16
Feb 14

A Novel Approach for Condo Development Show Homes

I have an affliction for window shopping when my family visits a new city. The first day we follow the standard tourist circuit and get caught up in all the trinket selling traps. Day two might involve walking off the beaten track stumbling upon a market place or quirky neighborhood. By the third day with postcard opportunities exhausted all that is left is to do is to go shopping. Whilst my wife hits Main Street, I hit the new condo show homes.

[Outside the US condo’s or condominiums are also referred to as ‘for sale’ apartments or flats]

A show home is a representation of the condo to be built accompanied by a sales office and marketing display. It may be located in a portable building on the construction site, inside an on-site building pre-demolition, in rented space near the site or even a purpose built standalone building. As construction nears completion show homes are typically relocated to a fast-tracked unit in the development.

Some show homes replicate – via a mock-up – an entire unit down to the fruit bowl on the dining room table, for others the mock-up is limited to a kitchen. Marketing displays often include information about the development, 3D computer animations, plans, artists impressions and scale models.

Whether it is waterfront apartments in Buenos Aries to the Trump skyscraper in Chicago, condo’s overlooking San Diego’s ball park to inter-generational subdivisions in America’s southwest, or the latest offerings in Lisbon’s Vasco de Gama, I am tire kicker #1 when it comes to real estate agents ranking their walk-in traffic.

The show homes main purpose is to help secure sales in advance of and during construction. Pre-sales are often a prerequisite to project funding.

Of course, if the market is hot, show homes tend to take a back seat. I have been involved in projects where a 10 m2 portable building with a few pictures on the wall and an eager agent with contracts on hand did the trick. Sometimes condos will sell by simply putting up a sign. Some developers leave it to a model and brochures in the real estate agents office. Yes, Twitter, Facebook, websites, brochures and investment seminars may suffice when demand far outstrips supply. However, on large projects in competitive markets, to maximise selling price, a well thought out show home is a must.

Excuse the unfortunate pun, but my ‘novel’ approach for the show home is to tell a great story. Let’s look at 14 ways a great story can help maximise development sales:

  1. First Impressions Count
  2. Pack a Powerful Introduction
  3. Structure the Story, Choreograph the Experience
  4. About the Author: Establish Credibility
  5. Set the Scene
  6. Pictures Tell a Thousand Words
  7. Build to Impress
  8. Don’t Leave the Reader Confused
  9. The Twist
  10. The Sizzle
  11. The Drama
  12. Grammar and Punctuation
  13. The Sequel
  14. The Book Signing

1. First Impressions Count
The saying ‘don’t judge a book by its cover’ unfortunately arises because most people do; whether it’s a book, a person or a new development. First impressions count so pay particular attention to the entrance to the show home.

Signage, especially way-finding is important. If a prospective buyer cannot find their way or become disorientated they may feel that the show home experience is disorganised or mismanaged – not a good feeling to start off on for the investment they will be asked to make.

People focus attention on signs (at least the first time they see them) so it is important to keep them clean, graffiti free and well maintained – whilst you are doing that not a bad idea to have the branding integrated into even the most mundane signs (like ‘park here’). I can’t recall ever thinking, hmm this development has too many signs, but it can be disconcerting when there is poor signage.

Apply the same degree of professionalism to the exterior entrance as you do to the interior of the show home – it is after all the first thing a prospect will notice. One poor example was where I had to walk through a half completed dirty lobby, up less than inviting unfinished stairs with construction materials lying around before we got to the display inside.

If the building is under construction and the show home is located within then ‘construction activity’ conveys to the prospect that the development is really moving forward. This infers sales have been good and can instil a higher call to (purchase decision) action. However, this should not preclude providing a clean and well signposted experience. Few people comment that a space is too clean!If the entrance is approached by car, consider the first impression the driveway and parking area creates. Tidy landscaping (one of the first things to let slip when sales are slow so just in case design to be low maintenance) and a smooth surface help. Entrance doors should be easily located and accessible from the parking lot.

Consider from the drivers and passengers seated view the branding of the development. Brand influence can start before a buyer opens the car door.

2. Pack a Powerful Introduction
A good story grabs the reader’s attention in the first chapter.A pivotal psychological moment and for some it represents a feeling of anxiety, is when they open the show home entrance door.Thoughts can range from; am I going to be greeted by a fast talking snake oil salesman with a pen in one hand and a contract in the other?; to a feeling of excitement of getting a glimpse of our potential next home; to sever skepticism that anything in the showroom I am about to view will influence our buying decision.

The ‘door opening’ should be a carefully considered moment, and the introduction should set a powerful positive tone reinforcing all the right reasons to purchase.
Examples of power introductions:
– For one high end development I visited there was actually a doorman – an immediate positive reinforcement for those seeking an exclusive and luxury condo purchase.
– I simultaneously experienced a weird combination of one of the worse and best introductions for a large master planned community. The show home experience started off with a rude assistant who barked at us as we came through the door and abruptly walked us into an auditorium. We sat their thinking, wow with that attitude how to they sell anything here. Then the ‘movie’ started, a highly professional advertorial on a curved screen that introduced the whole master planned community (without even discussing any details of the houses for sale) in its panoramic and heartstring pulling glory. We emerged ready to buy and itching to find a specific home to sign up to. Of course the staff had still lost all interest on our exit so we went for low to high back down to low in that particular intro.
– The entrance to a high rise projects showroom was in a similarly high office building adjoining the site. It was a full fitted out reception with a softer residential approach – complete with friendly receptionist who asked me to take a seat and a consultant would see me shortly. It was all very business-like, but the target market was indeed business people and the show home entrance mimicked the condo’s planned concierge.
– In Vegas, the doors opened to a large oversize open space with a ‘golden’ scale model placed in the middle to immediately draw your focus.
– In Buenos Aires a developer had done something similar where your focus is drawn to an impressive model uncluttered from the rest of the display on entering. In these cases the architecture was their power intro.
– People and activity can also produce a powerful introduction. Sales agents sitting around doing nothing and an empty room usually does not. Consider how to create activity in the showroom (café, locate developers office + staff, compress viewing times, shared space)

3.  Structure the Story, Choreograph the Experience
Create a structure to tell your story so the prospect does not jump to the final chapter without taking in the mystery, suspense, action and drama beforehand.

Think of the potential buyer’s visit to a show home as a choreographed tour from arrival to exit. Think how prospects on entering the show room will move and what they will be naturally drawn to, how they are likely to view displays or interact and the key selling points you want them to understand along the way.

This starts with careful design of the layout and placement of marketing displays, built mock-ups and the sales office. With marketing arranged in a staged sequence (which does not necessarily mean linear or a straight line all along one wall) sales staff can guide a consistent story to buyers.

