The Hospitality Sector Perspective© Customer Service Benchmarking Ltd

The Customer Experience in the Hospitality Industry

Part 1

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“A vital piece of intelligence”

Forward“A vital piece of intelligence for all hospitality leaders.

Whether in preparation to welcome the world as hosts of the Olympic Games 2012 or simply to grow sales and profit in the most competitive economic conditions for a

generation this report based on robust “actual” visit data identifies the challenges and

opportunities ahead.

The report presents compelling evidence for a shift in focus - to engage existing guests and leave them with a desire to return and tell their friends. Peer to peer

recommendation has always been the most powerful marketing vehicle and in a social media rich environment the opportunities and risks are even greater.

Such customer centric intelligence; vital for competitive advantage; was not previously

available but Customer Service Benchmarking now provides an accessible tool for all leaders to assess where they currently are and to identify the scale of their opportunity

gap by measuring and benchmarking performance in areas that matter.The report raises some important questions and challenges.”

Bob Cotton

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Be Better, Go Beyond Service and Satisfied! Stop transacting and start exciting guests!

IntroductionThis is the first in a series of three reports which unpick the reality of the customer experience in the hospitality industry, initially

considering the sector perspective, subsequent reports “mine” the wealth of data at our disposal to consider the sub sector and

competitive set performance before providing insight and intelligence gleaned from the performance of the best of the best.

We benchmark Experiences because It is the delivery of experiences; the added value, memories and emotions that matter, rather than the provision of customer service or goods.

We will demonstrate that many fail to deliver even consistently excellent goods, most simply transact customers leaving competitive

advantage for those who genuinely value guests and provide them with experiences that cause them to leave with a burning desire

to return and bring their friends! What business are you in? A great burger or pizza is not enough, good customer service and customer satisfaction are not enough and we will demonstrate

why! We will also identify critical metrics and customer “profiles” to help drive growth. Honestly appraising the experience you afford

guests is critical because average is not good enough, the competition for consumers time and money is intense and coming from

all quarters. Insight and Intelligence is key to supporting your goal of delivering memorable experiences which develop advocacy

and competitive advantage and we hope these reports help you shape your goals. These reports are a starting point, as you review

them consider the following questions: What do your target market expect? What do your target market want? Who are your competitors? What do you do better than your competitors? What do they do better than you? How are you going to excite your guests to become advocates and help you grow your business?

3

Apple have always understood and continue to understand that

they are not in the business of building computers!

What Business Are You In!4

Too many in the wrong business!

• Average cannot be the extent of your aspirations!• 34% of all experiences diminish future sales!• Grasp the competitive advantage opportunity• Be In the business of delivering experiences • Who cares wins!• The training isn’t working!• Don’t allow brand standards to inhibit your team!• Guests need to feel enthusiasm, affection and

kindness!• Think lifetime value!• Most hospitality guests would not recommend!• Stuck in the mentality of delivering goods!• Cardinal Sin - Recruiting personality then training it

out!

The Hospitality Sector PerformanceContents

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Skills

Perceived Value

Pace

Warmth

Interest

Training

Willingness to

Recommend

Confidence

Knowledge

PersonalityReflections

Welcome

Our questions have been carefully

designed and robustly tested .

They aggregate into the three

categories above.

We use SUBJECTIVE

questions to explore

the guest experience

NOT the adherence to

brand standards

Our Questions assess the following

aspects of the guest experience:

Measuring Experiences

Measure outputs not inputs!6

Over 3000 guest centric mystery visits inform our unique benchmark insight offering competitive advantage for those who care!

From the data we provide performance benchmarks so that clients know where

they are on their journey to delivering experiences that engage & excite guests generating competitive advantage and increasing guest advocacy

We can benchmark performance against the appropriate industry benchmark averages derived

from our ongoing “uninvited visits”

Most importantly we can benchmark performance against the best of the best from all available

visit data - with monthly reports identifying performance gaps and actionable recommendations

Benchmarking Performance

Hospitality Sector Casual Dining Budget Hotels Community PubsDrink Sub Sector Fast Food 5* Hotels High Street

Accommodation Sub Sector Coffee + B&B’s Destination PubsFood Sub Sector Fine Dining 3-4* Gastro Pubs

Ancillary Boutique Hotels

Eclectic Benchmark - “The best of the best”

Perhaps your business could contribute to The Eclectic!7

Average cannot be the extent of your aspirations!

