super important. If you feel like this is not your forte, you can always seek help. However, I would encourage you to at least start small with a good record keeping for your revenue and expenses. Once you have a very good tracking system, the rest is super easy.

Apivut

What is strategy?

We all have heard and used the word strategy almost everyday in our professional life. But, I found that not everyone truly understand what strategy is or whether what they are talking about is actually a strategy.

I got a serious interest in strategy when I was studying my first Master Degree. I came across an idea of “managing your desired outcomes”, which I think it’s a fundamental principle of any strategy – personal or professional. If you apply this principle – plan your desired outcome – you will always 1) think a few steps ahead and 2) you will respond, not react. Your life is going to be much simpler because you always know why you do what you do. As my interest in this area grew, I then chose to do a Ph.D. in business strategy. I learnt that there are many tools that help businesses do strategic planning such as SWOT Analysis, TOWS, The Balance Score Card, and etc. The problem is there are so many of them. I really doubt that anyone, apart from those high-fee consulting companies, would know or get benefits using those tools. They are very, very theoretical.

A few years later, I came across two great books that entirely changed my perspective about business strategy – one is Good Strategy Bad Strategy: The Difference and Why It Matters by Richard Rumelt, and the other one is Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant by W. Chan Kim and Renée Mauborgne. I summarised the concept of Blue Ocean Strategy in my previous post.

Why did I like these two books very much?

The first book by Richard taught me about the core principle of a strategy. He suggested that a good strategy needs to have the following three components:

  1. A diagnosis – what is going on? What is(are) the challenge(s) that you or a company encounter? I find that this is the most important step in any strategic activity. If you don’t understand a problem, how could you come up with a solution?
  2. A guiding policy – once you understand the challenges, you need to come up with guidance or a direction on how you think you can overcome those challenges. It could mean that you need to add more product features, or you may need to add another product line, or you need to improve your service offering.
  3. Coherent actions – There is no distinction between a strategy and an execution. You may have heard people saying –  oh it’s not working because  even though a strategy is good the execution is bad. The execution bit is a key part of your strategy, period. To execute the guiding policy above, you need to design all related / relevant actions.

What’s about the Blue Ocean book? The concept of the blue ocean strategy is to encourage us to stop restricting our thoughts around the traditional competition and industry boundary. The authors call this traditional concept “red ocean” – the trade-off between differentiation and low-cost. The blue ocean strategy argues why we have to choose if we could do both. The question is how and if you could find a way to do it, you wouldn’t have to worry about competitions anymore. The idea is basically to look for gaps or unfulfilled pain points or demands and offer something to close those gaps. In short, blue ocean strategists focus on creating and capturing new demand, not fighting over existing customers.

A true insight about strategy is valuable to everyone. It helps you to understand the situation, apply the right solutions, execute at the right time, and ultimately deliver the outcome that you want. You have to believe in this one.

Apivut

What I learn from Louis Gerstner

Louis Gerstner was a legendary CEO who saved IBM more than 20 years ago. He wrote a book called “Who Says Elephants Can’t Dance?” I love this book and have read it multiple times now. What do I learn from Louis’s book?

Louis had many interesting and useful management principles that I think would never been obsolete. The ones that I like the most are:

  1. I manage by principle, not procedure.
  2. The marketplace dictates everything we should do.
  3. I look for people who work to solve problems and help colleagues. (Love this) I sack politicians.
  4. I am heavily involved in strategy; the rest is yours to implement.
  5. (Also love this) Move fast. If we make mistakes, let them be because we are too fast, rather than too slow.
  6. Hierarchy means little to me. Let put together in meetings the people who can help solve a problem, regardless of position.

When I struggle at work, I always go back to his book. He is like my mentor.

Apivut

How to incorporate good strategy in a business plan for solo business owners

As a solo business owner, would preparing a business plan be on a top list of your priority? Based on the common challenges for many solo entrepreneurs (aka solopreneurs), preparing a business plan is not something that many solopreneurs do. Why is that? I come up with two main reasons – firstly, the word business plan sounds daunting, i.e. there seems to involve a lot of time-consuming work. Secondly, many solopreneurs think they have everything in their heads. Besides, many think their business models are straight forward – buy or create products and sell those products to someone else. How hard could it be?

Well, I do agree that the word business plan sounds daunting because I also don’t like to do it. However, it is important to have a plan for any business. Even you don’t require funding from a bank, having a plan and even better, a plan with a good, solid strategy, could make your business successful and increase a chance of success in a long term (by the way, did you know that more than 90% of new business failed?). Many sources suggest certain formats for a business plan. The structures are very similar. For example, an Australian Government website suggests having the following format:

  • Title page – This describes what the plan is for and includes general information on your business.
  • Business Summary – A one-page overview written after your business plan is finalised.
  • About your business – It covers details about your business including structure, registrations, location and premises, staff, and products/services.
  • About your market – This is the marketing plan. It should outline your marketing analysis of the industry you are entering, your customers and your competitors.
  • About your future – This section covers your plans for the future and can include a vision statement, business goals, and key business milestones.
  • About your finances – The financial plan includes how you’ll finance your business, costing and financial projections.
  • Supporting documentation – List all of your attachments under this heading in your plan for referral.