A formula used in many large house subdivisions in the United States involves a multiple show home planned experience. You enter the first home, walk through the rooms often in a predetermined sequence, exit a side or rear door and then are guided (fenced in, in many cases) to the next home. This is repeated again (one subdivision I recall going through 5 show homes in a row) until you finally end up in the converted garage of the final home – which doubles as a sales office. Just in case the highly upgraded finishes do not stir your willingness to sign up along the way strategically placed notes make sure you aware of all the key features and benefits.

One luxury condo show room experience applied a very personal, tailored experience. From the reception a sales consultant would take you into their office and you would discuss your wants and budget upfront. While eager to see the actual marketing and displays, the agent made sure to have a thorough understanding of what you are looking for and picks up on any concerns or key issues you may have, before providing access. The agent then would guide you around the showroom displays, giving a customised tour – embellishing those features that are important and brushing over others that may create issues. This obviously requires very skilled sales staff but was an effective approach.

4. About the Author: Establish Credibility
Renown academic authors sell books because they have built up credibility (at least until they are proven wrong). Even if the developer has a Trump like reputation, the buyer is more likely to make a decision to buy if they have faith in whom they are buying from.

Preface the prospect early into the showroom experience (as early as possible before they start judging what they see) by providing context about the developer – the ‘author’ of the project. Present the developers overall business vision and approach to development. Display examples of past successful projects. Look to convey a sense of financial stability and long term commitment.

Similarly, like the foreword in a good book, have others make recommendations about the development and the developer. Display accolades and awards the developer’s projects have received.
Examples to use in the show home:
– quotes from buyers enjoying their new home (and lifestyle and investment) from one of the developers previous projects
– a photo of a charity event where the developer has donated to the well-being of the community
– press articles displayed prominently how this development is going to change the area for the better- photos and quotes from dignitaries opening projects, or the turning the first sod (ground breaking ceremonies)
– display health and safety, construction excellence and other positively affirming certificates.Establish credibility before launching a sales offensive, it’s about selling a dream not selling a dreamer!

5. Set the Scene
Explaining the background of key characters and history of locations helps give the reader of a good novel  context for the story-line that unfolds.

In Greenfield subdivisions and brownfield gentrification of ’emerging neighborhoods’ the dream you are selling may actually just be one chapter of a much larger story.  Not only do buyers have to understand your vision for the site, they have process the vision for the entire area.

In large planned communities often there are multiple layers of developers and separate marketing displays: one for the master-plan and individual ones for each home builder’s projects. The master plan story is usually much easier to describe as everything is going to be new, none-the-less it needs to be told. A buyer’s top focus being unlocking the mystery of when all the promised amenity is going to happen.

In urban brownfield locations where a down and out area is being rediscovered for condo living, describing the locations future potential may be the most important chapter. Most brownfield locations have many existing negatives. If this is one of the first projects in the area there are likely to be few positives.

Addressing the inevitable questions about the location upfront in the show home’s marketing display is important. The developer’s vision for the future should be transcribed into a chronological story the buyer can understand and believe.

One approach is to present (map) every other new development planned in the area. Pay particular attention to projects that add value to your development. This could include new shopping, public amenity and transit. Allow the presentation to be updated as sales progress as often new restaurants and cutting edge boutiques pop up in emerging areas. The buyer is likely to visit other residential developments anyway so it’s unlikely you are going to have the market to yourself. You might as well use their planned developments as a strength of commitment to the area. Obviously let buyers know the benefits of your location over others! This is the time to promote the trendy little cafe that has popped up down the street that all the sales agent’s visit on their way to the show home.

Knowing the ins and outs of the area and having a thought-out response to negatives whilst promoting positives keeps the story-line moving – even if your response is “and because the area is in the early stages of rapid improvement we have priced accordingly”.

In a challenging location, consider carefully the directions you give visitors to get to your show home and between the show home and site location (if located separately).

Consider everything the prospect may drive or walk by on their way. Encourage the prospect to visit the positive signs of gentrification along the way (new transport construction, renovated houses, new restaurant) and re-route directions where possible to minimize negatives like run down properties and graffiti.

6. Pictures Tell a Thousand Words
Novelists create vivid pictures in the minds of their readers. Through words they convey both the character and the emotion of an environment the story is set in. A good show homes presents the character and emotion of the future development to prospective buyers.

One rule of thumb is to only display in the absolute best form of presentation possible that your budget allows. [As a buyer you should question low budget show homes for significant developments, even if the market is hot, a well presented show home should help sales velocity and pricing].

In addition to built mock-ups, artists renderings, architectural drawings, 3D computer animations, interactive displays & websites and 3D replica models are today’s show home presentation tools.
Each can be used with different dramatic effect:
– The less your show home presents via a full scale replica mock-up  of the condo interior, the more you have to present using other means.- Buyers don’t necessarily understand architectural elevations so unless they relate to a specific benefit, use sparingly.
– If using computer generated fly-through animations and renderings, ensure there is sufficient detail so not to leave gaps in the visualisation that buyers have to imagine on their own. For example often the texture of a wall can have a dramatic effect on the look of a building, a flat computer generated representation of a wall may leave the buyer thinking it is indeed a flat texture-less surface.
– In artists and computer generated renderings, pay specific attention to the cars and people in the artwork. They should represent what you want your target market to see.
– I am always impressed when I see a large scale replica model. Done correctly there is simply no better way to visualise the project. They are now increasingly replaced by computer generated animations but in my opinion they are still a great selling tool.
One impressive model for a large mixed use complex was translucent included lights where each apartment could be lit up independently. Identifying units available for sale on a model allows the sales consultant to then show their relation to key amenities such as pool, parking and the entrance. It also allows the consultant to describe the views and the spatial location differences between each unit.
On some of our earlier projects the models were so detailed, photos of the model were used for close ups in the brochure. Many architectural models are built (by architects) with concepts in mind, whereas many buyers focus on details, so also be careful what you leave to the buyer’s imagination.
– Interactive displays should be well maintained, easy to operate and work correctly. Touch screens have a habit of needing to be touched with increasing pressure until some parts of the screen don’t work at all. Also consider that while many buyers may peruse over a brochure or website at home for hours on end, they are going to have a much shorter concentration span whilst standing within a show home playing with an interactive display.
– If you have purchased photography and had images prepared for the projects brochure and website, ensure you have copyright to use them at a resolution suitable for large visuals in the showroom (and for site signage).
– There are so many ways to present marketing information, rather than just hanging display boards on the wall. Retail outlets in airports and signature stores have all sorts of innovative ways to present their products and can provide good inspiration for the humble property development.  In one project showroom we effectively created a pass through display wall, separating two spaces by suspending large double sided images on ceiling to floor stainless steel cables.

