Hotel Chain Answers a Wake-Up Call for Better Performance

The managers of a major hotel chain faced a series of big problems. The company’s share price had been declining for years. Costs were unacceptably high, and average revenue per room was below internal targets. Customer surveys showed that satisfaction rates were far below acceptable levels.

Managers responded with a set of restructuring initiatives intended to reduce costs, improve quality, boost productivity, and drive up occupancy rates. Unfortunately, none of these changes produced the desired improvements. In fact, each of the problems continued to get worse.

A FOUR-STEP PLAN FOR SUCCESS

The company called in BCG to help it address its systemic problems. BCG applied the four-step Smart Simplicity approach:

1. Smart Start: What are the problems caused by complicatedness that need to be solved? Interviews with senior management were conducted to align on key performance issues. The conversations revealed that customers were unhappy, profits were down, and occupancy rates were below targets.
2. Diagnosis: What are the root causes of complicatedness? Deep dive socio-organizational interviews focused on stakeholders and their relevant behaviors. The goal was to discern why people behaved as they did based on their goals, resources, and constraints. It turned out that the company’s problems were the result of a chain reaction. Rooms were prepared late, or were held out-of-service due to maintenance problems, which frustrated hotel guests. Housekeeping saw the maintenance issues but didn’t call them in. They were incentivized to clean rooms as fast as possible, and repairs would slow them down. Receptionists had limited options: either give unhappy customers rebates, or transfer them to other rooms. The hotel thus kept rooms in reserve, which is why profits and occupancy rates were so low. The receptionists were trying to solve the problem with the only resources they had.
3. Solution Design: What are the targeted interventions to reduce complicatedness and address the root causes of the performance issues? BCG helped the company develop minimally sufficient, prioritized interventions guided by the Six Simple Rules of Smart Simplicity. Testing solutions against the rules enabled the company to be geared toward fast decision-making, collaboration, information sharing, and flawless execution.
4. Implementation: How do you implement the solution, make it sustainable, and ensure there’s constant improvement? The hotel chain gave receptionists power over the housekeeping and maintenance departments so that all parties could cooperate to solve customer problems without giving rooms away. In addition, they changed management career paths and required managers to work in more than one function, so they could learn what other functions did and how it all fit together. They removed the counterproductive “hard” and “soft” elements, such as ineffective training programs and financial incentives. Implementing Smart Simplicity helped the hotel chain reduce complicatedness and significantly improve performance, productivity, and engagement. As a result, the company tripled its share price in just three years.

THE RECEPTIONISTS’ CONTEXT

To address one key problem area, the company applied the first of the Six Simple Rules of Smart Simplicity: Understand what your people do. The firm’s internal sales team observed and interviewed receptionists in multiple locations to better understand their problems, goals, resources, and constraints.