Hospitality Sector Benchmark 75.42%

74

74.5

75

75.5

76

Feb 11 Sept 11 Jan 12

Guest experiences have

improved but it remains a

mixed bag with visit scores ranging from 18% - 100%Evidence of belt tightening in

inflationary times served up

diminished performance in

October & November75.42% is Average - the

target is 90%

Productivity improvements can not be at the expense of

guest experiences

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34% of all experiences diminish future sales!

0

10

20

30

40

0-10% 11-20% 21-30% 31-40% 41-50% 51-60% 61-70% 71-80% 81-90% 91-100%

Only 13% are gaining recommendations

Only 13% of businesses scored ≥ 90% the level required for recommendation - 87% of businesses are not delivering experiences

worthy of recommendation34% of businesses scored ≤ 60%

The graph describes the % of average scores achieved in each percentile and is based on over 1400 “uninvited visits” across the hospitality sector.

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Grasp the competitive advantage opportunity!

0

10

20

30

40

0-10% 11-20% 21-30% 31-40% 41-50% 51-60% 61-70% 71-80% 81-90% 91-100%

A different perspective reveals a substantial Opportunity.....

With the correct focus 30% could readily transform their business and convert existing

guests into their most powerful marketing vehicle - peer to peer recommendations.This would not only transform their business but the dominant view of the sector.

Enticing ever more potential guests away from their streamed HD film, M&S meal and

wine deal, 50p bottles of lager and very comfy couch.

10

Michael PorterThe basis of above-average

performance within an industry is sustainable competitive advantage.

There are 2 basic types of competitive advantage:

Cost LeadershipDifferentiation

“The only truly sustainable competitive advantage is to learn faster and deliver better than your competitors”

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Sector fails to engage and earn recommendations!

Short on Personality and short of the Target!

73

74.25

75.5

76.75

78

Personality Skills Reflections

Personality is the worst performing category,

depressed by a failure to: welcome, be interested in

the guest and demonstrate

warmth.

Reflections is limited by

ambivalence and guests unwillingness to

recommend dragged down

by a lack of personality and

guest engagement

Target90%

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Be in the business of delivering experiences!

What a year 2011 was! High debt burdens - spiralling fuel & food costs, squeezed profit margins, falling sales or sales propped up by discount fuelled guests - labour cost controls - fearful teams dominated by part time

transient workers. Result - Too much debt - not enough personality!Indeed many businesses closed as UK PLC fights for the available leisure spend in the face of ever more

discerning and value conscious guests who have more choice than ever before.

“Shall I go out to my local restaurant or relax in my comfortable sofa watching a streamed HD film washing

down a M&S £10 Meal for 2 and bottle of wine with a few 50p bottles of beer or lager?” Hospitality businesses should be in the business of delivering experiences not selling goods or services!

The reality for guests is somewhat different:Some sell Goods - burgers, pizzas, flat whites, cask ales, bottles of wine, steaks or bedsSome sell Services - they transact or process goods to guests - they simply get the job doneThe best provide Experiences - delivering goods and service with the enthusiasm, expertise and style that elevates the delivery of basic guest needs so as to create memorable moments - transforming a process into

an experience.

Too many customers are given goods for a price, most are simply transacted leaving the majority of guests sufficiently disgruntled to share their thoughts on twitter and facebook thereby accelerating the demise of operators who will certainly get what they deserve - faster than ever before.

Meanwhile the best continue to deliver and focus on team and guest experiences, growing the gap between

themselves and the rest while warmly, welcoming new friends with huge smiles, an open heart and many kind

words - delivering experiences guests pass on peer to peer.