7. Build to Impress
A built mock-up, a replica of the interior of the condo or key rooms within it, is where you leave the buyer little recourse to their imagination. What you see is what you get – at least most of the time.

Until the show home is relocated to a constructed building, it is still a representation of what is for sale. You can replicate almost anything except its location and relationship to the rest of the building and environment.

The specification that you are presenting as compared to what you selling is important. I have experienced two schools of thought:
a) Produce the highest spec option – build out every optional extra and upgrade, or
b) Build the base option and use material samples to describe upgrades available

The problem for buyers in option a) is that you actually don’t quite know what you are getting for the price when looking through the mock-up. The upgrades are often dependent on your floor plan and priced separately. What you see may be an upgraded option tens of thousands more expensive than the for sale price point that got you to the show home in the first place. This appears to be exactly the psychology employed during boom times to solicit maximum revenue from buyers, especially in middle to upper priced standalone homes. Lower priced homes often want to present how good the base option is so you can keep the total purchase price more affordable – also more likely to be employed when times are tight.

Option b) is easier for buyers to understand but if your base spec is relatively low, the visual appearance of the mock-up may be compromised. Typically it is most noticed in kitchens – especially bench-tops and fittings.

The correct formula does depend on your target market and also the margin the developer hopes to make on upgrades versus the difficulty and management time in allowing too many variations to the specification. It is easier to allow multiple upgrades in standalone housing compared to condo buildings. Standalone houses can be built to spec, much more efficiently whilst condo buildings usually have to have all units built, often before all units have been sold – this means keeping a much more upgrade restrictive specification all the more important.

Some show homes combine the two philosophies and display both a base and upgraded version. I have seen show homes that have built a replica of both types of apartments and some which have just built replicas of the kitchen.

Kitchens and bathrooms sell homes, these are typically the best areas to concentrate on in your mock-up. Possibly not a great idea to plumb the display bathroom (the temptation to use the facilities may just be too great !) but plumbing up the kitchen is a good idea, as you can turn it into usable function space and demonstrate how well the kitchen works for entertaining.

If you build a mock-up make sure it is of the same quality you intend to provide in the completed condo. What buyers see is what they anticipate will be in their finished home – to the degree some will take photos to record such that anticipation, just in case it doesn’t measure up when they move in.

Views are often one of the key selling points that are a harder little harder to recreate in a mock-up, however there are techniques that can be used:
– Build a separate tower on site and physically walk people to the level a unit will be on.-Rent nearby space at a high level to showcase the best and most expensive apartment views (like the show home in the office example mentioned earlier)
– Print a high resolution photo of the view behind window joinery in the mock up. In most urban luxury apartments that use this technique it is most often the city lights scene at dusk.
– Embed an interactive computer display (also portable to a website) so you see photos of the exact view from the location of each unit. This requires airborne photography (balloon mounted camera that takes shots in various directions at eye level intervals for each floor).

8. Don’t Leave the Reader Confused
How disappointing are  the words “to be continued…” at the end of a book, or to be left wondering why did one character do such and such in a mystery novel.

I have seen show homes that meticulously recreate a full apartment down to every last detail in let’s say a modern style, but the display suite and sales office is in a different style, like traditional oak paneling. This gives mixed messages and may confuse the buyer as to the intended style of the finished product.

Where there is a noticeable benefit show homes should clearly differentiate when the mock-up starts and where it finishes. Changes in floor treatment helps, as does raising the mock-up higher than the rest of the sales office and having independent walls, without using the existing building structure. This is especially important if the mock-up is within an old warehouse or other space.

Many mock-ups are created in open spaces of buildings intended for an alternative use like an existing warehouse or office space. In these situations the lighting may be a completely different effect to the actual residential setting – consider dropping in ceilings, or modifying existing lighting accordingly.

9. The Twist
Consider having at least one unique selling proposition that differentiates these condo’s from the competition. Use this like a twist in the plot as you tell the story.

It may be a substantial difference or a minor tweak that leaves a big impression in the mind of the buyer.“……and this will be the first development in New Zealand where apartments have their own 3D printing facilities…… ”

Obviously the list is limitless but here are some examples:
– iPod docking stations (ok, that was so last decade!)
– total electronic control of all systems via remote and web
– mirror televisions in bathrooms
– feature texture wall paneling
– feature splash backs
– over-sized decks
– infinity pools on decks
– hanging herb gardens
– over-sized car parks, smart car parking, electric car charging, parking on your level (in a high rise)
– wine cellars, wine attics, wine wall, wine floor

10. The Sizzle
A spicy novel is often the reason it gets picked up in the first place.

A condo development is not just a home, it’s the sexy lock up and leave lifestyle. It’s you at one with the metropolis and it’s all the amenity of your favorite star hotel at your doorstep.

Profiling the sizzle of additional amenity within a development is a double edged sword. Whilst it may appear an effective selling tool for the development to offer the latest and greatest amenity, buyers are now weary of the additional monthly costs such amenity can incur.

During the mid-2000 boom every amenity thought possible was being offered and the cost glossed over or ignored by buyers. During the latter half of that decade a contributing factor to condo prices falling in many cases much faster than home prices was the high monthly home owners association fees. Valet car parking was dropped at so many developments because of the high cost of staff. Increasingly condo developments sell low monthly fees – because of the provision of limited amenity) as one of their key selling arguments. A pool in Arizona goes without question, a pool in Wellington is simply an added expense.

Therefore, in the show home consider displaying marketing of the additional amenity to be provided in the condo development in terms of cost benefits and value for money as well as lifestyle ‘enhancers’.

Where possible market optional amenity. This is where the costs are mainly variable  – allowing the buyer to choose the service where another may not wish to.

11. The Drama
Somewhere in the middle of the novel, the main character has a really bad day, drops their guard and becomes overcome by the drama of their predicament.

In the show home confront drama and issues in the industry head-on. For example:
– In New Zealand and Vancouver weather-tightness has caused significant issues with cladding over the last 20 years.
– Condos maybe associated with the poor acoustic construction of for rent apartment buildings.
– In colder climates appropriate thermal insulation may be topical.

In these cases consider a built mock-up of the construction of the applicable assembly (external wall cladding, inter-tenancy wall and floor sections, window and wall cross-sections). Post videos and references of successful installations and display written guarantees and certificates of proven performance.

12. Grammar and Punctuation
The best written novel won’t get past the editors desk until all the t’s are crossed and i’s are dotted.