Some sources such as National Australia Bank (NAB) suggests focusing more details on a sales and marketing component and including a pricing strategy. I think the bank wants to ensure that solopreneurs are clear about how they generate revenue. 

My formula is slightly different. I am a big fan of having a clear strategy in mind. And, it’s always a good practice to put the strategy in the plan. Why? Writing strategy down is a great way to organise your thinking process. It also means that you have done your homework before you write the strategy down. Below is my recommended structure of a business plan for any solopreneurs.

Executive Summary

Have you heard about an elevator pitch? If you have under 1 minute to explain about your business compellingly, how would you do that? My suggestion is that you include the following components in your pitch:

  • Our business notice there is a gap in [xxxxxxx], and we can offer a perfect product or service to fulfill that gap
  • We will do it by [xxxxxxx]
  • The following will be happening in the next months

Demand Gap Analysis

This is the most important part of my business plan. You have to find out if there is unfulfilled demand in a product or an industry that you are interested in doing business. If you are selling the product that many people are already selling, it would be hard to differentiate yourself from the crowd. I don’t say that it’s not possible, I say it would be hard. In this case, you will have to ask yourself – why would customers want to buy from you? Is it because your product is cheaper or better? How can you tell customers that your product is better?  

Business solution

Once you identify the demand gap, now it’s the right time to explain about your product or service. Below are the good questions that should give you an idea on how to write in this section.

  • What is the product or the service?
  • How is it going to fulfill the demand gap?
  • Are there a number of businesses selling or offering the same product/service?
  • If there are, how is your product/service different from those businesses?

Sales and Marketing plan

This section is to use the analysis from the business solution section above and add how you would tell customers about your product or service. Imagine that no one is aware of your offer. You will have to explain how you will let people know. And, it’s not just letting them know about your product/service. You will have to give them good reasons to buy from you. You also need to think about communication channels. The common online channels to consider are:

  • Social media
  • Email
  • Search Engine
  • Website – to me, it is necessary to have a proper, professional looked website. The first impression is very important.

Financial plan and forecast

Your financial plan and forecast don’t have to be complicated. Chances are you will rely on personal financial sources anyway. What you have to bear in mind though is that you have to split your limited budget in different bucket carefully. The main buckets are:

  • Product-related budget
  • Sales & Marketing budget
  • Contingency budget

Remember this – you should always have enough money as a backup.

Future Plan

You should try to think and explain what could possibly happen in the next two to three years. Of course, you wouldn’t know for sure. However, this exercise encourages you to think beyond the next six months. My assumption is you want your business to last as long as you want it to be, correct? It doesn’t have to be complex. You could only ask the following “what if” questions:

  • What if my customer’s preferences change next year?
  • What if my suppliers increase prices by 10-20% next year?
  • What if there are 5-10 people selling the same product next year?
  • Or, what if my business work so well that I have to add more staff?

I hope the above plan doesn’t sound too daunting. I strongly recommend that if you plan to launch a new business, you should spend a few hours to prepare the above plan. I can guarantee that it will save a lot of your time and money.

Apivut

The essence of strategy

Do you apply strategy in life? When talking about strategy, many people assume its application only to business. In fact, you should apply the concept to your everyday life. It’s not difficult but the potential outcome is so worth it.

A simple way to explain about a strategy is that it is an action that you take in order for you to get the outcome you expect. What I mean is if you follow this principle, you will have to approach everything with the expected outcome before you take any action. You will stop reacting but responding instead. Reacting is an emotional state to a particular situation which you have less control. Responding is the opposite. You insert control in your action.

Remember this – the most important of being in control of any situation, i.e. the essence of strategy, is the ability to master your emotions. Anger is the most destructive of emotional response, for it clouds your vision the most.

Don’t let emotions cloud your judgement.

Apivut

Social Media Community

I am lucky that I have an opportunity to introduce a Facebook group for our members to the company. A number of people were afraid about the idea but somehow it happened. My goal is I wanted to create a ‘window’ that allows us (the company) to see the outside world, on how customers think and feel about us. It would be a good source of information that could answer a lot of questions of why certain things happen in certain ways, for example, what members like and don’t like.

Managing a large group of customer community is not an easy task. You have to deal with all types of customers – some love the product/the company, some hate it, some has special agenda, some just wants to attack the company. The first, and most important, rule for myself, as a community manager, is to take emotion out of the equation. The less you feel emotional, the more control you have in managing the community. In the end, they are all our customers.

The second rule is you have to protect your team. Not all posts and comments are nice. Some are very nasty. Some customers are really, really rude. Seeing negative posts or comments or getting attacked very often could drain your team’s morale. We are all human so regardless of how hard we try, we still have emotion. As a leader, I have to protect my team. What I normally do is to use myself as a bait to pull all interests towards me and leave my team out of the whole situation. In doing this, I have to stay away from a company from time to time because it could be very frustrating.

My final word is you need to have a high purpose of why you do what you do. My goal is I want us to get closer to customers, to understand their issues and to encourage the company to act quickly to customer’s problems. The high purpose will keep you going. If you do it because it’s just a job, you won’t last long.

Emotions and social media cannot be together. Trust me.

Apivut