“Experiences are as distinct from services as services are from goods” - Tom Peters

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Who cares - Wins!

The Ownership factorIndependent hospitality businesses outperform Branded or Chain operations.While both groups fail to attain the target 90% the 6.28% gap is significant.Do owners care more than managers? The independent v chain data reveals a

significant challenge for sector chain owners - how to get corporate managers thinking and behaving like owners.

50

60

70

80

90

73.6671.6 71.89

76.6 76.97 78.17

Warmth Personality Average ScoreChains Independent

“Most independents are best off, I think doing what I prided myself on

doing for so many years as a

storekeeper: getting out on the

floor and meeting every one of the

customers. Let them know how

much you appreciate them, and

ring that cash register yourself. That little personal touch is so

important for an independent merchant because no matter how

hard Walmart tries to duplicate it -

and we try awfully hard - we can’t really do it.”

Sam Walton,Walmart

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The training isn’t working!

71

73

75

77

79

72.6673.57

71.71

77.3177.92

78.91

74.49

77.28

74.43

75.42

Welcome Warmth Interest Confidence Pace Training Knowledge Value Recommend Average Score

No business needs to be exceptional in every area but it certainly needs to be exceptional in some and particularly those that matter to their target audience.

The 4 weakest areas are the most important: Welcome, Warmth, Interest and KnowledgeThe sector is below target on every measure!

Its time to review your slice of the reported £4,242 million spent annually on training - Are

you getting a ROI?

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Take the leapStart Engaging and exciting

your guests before they find

your competitors

Stop training process, and

transacting guests, release the

personality and measure what matters rather than brand

standards

According to a recent Square Meal survey

45% of complaints are due to bad service....

and

65% of employers report a need to improve

customer service skills according to The

National Employer Skills Survey

According to the National Employment Survey the sector spends £4,242 million on

training each year.... yet:

“Not everything that can be counted counts” Albert Einstein

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photo credit: Vinoth Chandar

Don’t allow brand standards to inhibit your team!

Have you ever recommended a restaurant on the basis of “its world class table

checks”?While conducting another unnecessary

table check within the required timeframe, are your team missing opportunities to engage guests in a way that would grow

sales for today and tomorrow!

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Guests need to feel enthusiasm, affection and kindness!

7%

30%

9%4%

31%

9%

3%4%

4%

Welcome Warmth Interest Confidence ValuePace Training Knowledge Problems

Warmth @ 30% is the most cited positive driver of recommendation

Value @ 31% is a prominent driver but most frequently

cited for negative reasons

Training is the least influential factor @ 3%

Emotions drive value, connection, willingness to

recommend and advocacy.

Most Valuable Driver: Warmth

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Think life time value!

Introducing Net Promoter90%+ or you are nowhere

There is clear evidence that for anyone considering their satisfaction, loyalty and the willingness to recommend performance

a score in the realms of 7 or 8/10 (which might get you an A* at school) cuts no mustard with consumers in the real world.

If guests are not rating 9/10+ they are not going to recommend

you!

Net Promoter® developed by Satmetrix, Bain & Company, and Fred Reichheld, is a useful measure of customer loyalty. It polarises your

promoters and detractors and is calculated as:(The percentage of guests scoring ≥90% on willingness to recommend) -

Disney’s own research has found that advocates - those scoring ≥90% are worth 4 times as much to the company over their life than other guests.

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Most hospitality guests would not recommend!

Hospitality Industry Net Promoter Score - 12.4

Unit Welcome Warmth Interest Confidence Pace Training Knowledge Value Recommend Average Personality Skills Reflections1234567891011121314