A show home can be a considerable investment. Supplement that investment with the appropriate level of detail to round out the story. For example:
– Don’t let the paperwork let you down. Present nice and tidy contracts, plans, specifications and well-presented documentation
– Furniture. Some developments will sell furniture options with the unit for the investor, however often this is not the best furniture to use in the show home. Show homes appeal to people’s sense of ownership and livability, investors respond to the financial return. To achieve both (if both represent target markets), style for the owner occupier and present a professional investment pack for the investor.
– Finishing touches can make the difference. Turn a sterile display into the living environment you are trying to sell. A room stylist can be invaluable to add that personal touch to the mock up and the rest of the display. That can mean fruit bowls, candles, cooking books, rugs, cushions, colour coordinated towels and strategically located plants & artwork.
– Consider your opening hours, do they make sense to the viewing habits of your market? What is the view when someone peers through the window outside of opening hours?
– Recording contact details of show home visitors is important for the sales follow up. Agents have many techniques, typically here’s a pen please fill in the under spaced box on the page style.  In a show home today with all the technology available, make it a slick and simple (i.e. not clunky and annoying) professional experience. Via iPad, laptop, interactive display or stylus – capture all the pertinent data is directly into your sales CRM database, with automatic thank you emails and follow up reminders.
– Branded water bottles, pens and note pads can add that little bit extra and they cost next to nothing.

13. The Sequel
What happens next? Some novel authors may leave a sub plot unexplained, something that can be turned into the next edition.

Show homes can be designed to be used throughout the development process beyond their initial direct selling function. For example:
– Function and entertaining space for a café, parties, cooking lessons, cocktail mixing and other events (primarily to get more prospect travel through the door)
– A recorded physical specimen to benchmark construction quality – especially levels of finish

14. The Book Signing
To the novel connoisseur there is nothing like a personally autographed copy. However, imagine turning up to meet your favorite author and they are rude, disinterested, arrogant or plain annoying. You would probably want to return the book.

Now think about the sales agent. They are, as far as the buyer is concerned, as close as you can get to the author in the show home. There are very few markets where professionalism, market knowledge, a smile and personable demeanor do not go far.

Match the agent to the target buyer. This sounds obvious but in a show room setting there can be a tendency to staff with young inexperienced sales agents. They need to be well trained to ensure what they say and how they say it is consistent with the author’s intent.

Summary – A novel approach for condo development show homes:

  1. First Impressions Count
  2. Pack a Powerful Introduction
  3. Structure the Story, Choreograph the Experience
  4. About the Author: Establish Credibility
  5. Set the Scene
  6. Pictures Tell a Thousand Words
  7. Build to Impress
  8. Don’t Leave the Reader Confused
  9. The Twist
  10. The Sizzle
  11. The Drama
  12. Grammar and Punctuation
  13. The Sequel
  14. The Book Signing

 

www.aenspire.com

 


02
Feb 14

Seven Secrets of Successful Events

I find the psychology of corporate seminar style events interesting.  This type of ‘event’ is a key weapon in many a business developer’s arsenal. Whatever spin you put on it most seminar events are a strategic sales tool.

Although I am no expert by any stretch of the imagination I have found myself running a number of events over the years. As jack of all trades for the New Zealand office of RICS (Royal Institution of Chartered Surveyors) planning events was about 30% of my time – internationally RICS runs hundreds of events every year. Add to that I have run events for property development, hotel marketing and Internet software. I also have received a 2nd hand education from my wife. She spent 5 years as a fulltime event manager initially for the Arizona Association of Realtors and later for the Arizona Department of Health.

Even for the most basic event there is a lot of preparation and organisation required. However, rather than discuss the logistics in planning and running an event, I will explore some of the strategy, and tactical psychology involved.

Essentially, a corporate seminar style event is used to sell something. What is being sold is sometimes a little harder to pin down. Most events actually have multiple layers of sales, some obvious and some very subtle, some with the selling occurring not only at the event but also before and after.

In New Zealand I ran events for RICS focussed on one key strategic driver – membership growth. Membership growth in emerging markets like New Zealand was consistent with RICS being a globally recognised professional qualification and added value to existing members.

Events were my number one marketing tool 100% focussed on membership growth. I used events to sell memberships.

Membership growth involved retaining existing members and gaining new local members. In New Zealand, RICS for the most part was not a pre-requisite qualification to earn your keep (unlike the UK for example). My primary selling approach to retention and recruitment was that RICS membership can give you a commercial advantage.

Therefore, while the strategic objective for holding events was to achieve more members, the tactical actions in planning an event became focussed on commercial advantage.

The tactical formula I learned to apply includes a number of interrelated tools – what I call the seven secrets of successful events:

1. Get the right people to the event
Firstly you want a high number of attendees to start off with – it is a lot easier to focus on marketing when your fixed costs are covered.  However, you can’t simply set up any old event and expect people to turn up, or worse rely on the fact that attending so many events a year is compulsory for membership. For some soft networking and a few drinks is a sufficient reason to turn up, but there are plenty of networking opportunities with the crowded event calendar in most industries today.

You need to give people a valuable reason to attend.

I quickly found out that if the right people were coming to the event that was one reason for many others to attend and I publicised the fact accordingly. Many RICS members and prospects, are consultants – to them the right people were potential clients. Basically the more property owners, developers and government authorities at the event, the more this event was a potential commercial advantage (via networking) for many RICS members. I applied a person by person approach and tailored marketing around the ‘you need to know this’ content of speaker’s presentations to get as many ‘clients’ as possible to our events.

 

2. Celebrate success
In New Zealand I made a point of giving new members the option of receiving their membership certificate, framed and personally presented by RICS Chairman at an event. For the prestigious Fellowship award, we tried to make attendance compulsory as these high standing achievers were certainly an attraction for other high achievers to attend. The commercial advantage for those receiving their certificate live is they receive recognition and exposure to event attendees. When fellowships were awarded, there were simply more top level contacts at the event to network with.

 

3. Provide real value to attendees
RICS had a real advantage in that many speakers are international RICS visitors with impressive experience and polished at public speaking. There were even a few that we bailed up while they were in holiday in New Zealand to give a presentation – one poor chap the same day as he and his family had arrived from the 24hr London to Auckland trip.
We would often supplement these international draw-card speakers with RICS members in NZ who were well renowned experts in their fields.
We actively pre-screened presentations and looked for the most topical and interesting subjects for the seminar events to provide commercial value for money.

 

4. Provide real value to sponsors
I did not view sponsors as a revenue source – although it did help!
For the first few events I was involved in, we stopped hiring expensive venues and approached ‘sponsors’ to provide their premises free of charge. As the brand grew in New Zealand we would get sponsors to provide a venue plus catering and later on we secured fee paying sponsors – eventually they started to approach us.

