Less than two years after embarking on a huge infrastructure change, Village Hotels is now selling 180,000 more rooms each year across its portfolio of 29 UK properties.
The changes, which included a complete tech stack overhaul, as well as innovations such as mobile check in, mobile room keys and Amazon Alexa in rooms, have improved customer satisfaction scores, streamlined operations and positively impacted both the top and bottom line.
Keen to move away from the constraints of legacy systems, Village opted to move its entire tech stack to the cloud.
“We decided to go with cloud-based technology so as to eliminate the cost of repurchasing the hardware. We wanted an open API architecture. All our technology partners have an open API we can work with, and that allows us full flexibility. With a lot of legacy platforms, you are unable to innovate and imagine what could be in the customer journey. You can’t connect the platforms. Because of this we completely rebuilt our infrastructure,” explains Rob Paterson, Commercial Director, Village Hotels.
We caught up with Rob to find out more about the changes at Village Hotels, the challenges of innovation and improvements this has brought to the business.
What technology changes did you make?
We changed our entire IT infrastructure. We installed 100mb Broadband lines into all our hotels, which ensured we met our customers’ needs and gave us space to continue to innovate. We wanted something that would provide longevity for the business in terms of network capability.
We upgraded our infrastructure to the latest versions, moved everything into the cloud, and we changed 36 applications. Pretty much we changed everything, starting with the PMS.
How quickly did you manage to implement these changes?
We sat down six weeks prior to a hotel opening – the Village Hotel Glasgow – which was to be completely deployed on legacy platforms, and we opened that hotel on the brand new platforms. In six weeks we changed all the door locks for the self check-in, changed the configuration of the reception, the PMS, event management, gym system, POS, EMS, everything! We then rolled out three hotels per month; it took about nine months to complete the entire portfolio.
What does it take to lead such change?
It’s down to attitude and mindset. Everyone says they are innovative but as soon as they encounter a roadblock their initial reaction is to wind back. If we had wound back on every roadblock we hit we would have wound back hundreds of times.
We had to rethink the entire customer journey. A small example is that the new system doesn’t have a newspaper facility to offer the guest on check in. But is that really an issue in today’s connected world where most people carry a smartphone? There were thousands of things like this that came up where we had to rethink the journey. And the result is our customer scores are better than ever.
Innovation, by its nature, means you are not going to get everything right. There is no blueprint. You are going to make mistakes so you have to be ok with that.
What results have you seen so far?
In pure support, maintenance and hosting costs we’ve saved hundreds of thousands of pounds. Our new PMS and event management system are a lot cheaper because there is no big CapEx expense every three-to-five years to upgrade our hardware; it is all managed in the cloud on a SaaS model. Everyone shares in the latest product releases and we are always on the latest version of each application. There are no recurring costs to upgrade to the next version. It’s also a fully open platform with published APIs.
In other cost bases, we’ve achieved a lot of labour efficiencies, credit card transaction efficiencies, and plenty of top line revenue benefits from being automated.
For example, no show and cancellation revenue relied on the receptionist manually processing that each day, it was not a managed process. We had 28 different hotels with four to five people handling it. Now, it just happens autonomously. Our no show and cancellation revenue has spiked as it’s now fully automated and consistently charged.
We also have more efficient labour models now thanks mainly to our self check-in and self check out. In terms of customer scores, our results for check-in and check out have shot up to be our highest scoring areas.
The end result is that our customers are happy, our top line revenue is stronger and our costs are lower, so it ticks all the boxes.
How has your pricing strategy changed as a result?
Everything we’ve done has kept our variable cost very low. That allows us to be more efficient than our competitors and therefore more aggressive on pricing.
The benefit is that once we get the guest in we have so much to offer, from Starbucks to spa treatments, the pub, the gym, business centre, party nights, etc. There are many things to do and to sell.
Two and a half years ago we were achieving 77.5% occupancy with a higher fixed cost. In 2017 we achieved 90% occupancy and we forecast mid-90% in 2018. That’s a huge step forward. It’s 180,000 more rooms sold each year. That’s a lot of customers coming through the doors that we can sell to.
Is there room for further improvement?
We’ve invested $40 million in the physical product and we now have a great product and great customer scores. Our future is geared toward improving the quality and spend of our customer. It’s now about optimising every single customer that comes through the door.
We want to get to 50 hotels in the next three years. These will all stay under the same owner/investor, developing from the ground up. Our main strategy is to buy the land and build from the ground up, although there’s likely to be some acquisitions in there too.