77.45% 73.02% 69.73% 74.85% 76.22% 76.46% 73.64% 75.46% 73.68% 74.13% 72.63% 75.44% 74.57%80.00% 77.50% 82.50% 87.50% 82.50% 85.00% 90.00% 92.50% 97.50% 86.11% 81.88% 85.83% 95.00%66.28% 68.02% 66.64% 73.10% 75.10% 77.70% 67.62% 70.90% 67.10% 70.48% 69.03% 73.47% 69.00%78.89% 80.91% 83.64% 83.64% 83.64% 85.00% 83.64% 83.64% 82.27% 82.97% 82.12% 84.09% 82.95%90.00% 70.00% 75.00% 75.00% 70.00% 90.00% 67.50% 67.50% 72.50% 75.28% 77.71% 75.83% 70.00%75.95% 72.79% 72.31% 75.67% 78.17% 77.79% 75.77% 78.65% 74.62% 75.45% 73.21% 77.24% 76.63%74.48% 76.57% 73.78% 78.74% 78.13% 79.86% 76.32% 78.71% 76.50% 77.08% 76.06% 78.10% 77.61%69.43% 71.24% 68.94% 77.24% 79.73% 80.48% 74.76% 77.06% 73.76% 74.93% 72.01% 78.32% 75.41%68.52% 70.21% 69.69% 75.46% 75.67% 75.15% 71.08% 75.67% 72.22% 72.71% 71.13% 73.97% 73.94%77.11% 80.20% 78.24% 82.35% 80.98% 82.55% 79.02% 79.80% 81.37% 80.37% 79.95% 80.85% 80.59%70.14% 68.69% 66.97% 75.25% 78.74% 75.86% 69.49% 77.27% 69.29% 72.38% 69.99% 74.70% 73.28%84.07% 85.00% 82.65% 86.18% 78.53% 88.53% 87.94% 79.71% 81.76% 83.66% 84.29% 85.00% 80.74%75.33% 81.30% 83.48% 84.35% 83.04% 83.04% 80.87% 74.35% 86.52% 81.63% 81.92% 82.32% 80.43%68.91% 70.00% 69.09% 74.24% 75.61% 74.09% 72.58% 80.76% 72.42% 73.23% 70.69% 74.09% 76.59%

In the example above only Unit 2 guests would act as advocates while in the case of Units 3 and 11 the

guests would leave sufficiently dissatisfied to act as detractors. Unit 2 guests would advocate and would

likely include the knowledge of the team and the value for money when recommending to colleagues or friends.

The hospitality sector net promoter score (based on our “uninvited visits”) is 12.4Definition: In every 100 guests there are only 12 more promoters than detractors. More guests are

ambivalent while 61% of guests would not be willing to recommend.

While this compares favourably with certain sectors of UK PLC such as Utilities @ -35 it is best put in

context by considering Apple 78.35 and Amazon 70.33 as reported by Satmetrix 17/2/2011

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Stuck in the mentality of delivering goods!

Food & Drink Rating 78.45%In the most recent 100

“uninvited visits” we have

included the question:Please rate the food and

drink

While the sector is substantially below the 90%

target on both experience and

F&B metrics guests rate the

food and drink more highly.

Better at delivering goods and

a long way from delivering

experiences.

70

75

80

%Experience Food & Drink

Target90%

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Cardinal Sin Recruiting personality then training it out!

• The hospitality benchmark is 75.42% - 14.58% below the 90% target level. Average is not competitive advantage.

• 13% of businesses act as sector assassins - creating “hospitality detractors” • 30% of businesses could transform their business with focus. A shift of less than

10% in current performance levels is all that is required.

• Personality is the weakest performing area for the Hospitality Sector• Welcome, Warmth, Interest and Knowledge are of most concern• All areas are well below the 90% target that is required to assure

recommendation• Warmth is the most cited positive driver of recommendation• Training scores best - What was the ROI on the £4,242m investment? A well

trained team does not of itself drive guest recommendation.

• The industry has a Net Promoter of 12.4 - another indication of guest ambivalence, unwillingness to recommend and competitive opportunity

Sector Headlines

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Measure the things that count not what is easy or convenient!

ConclusionsHaving excellent products or goods available is not enough.

Processing guests through your service system leaves future sales in jeopardy in

the face of better operators and social media.

The sector performance is average - the majority do not deliver experiences that develop advocacy and growth

The sector is significantly below the 90% benchmark level which promotes growth.