Sponsors were integral in so many aspects of the event promotion and helping to provide commercial advantage.

Firstly, our association with the sponsor brand was important, we did not take on any sponsor that would risk degrading the RICS brand.

Secondly, we promoted the sponsor at every opportunity. We valued their involvement and understood it for what it was – sponsoring a RICS event was a way for them to gain a commercial advantage. In the early days, we had to convince sponsors the commercial advantage was to associate themselves with a global brand, best practice and high ethical expectations RICS places on members. Later, the higher number of attendees and market exposure we generated helped sell more of a direct commercial advantage to sponsors.

Thirdly, having a good sponsor association had an attendance flow-on effect, with high quality sponsors helping to attract more attendees.

Fourthly, we treated sponsorship as a way to keep costs down to paying attendees. This further enhanced value for money for existing members and prospects.

5. Provide real value to speakers
Except for one sports celebrity during the rugby world cup, as a not-for-profit we generally did not have funds or sponsorship to pay speakers fees. However, we played on the psychology that while attendees get value from listening and learning from the speaker’s experience, the speaker gets market exposure to demonstrate their expertise.
In the property industry site visit events are an easy sell as most want to see how the latest project has turned out and learn from those involved in its development. The main ‘speaker’ in this case is the building itself and the development team behind it. I made sure when we promoted a site visit we did our part to sell a commercial advantage of the new development.  Even the larger number of those who read the event promotional material but could not attend would have exposure to the project.

Another way to add value to speakers was to get media coverage of our events and those involved. We always made sure media was invited to our events and canvassed them to attend. Not always but often enough the event was mentioned in print.

6. Promote the brand, unashamedly
A little bit of my experience in America rubbing off; with a captive audience I made sure everyone heard the succinct but persuasive RICS global growth, educational and commercial advantage story. This was my one direct sales pitch of the event – brief and toned down for the Kiwi audience. I felt it was important to reiterate the value of membership as much to existing members as to potential newcomers.

This was also supplemented by collateral materials at the event. I mainly used examples of RICS publications and educational resources, rather than in your face ‘sales’ materials. The quality of these publications did more to sell the high standard of the qualification than me talking about it.

7. Don’t forget the before and after
Many more than whom attend look at the promotional material in the lead up to the event. We used the pre-event promotional material to sell not only the seminar but also the RICS brand and its competitive advantage – albeit subtly.

In event promotions I also highlighted those companies that had ‘sent’ attendees in previous events to solicit new attendees from new companies – i.e. a little bit of keep up with Jones psychology as well as if this company is a potential client of yours, they will be at our next event and so should you!

Post event was a good opportunity to canvas new sponsor prospects on the basis that either:
a) their competitors had sponsored us at the last event and therefore to maintain their competitive advantage they should considering sponsoring us on our next event!
b) they could now associate themselves with blue chip sponsors we currently had signed up – i.e. for example a small building surveying firm with sponsorship alongside a major bank or industry leading legal firm.

In the end some sponsorships became substantial and we were in a fortunate position where we had to make sure new sponsorship did not cannibalise existing relationships.

——————

Within these seven secrets there is a lot of selling occurring – some obvious, some not so much:

– Event and seminar promoter is selling their brand
– Attendees are selling themselves (and indirectly or directly their services) to other attendees
– Speakers are selling their ‘expert’ status to attendees
– New members (receiving their membership certificates) get exposure
– Buildings and those involved in their construction are advertised
– Sponsorships are sold
– Sponsors sell their brand (and indirectly or directly their products and services) to attendees
– Prior sponsors and prospect client companies are promoted to competitively sell new sponsorships and increase event attendance.

So I have discussed the seven secrets in the context of seminar and site visit events for a not-for-profit professional membership organisation. However, many attributes of these secrets can be applied to whatever the event is ‘selling’.

For example, having the Mayor speak at an onsite property development launch (our objective was to sell condos and tactically have council onside) used the tools:
– 1. Get the right people to the event – Mayors seem to attract an entourage, and
5. Provide real value to the speakers – In our case a mention in the morning TV news and plenty of photo ops to promote inner city gentrification.

In my wife’s case she was ‘selling’ the latest improvements in vaccinations and disease prevention to health professionals throughout the State with the objective of reducing the State health budget. Her tools included:
– 3. Provide real value to attendees – Influential nationally regarded speakers (and potential medical networking and academic contacts) from the ‘Centre for Disease Control’ in Atlanta (think zombie movies), and
4. Provide real value to sponsors – A highly competitive but sensitive arrangement involving drug mega companies sponsoring state sanctioned events, gathering brand recognition without actively promoting their products

 

www.aenspire.com


30
Jan 14

Property Development Management: Buying a Decision

[We look at the Focus, Solve, Package method for complex organisations undertaking property projects who need development management services that deliver an approval.] 

Place a conditional purchase agreement on a piece of land, get an architect to draw up some plans, have a builder cost it, get a valuation and take it to the bank for some funding. If your total cost is 80% of the valuation then it’s all good to go – sign up the builder, list with a real estate agent, stick an add on trademe.co.nz or ziprealty.com and you are now a property developer!

Sometimes it is that easy. Rising property markets forgive many mistakes or unnecessary risks taken in ‘back of the envelope’ developments .

For corporate, government and large private real estate developments it is typically a little more difficult. For those who rely on the professional services of others, to undertake development management on their behalf, thinking it is that easy, can result in some expensive lessons.

Many companies who provide development management services provide a list of items that they can undertake on behalf of clients. More often than not it will comprise a variation on the following:

– Client brief preparation and business objectives analysis
– Identifying development opportunities and potential  acquisitions
– Site due diligence and condition assessment
– Market research, demand and competitor analysis
– Bulk and location, master planning and conceptual analysis
– Preparing and analyzing development appraisals/feasibilities and financial models
– Risk analysis and mitigation strategy
– Options analysis and ‘product mix’ development scenarios
– Project/consultant team selection, appointment, managing and leading
– Planning and consent engagement, strategy and implementation
– Design management from concept to developed design
– Cost engineering
– Value enhancement
– Funding, financing and investor strategy
– Stakeholder, public relations and community engagement
– Sales, marketing, branding and purchaser/lessee management
– Procurement of contractors – strategy and contract negotiation
– Client representation during construction delivery; cashflow, programme and variation management
– Dispute resolution – or contract enforcement!
– Closing (settlement) management; purchaser or lessee ‘wrap up’

Some companies even have a nice diagram which shows how they see development all fit together. Many academics have attempted to describe the end to end process [Daniel B. Kohlhepp at John Hopkins Carey Business School] or  apply complex financial theory to model the process [Jihun Kang at MIT]. There are also a number of books that look to describe development from conception to completion [Sara Wilkinson and Richard Reed].

