The term ‘kaizen’ is a Japanese word that means improvement. When applied to business, Kaizen means to continually improve business processes (or business systems) to achieve ultimate efficiency. This means that to achieve Kaizen in business, constant and gradual improvements should be made, tested and improved again over time. Kaizen results in greater efficiency, happier workers, less errors, improved profits and a much more streamlined company.
The Kaizen principal is the reason why Japanese business such as manufacturing, finance and sales operate at optimum efficiency.
So what can we learn from the famous Japanese principal for the hotel and accommodation industry?
Firstly, it is important to note that applying the Kaisen principal in the quest for continual business improvement can only be made if managers first realise that things can be done better. This is the part where most people come unstuck, because many hotel managers are not aware that there can be improvements.
They are happy with the systems that they have and may not realise that there may be a lot better way to improve business processes. This means that many hotel operators are unconsciously incompetent – meaning that they don’t know that they don’t know (that improvements can be made).
Therefore, business improvement cannot happen if management are not looking for a better way, therefore the process will stay the same – and will likely become worse because it is not continuously being improved upon.
An example of hotel managers being unconsciously incompetent, is to do with their room rates. Many hotel managers set their rates at what they believe they are worth. To do this they often look at the competition’s hotel rates online. This is a time consuming process, not to mention that it is often the least profitable because it is more than likely that the hotel is setting their rates based on their competitor’s rates.
So what should hotel rates be set to?
As in any free market, the value of goods and services is most accurately based on the consumer, not the competitor. Consumer supply and demand should only be the only true driver of price. Hotel room rates are no exception to this general market valuation rule.
To accurately calculate supply and demand, you need up to date information. For example, if there is an event in your hotel’s area that you are not aware of, and you receive 20 hotel room bookings within the space of 2 hours, your demand has effectively gone up. To apply the Kaisen principal to this scenario, it would be efficient to increase the price – for greater profit to sell the remainder of the rooms because of the increase in demand. Many hotels in this situation simply haven’t got the up-to-the minute data to do this, and if they do, the time taken to adjust rates across the channels can be very time consuming. This means they lose out on certain profit (or revenue).
This is where most channel managers fail, because they do not have a business process for reacting in real-time to supply and demand. Sure the channel manager still works. The hotel still gets bookings, but it is not compliant to the Kaisen principal because the hotel is:
a) missing out (losing) on easily achievable profits
b) wasting time which causes inefficiency;
c) losing reservations after the initial influx in bookings, because their rates are set too high in a slower period; and
d) reacting too late to the market
By the time the reservations manager reacts to this influx of bookings, and increases the price in the channel manager, it is often too late. Then what generally occurs is that the reservations manager set rates that are too high in the following days after the bookings – which is a quiet period – and their rates should be actually set lower because hotel room demand has dropped. Because the rate is set too high for the following period, less rooms are sold. Then the channel manager realises this (often when it is too late) and reduces the price to what it was before – again, when it is too late and room sales, restaurant and the tour desk revenue has suffered.
If we apply the Kaizen principal to hotel reservations, it would be to:
a) Increase Room Reservations – in slower periods
b) Increase Revenue (Yield) – in busier periods.
This practice is called Yield Management. Effective Yield Management is the cornerstone to Kaizen in regards to hotel reservations.
Introducing Allotz Autopilot
Unlike other channel managers, Allotz Autopilot is a real-time channel manager, that has in-built Yield Management.
This is how it works:
Simply enter your minimum rate (distressed) and current rate (rack rate) and Allotz Autopilot responds in real time to demand to achieve maximum rate or occupancy. Allotz Autopilot reduces room rates when demand is low but never below the minimum (distressed rate) that you have set. Increases rate when demand is high until demand levels off and does so incrementally.
This Yield Management technology is exclusive (and patented) to Allotz Autopilot. It is the only channel manager on the market to have this real-time technology.
Start improving your hotel reservations process today with Allotz Autopilot. Simply fill in the form to the right of the screen to request a demo of the world’s leading channel and revenue management system.