The sector is better at providing food, beverage and accommodation goods. The sector is better at systems and processes.

Without personality hospitality businesses are simply expensive vending

machines. Personality drives connection and feelings of warmth yet this remains the weakest area.

“To deliver better and learn faster than your competitors is the only truly sustainable competitive advantage” M. Porter

Yet the majority are fighting on the battlefield of goods and efficiency.

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David McHattie: 07795813097 david@customerservicebenchmark.com

LET US DEVELOP YOUR COMPETITIVE ADVANTAGE

WHAT YOU GETA service dedicated to help provide you with the insight, intelligence and support to grow competitive advantage. We will arrange independent mystery visitors who will appraise the experience against our “fixed” benchmark questions as well as your 6 custom questions.Each visit generates a PDF visit report - distributed to you by e mail within 48 hours of the visit.Why we are different!No internal analysis is necessary as we provide you with a performance report after each wave of visits comprising:• Internal benchmarking - you against you as you expect of any mystery guest program• Benchmarking your performance against the sector, sub sector and competitive set benchmarks• Benchmarking your performance against the best of the best using our Eclectic Benchmark• Net Promoter Score indicator and benchmarking• Certification for sites who achieve 3 or 6 consecutive 90% visits• Draft press releases produced for your circulation - as appropriate• Best practice INSIGHTS & RECOMMENDATIONS to support improvement• Social media highlighting

We will also be pleased to attend one team meeting per annum to help focus and motivate the team as an external and independent voice. Additional sessions can be arranged but will be charged.

No Annual Contracts | No Set Up Fees | No Hidden Costs

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Performance Benchmarking + Consultancy for the cost of a mystery guest!

COSTSOur costs are based on a per visit cost of £95 plus VAT - this price is based on

our minimum requirement of one site

asking for three visits.  The only other cost will be the amount agreed to

cover guest expenses - this is your choice and

can range from nil in the case of a telephone

enquiry to hundreds of pounds if a 5* hotel requires guests to stay and sample the

restaurant, bar and breakfast in the morning.

These are entirely your decision and you can be

as prescriptive as you wish - most restaurant operators simply settle on -  a meal for 2 capped

at £50 - or similar. 

In our hands the right questions + independent professional mystery guests produce pragmatic, operator centric intelligence

reports that drive focus & improved customer service and advocacy.

Take 15% offuntil 30th June 2011

Limited OFFER

Flexibility as StandardYou decide the frequency:

For a single site operator insight based on 3 visits may be

sufficient and all that the budget can stretch to.

For larger organisations or collections of sites you may wish to

arrange weekly, monthly, bi-monthly or quarterly visits to develop

robust benchmarking data by site, by collection or brand.

Medium or larger PLC organisations; with one or multiple brands; may decide that one or two visits per site over the course of the

year is appropriate - visiting & reporting on one brand or region

per quarter. Or simply ask that a quarter of all sites are visited and

benchmarked per quarter Your business your choice.

Focussing the team on what mattersGather sufficient data to identify development opportunities

Acting upon the insights and recommendations

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Part 2coming soon....• Food, Drink or Accommodation? Which sub sector is leading the way?• The value of a receptionist - is it sufficient?• The issues facing the pub industry• Which accommodation competitive set is setting the bar for the rest?• Unpicking the food led competitive sets• Are coffee shops doing a better job than fine dining?• Fast Food or Casual Dining? Budget or 5*?• Guest migration patterns• Going out of business in blissful ignorance• Avoid Developing Negative Emotions!

A mixed bag!

Delving into Sub Sector & Competitive

Set Comparisons

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Part 3coming soon....

• Why some businesses prosper and others fail• The genius of Steve Jobs• Which businesses are setting the pace - the

Eclectic Benchmark Contributors• Case 1: Knowledge = confidence and growth• Case 2: The power of personality and pace• Case 3: Engaging guests drives promotion• Case 4: Budget Hotels - Better than you

imagined?

What can we learn from the

best of the best?

Differentiated, better and prospering!27