In my attempt to:
a) write a book,
b) develop real estate development process workflow software, and
c) create decision tree based algorithms for teams to use on multiple development projects,
I have found it impossible to ring-fence property development into a prescribed process. My experience has been as soon as you think you have established a model, you find something new or an unexpected event throws the model out. [I am sure others have figured it out though, somewhere out there?]

My effort at a book – currently drafted at 61,000 words – is a mix of theory, international best practice, new ideas and linked to practical examples I have been involved in (both successful and unfortunately some failures to learn from). However, the manuscript has simply grown too complex to succinctly clarify the rules of the property development game. The more I research and the more markets, projects, deals and approval processes I have been involved in, exception becomes the main rule.

Property development is not a linear process, nor is it a circle, or decision tree or a catchall matrix.

To me property development is like baking a cake following a recipe except you start with a blender already half fill of ingredients. Some of the ingredients you don’t know are in the mixture until you start to taste and some you may never discover for years. You add some of your own ingredients, mix, taste, take some out and put in a little more of this or less of that. Quite often you have to throw out the mixture and start again. Sometimes you have to change the recipe to match the ingredients. Then after you think you have the right ingredients and the right taste for the right recipe you have to bake the cake – not always with the latest Smeg oven. [This analogy could go on and on to include the changing tastes of those eating the cake, to the shops supplying the ingredients, resizing the blender and dealing with a power cut!]

Simply put, property development is art and science. The only certainty is that something will change.

This has implications for those relying on others expert opinion to advise on property development. A private developer typically takes on risk, without perfect information and makes a decision on intuition, experience and the promise of what could be rather than the risks of failing. Their ability to get a project financed is often the prime determinant whether that project goes ahead or not. The developer makes the ultimate decision, personally takes on risk and is also typically (hopefully) the most knowledgeable person in the development process.

Complex organisations, where development is not their core business, need to have evidence presented at different layers and then ultimately approved by those with the financial delegation to do so. Those making the ultimate decision are often not the most knowledgeable person in the development process. They rely on the expertise of others and a nice sequential approach to development may seem like a fair logical approach to them.

However, that is a sure fire way to spend a lot of money on a lot of advice and potentially not get anywhere.

The managers in the complex organisation, at the start of a project or any ‘stage gate’ within, may actually not be in the market for development management services.  What they really want is to buy [the case for] an approval decision.

We describe an iterative approach to development management, which has the approval decision at its core.

We call it FSP – Focus, Solve, Package.

Focus, Solve, Package can be applied to a new opportunity under investigation, a subset of a project already underway with decisions pending, a problem that needs to be addressed or revisiting a project in disarray.

Focus
– What does the project need to achieve?
– What are your constraints?
– Who is the approver and how do they gain understanding?
– What results do you need to solve for to reach an approval?

Focusing is about defining the problem or opportunity and extracting the factors that are necessary for success – for this particular client on this specific project. It is important to separate what is really critical to a successful project from what is simply window dressing, unnecessary or can become counter-productive.

Focus means you work intensely on exactly that which will achieve the approval decision.

Solve
Create and test solutions for the project, with a multivariate analysis type approach within the greater context of macroeconomics, risk and achieve-ability of Focus.

Look at every variable of the financial feasibility and non financial components, apply conceptual changes and measure their impact both in isolation and their effect on the whole:
– Revenue (source, quantity, velocity, sustainability)
– Costs (fixed, variable, negotiable)
– Design (base, value change, influential, product mix, type)
– Construction (alternatives, procurement, staging, critical path)
– Consent (minimum, maximum, negotiable, politics)
– Deal (structure, timing, financing, capacity, parallel process, guarantees, worst case)
– Stakeholders (benefit vs.cost, value for money, equitable, competition)

Package
Clearly demonstrate how the result has been solved so decision makers will understand and approve. The more you understand what is the focus of the approver the easier it will be to package a case for approval.

Package is all about the argument you create to buy a decision. The formal presentation may be a business case, a loan approval application, a request for proposal or an interactive decision forming presentation. However, package is most importantly about how you tell the story, so the approver understands how the route to the decision has been solved based on the criteria of their focus.

Focus.Solve.Package

There is one last word I will add to the FSP approach to development management; repeat.
You may get lucky and bake a successful cake the first time round, but please warn me if I’m coming for dinner and this is the first time you will be serving Beef Wellington.

www.aenspire.com

 


27
Jan 14

Rental Guarantees: Beware of Fools Gold

The short term rental guarantee lends itself to one of the most insidious scams in residential property investment.

They can take different forms but most commonly the scam works by convincing – through basic math manipulation and psychology – a purchaser to pay more than the true market value. The sellers are typically ‘investment promoters’ one step removed from the developer (albeit often linked at the financial hip). They guarantee a rent that is above market, and when the guarantee period ends, the purchaser is left with a lower rent and much poorer than promised investment. Many rental guarantee schemes result in substantial capital loss.

This is an example how a basic rental guarantee for residential property works:
– Market rental is $500 per week
– Purchaser is sold property on a market investment basis at a 10% gross yield
– Purchase price is the annual rental divided by the gross yield
( $500 x 52  / 10% ) = $260,000
– Promoter guarantees rent for two years at $600 per week
– Purchase price is based on the same 10% initial gross yield
( $600 x 52 / 10% )= $312,500
– The cost to the promoter is $100 per week for two years or $10,400
– The true value to the purchaser is $10,400
– However, the difference the between sale prices is $52,000
– So the developer pockets $41,600
– The value to the developer is often more pronounced than this as the guarantee is over time, and therefore inflation further reduces the guarantee’s cost

Caveat emptor (buyer beware) perhaps and yes markets can turn sour. However, the key component of the scam is when the purchaser is sold the investment as if  $600 is a realistic market rate.

Rental guarantee scams are more common in off-the-plan sales as settlement is typically a year or more out and over embellished market rent estimates much easier to promote. They are also often offered for renovated high yield, low price property. The sales tactics are typically investment based seminar hard sells with the psychology focused on the yield and leverage. The guarantee is promoted as being their belief in a rising market and their superior investment selection prowness as opposed to a logical look at the assets true value. Near the latter stages of a property cycle, these schemes always appear to resurface – I have first hand experience with them in three countries now, across two property cycles and the tell tale signs are all so obvious.

There is nothing wrong with investment seminars to sell property. However, the problem arises where the promoter knows full well market rent is less than being touted but is prepared to subsidise for a short period of time to make the sale at an inflated price. They then hope for higher rentals in the future or blame the difference on market conditions. Worse the promoter simply disappears.

In New Zealand the rental guarantee became especially problematic with serviced apartment rentals where the occupancy rates and room rates were guaranteed far in excess of what actually and should have been reasonably forecast to materialise. Many were also not protected by a commercial lease arrangement with sound backing.

Different variations exist in lease arrangements where investors are sold a guaranteed yield for the first period of the investment. Another variant is where a tenant has part of their rent for the first term pre-paid by the promoter before the property is sold to an investor.

There are  three types of rental guarantee which makes sense and are more aligned with an insurance policy rather than a sales gimmick.

1. If the rental guarantee is equal or less than current market rent  it effectively acts as an underwrite. This guarantee may offer piece of mind and protect your downside in the case of deteriorating market conditions. There is nothing wrong with these guarantees – often used to market properties in flat markets – so long as you don’t overpay for the privilege in the first place.

2. Even if at an inflated market rate, if a private rental guarantee were offered long term, the difference between value of the guarantee and the difference in upfront purchase cost would reduce, to the point it may be worth the piece of mind to have rental guaranteed for a longer term. Solvency of those paying the guarantee, if required, then becomes the prime concern. However, a long enough guarantee ends up being a zero sum game so why not just pay based on the real market rent at the outset?

3. Long term government leases often tie in a rental rate for a long period of time. With these you shouldn’t worry about solvency of the guarantee – if it is provided by the government on behalf of the tenant as opposed to a guarantee paid by the promoter. In addition, the rental rate is likely to be much nearer true market value as the government should have done substantial due-diligence before committing to a long term lease.

Commercial investors often employ much more rigorous logic, not to mention lawyers, to the terms they sign up on – so they should be well aware of dubious rental guarantees. There are also many private investors who enthusiastic to get into the market act like speculators and their lack of due-diligence, coupled with fairly average legal and accounting advice are key enablers of property scammers.

It is the mum and pop investors who often end up holding iron pyrite.

So, the next time you see a rental guarantee being offered it may pay to take a real close look at how golden its really is.

P.S.
If anyone has any examples of residential rental guarantees that look like scams, or alternatively those which look to add real value, I would be interested. I have researched and found both the good and bad currently active in residential property markets around the world. Some actually promote the choice of a discount or a rental guarantee which is a step in the right direction. Be very aware if buying off the plans in Dubai and Eastern Europe and maybe take a second look elsewhere, including New Zealand…

 

www.aenspire.com


20
Jan 14

S.W.A.T Surround Hotel Gunman: Revenue Management Ideas for Online Guest Reviews

11pm Tuesday, its fine, dry and 30C.
Ring ring.
“Hello” I eventually awake and answer.
A voice trembles on the other end  “Hola Andrew, esta policia en el hotel……”
“Ok,  ahhh ok, I’m on my way” I nervously respond.

……………………….

I arrive at the hotel, the car-park out front is full. This is usually a good sign, if the car-park is full at this time of night that means a good number of rooms are full. A full hotel is a happy hotel, lots of guests, lots of eyes across the property, lots of revenue and fixed costs well covered.

Alas the car-park is full, but it is possibly one of the worst sights a hotel General Manager can expect to view on his second day on the job.

With rifles drawn, armored vehicles running and looking like a cross between power rangers and the navy seals, the local S.W.A.T have taken over.

Members of the Phoenix Police Department SWAT team prepare to enter the home of a suspected gunman who opened fire at a Phoenix office building, wounding three people, one of them critically, and setting off a manhunt that led police to surround his house for several hours before they discovered he wasn't there, Wednesday, Jan. 30, 2013, in Phoenix. Authorities believe there was only one shooter, but have not identified him or a possible motive for the shooting. They don't believe the midmorning shooting at the complex was a random act.(AP Photo/Ross D. Franklin)Note: Picture is for illustrative purposes only. This is the local S.W.A.T team and closely resembles the same scene but this is not the hotel or night in question.

So I enter, walking past the elevator which has a team of five officers going in and out of the doors and playing with the controls. I end up finding the police officer in charge and after a conversation with the operations manager, get a reasonable picture on what is going on.

A hotel guest in the hotel’s rear building had rang 911, they said they heard a gunshot. They were screaming that the gunman had shot a guest and someone was now trapped in the elevator. Alerted to this the local constabulary paid the rear building of the hotel a visit. They found a blood trail down the hallway wall from a rampaged room to the elevator. The elevator was stuck between the 2nd and 1st floors. There was every suggestion either the gunman or a victim or both were trapped in the elevator. The officers shut down the hotel and called S.W.A.T.

Thirty minutes later, desert storm was launched. The men and woman in black were highly efficient and did not intend to waste time. The elevator I had earlier walked past was being used as practice area to test how to break into the shaft and secure whatever situation they would encounter. Practice took less than an hour.

During that time I had talked to guests via phone who were still in the same building as our gunman. The S.W.A.T officer’s instruction to me to tell all guests in that building was very clear. Lock your door. Stay in your room. Stay away from the windows – that I was told was because if the gunman was outside he may shoot at any movement behind a window.

Hmm, just two days in, to managing the inn, this is not the type of information you need to keep you up at night. Revpar (revenue per available room), occupancy rate, ARR (average room rate), forward bookings, average length of stay, fixed cost per room, incremental cost of new customer and plenty of other measures are where the mind should be this early into the role.

Then S.W.A.T went on the offensive and raided the elevator in the rear building. Two minutes later after finding nothing they left. I received a follow up letter a week later in the mail.

There was no gunman. There was no shooting. There was a fight, some blood and  maybe a rifle had been sighted by the anonymous guest. But whoever the culprit and victim were they had disappeared. We never saw the guest who checked into the rampaged room again either and they had used fake ID.

The next day the hotel opened and continued as usual and a whole new batch of guests checked in, none the wiser.

We were very lucky we hadn’t yet addressed our hotel’s limited online presence and therefore there was almost no opportunity for  a guest to post an online review describing that fateful night.

I had just taken over GM duties basically to try a fresh (albeit completely inexperienced) look at improving net revenue. My original role for the hotel was to develop it  into a $100m mixed use project with for-sale condominiums, offices, rental apartments and some retail. However, that vision faded as the peak of the property cycle passed and now the previously neglected hotel had to help pay the mortgage during America’s great recession.

Most residential development projects take years and within that period you sell each unit once. A development manager on a reasonable sized project may deal with up to a couple hundred sales over 3 to 5 years. So I had to readjust very quickly when I looked at the first report on my desk on day one of my GM duties. The report displayed how many of the 166 rooms were sold tonight. Report 2 showed each night for the next 30 nights and report 3 showed monthly bookings over the next year.

Over the next 12 months I was looking down the barrel of having to manage 60,590 room night sales !

Hotel rooms are perishable, like airline seats, rental car bookings and even golf course rounds. If a room stays empty one night you can not recover that revenue. Airlines have sophisticated automatic algorithms assisted by revenue managers to help optimize occupancy – that is why the price changes depending on when you book and how many seats the airline has available and other factors.

The budget hotel industry I was involved in was relatively unsophisticated in revenue management. It was more of an art based on local knowledge and experience than anything like a mathematical algorithm.  I was in daily contact with the franchisor and I attended the parent company’s General Managers course in Orange County to learn the tricks of revenue management – or at least increase the franchisor’s profit!
However, even with thousands of hotels worldwide, across price points and a substantial support network for franchises, there was not much practical usable help on automated or assisted revenue management.

[I am convinced the mega hotel-casinos in Vegas had it sorted – even if I just base that hunch on the sheer number of bookings they managed to get out of me!]

One of the key areas where increased hotel revenue seemed obvious was to achieve a strong online presence and to maximize online bookings with third party booking engines. We had recently changed franchises (also in the attempt to improve revenue) and whilst we were now part of a new centralised booking system that  included web bookings we had not actively sold rooms via the third party sites, nor had we engaged with guest review sites.

Basically we were starting fresh, with a clean slate for reviews. Over the next 12 months a substantial amount of my focus was devoted to revenue managing third party web booking sites.

I would look at the forward booking schedule for the week almost every couple of hours, down to the minute when we were filling up and had just a few rooms left. We  tried and tested different revenue management tactics that included ideas from hotel experts, analysis of all our competitors and research into hotel best online practice.

What become glaringly obvious was the immediate power of the guest review on bookings. It has literally changed the hotel industry. Trip Advisor, Hotels.com, Expedia, Orbitz and Lastminute.com were some of the ones we focused on. There are a lot more of these sites now and  Web 2.0 social media are moving reviews and recommendations into a whole new world. Cornell University have done comprehensive research on the impact of social media on lodging performance.

A bad review on its own can be seen as sour grapes or just an out of character situation, but if 50 out of 100 reviews are negative it is going to significantly affect your potential to sell a room to any potential guest reading – at least without discounting the price. Many read the reviews across multiple web sites before they book, even to our surprise for a budget hotel.

We learned to try to manage reviews proactively. Travellers who had bad experiences were more than likely to post a review than those you had a good or standard experience.

This preemptive guest review management included:

1. We encouraged those who thanked us at the front desk (for having a pleasant stay) at checkout to post a review – we even had a computer set up in the reception where we showed them how to do this. For repeat guests  (they kept coming back for a reason, hopefully because we were doing something right) or whenever there was a positive encounter we encouraged the guest to post reviews while it was still fresh in their mind.

2. We were conscious during the guest’s stay if they had booked online via a third party site; they had more opportunity to post feedback as most of the online engines would later email guests asking them if they would rate the hotel. Yes it  probably meant we were more proactive with these guests as they had a greater chance of influencing the hotels future business.

3. We actively monitored online reviews daily. If there was a negative comment we would always address it online (some websites allowed hotel operator feedback or right of reply). Typically we would not argue the point, but we would point out our very low pricing, or future planned capital upgrades. More often than not, the comments were out of line when considering the low price guests had paid. If negative feedback was not justified we fought (to the bitter end) to get the website to remove the post. Third party websites now look to be more actively addressing unwarranted negative reviews.

4. We obviously did everything we thought we could to make sure the hotel was as clean and maintained as possible. This was a major problem for the hotel; it was old, had been neglected for years and there simply was no budget for significant capital expenditure until we were forced to spend it. Burst plumbing was especially problematic and never easy to locate and repair. Guest satisfaction and cold showers are not compatible.

5. We had a customer is always right attitude and gave refunds where justified – and even when not  justified if that was going to be more cost effective approach in the long-run and not put our reviews in jeopardy. Yes some people tried it on and threatened to post a negative comment if they did not get a refund. We actually would preempt those guests when they left and immediately contact the site they booked through and Tripadvisor explaining the situation in advance – to grease the wheels for a review removal if it was ever posted.

6. We went out of our way to provide customer service if there were issues. Moving someone to a new room was done without question. I found if our staff were super friendly and helpful, that could turn around the guests opinion from a negative to a positive.
For example if the guest wrote ‘I stayed at X hotel, the room had a faulty air-conditioner, but staff were very helpful and moved me to a different room…’ it is actually a positive review and assuming we had free rooms (which most often we did) only cost us the variable increase in housekeeping that room – about $10
Compare that to this ‘I stayed at X hotel, the room had a faulty air-conditioner, so I pleaded to move rooms because my kids were sweltering, but staff were so rude and wouldn’t do anything about it. They sent a maintenance guy but he couldn’t fix it and couldn’t understand me so I was so tied I just gave up and we had a sleepless night. In the morning the staff didn’t even apologise.’
This is a dramatic difference with the potential to affect hundreds of future room night sales, all for a lousy tenner.

7. For a while we made it clear that the low price was because the hotel was undergoing an upgrade or other works, before they checked in  – to lower expectations before they think of commenting.

8. We made more money when our guests booked via the franchisor booking system than the third party website, so all attempts were made to direct bookings that way. That helped because the franchisor booking system either did not allow comments or could manage it much more responsively. The problem was, despite their marketing attempts to retain the online booking role, third party website bookings were much more aggressive and successful five years ago. According to a Hotel News Now article this trend may be peaking.

9. Selling more rooms via Travel Agents, although typically more expensive meant groups of guests for longer stays without any reviews. In our case Contiki was a big contract (and surprisingly few problems) and we also had visiting school sports teams (however, with parents on edge, complaints could easily escalate). Budget hotels are also not always top of mind for the kinds of guests that now use Travel Agents and often the room rate had to take a hammering to secure this volume business – so opportunities to increase net revenue were limited.

All of the above helped the online reviews, sometimes staff were diligent in applying customer service, other times we let ourselves down. You simply had to continue to be super vigilant as online reviews were becoming increasingly influential.

Online ‘references’ are firmly entrenched in the hotel industry and managing their impact is now a significant part of revenue management. I can’t bear thinking what would have happened after the S.W.A.T raid  if our online presence had been up to speed.

www.aenspire.com

P.S.
Coming in a future post. What about other  industries and service providers – is the online feedback review catching on in the professional world and what are the implications?