In an exclusive interview with Kamal Gill, Executive Editor, Today’s Traveller, Paul McLoughlin, President, International, Frontline Performance Group, spoke at length about the opportunities and challenges confronting the hospitality landscape in a post-pandemic world.
TT Bureau: Exciting things are happening in Frontline Performance Group (FPG). Take us through the developments.
Paul McLoughlin: It has been over two years since we acquired TSA, our largest competitor headquartered in Singapore. The process of merging the two companies and changing our business model towards enabling our clients on a subscription basis to operate a highly profitable frontline-led sales and service program has been my top priority. My team and I now have international operations in over 100 countries, including India, where we employ over 60 people in our offices in Ahmedabad and Pune.
Undoubtedly, the pandemic posed significant challenges, particularly in the hotel industry, which experienced a notable decline in activity for FPG. However, we are now witnessing a gradual recovery towards fully realising the hotel sector’s potential. Moreover, we have completed the implementation of the Hyatt Global Integration, which has resulted in the activation of 500 Hotels globally joining our program. This achievement, along with the rollout of Global MSA’s with Hilton and Marriot, has recently constituted a central focal point for our organisation.
TT Bureau: What are your top priorities for the next 12 months?
Paul McLoughlin: As we enter the midpoint of 2023, our program is successfully generating 2-8% RevPar improvement for approximately 600,000 rooms across 100 countries. The Asian market displays signs of strength and recovery, and we will continue to look to grow there. Notably, India also holds strategic importance for our organisation. We initiated our entry into the Indian market last year through partnerships with Hyatt and subsequently are now engaged with local and international brands. Thus, the progress in India has been fruitful and aligns with our overall objectives of having 1 million rooms in our program by the end of 2024, generating over $ 2 billion of incremental revenue annually for our customers through their frontline teams.
Another critical priority in the coming months for FPG is introducing our enhanced Performance framework, which guarantees a minimum of 4 times the investment our clients make in our program. Our clients who implement it effectively will see substantial increases in RevPAR with an average ROI of 25:1 on their investment.
TT Bureau: What are some notable Challenges emerging in the hospitality landscape?
Paul McLoughlin: A notable global trend is the increasing correlation between customer expenditure and various markets. This pattern is particularly evident in the airline and hotel industries, where operational constraints and pent-up demand have contributed to sustained high rates. Consequently, customer expectations have risen in tandem with prices.
However, the hotel industry faces a challenge in meeting these elevated expectations due to a shortage of skilled personnel compared to pre-pandemic times, compounded by limited available talent pools in many markets. As a result, service levels have needed help surpassing the desired benchmarks. This situation presents both opportunities and challenges for our organisation.
On the positive side, progressive brands/ownership we collaborate with have expressed a need for assistance in driving incremental revenues and enhancing service levels. They seek to transform their frontline staff into true brand ambassadors. Conversely, many hoteliers need help with operational challenges and prioritise addressing service-related issues over revenue generation. Lots have acknowledged the value of our program but feel overwhelmed by their existing workload. Overall, it has been a productive year for us as our program continues to evolve.
TT Bureau: Talk to us about how the nature of your business changed throughout the pandemic.
Paul McLoughlin: It’s worth mentioning that our organisation originated as a consulting firm specialising in coaching, training, and consulting services in many verticals such as automotive, theme park and retail. Similarly, like us, TSA began as a coaching and training organisation. We transitioned into the Hospitality sector, helping hotels improve their performance, revenue generation, and service levels on a performance-based payment model. Our challenge was that our departure led to a decline in program effectiveness, while our re-engagement led to its revitalization. Consistency of performance needed to be improved.
We saw an ideal chance to transform our business model during the pandemic. We decided to shift towards an enablement approach where tech was an enabler but only part of the solution, offering our client all the necessary tools used internally to run a successful sales and service program on the frontline. Additionally, we would certify, support them and provide them with our In-Gauge platform. Their primary benefit was that they could enjoy all the advantages, with consistency of delivery and improve their GoPar substantially. This shift allowed us to establish a subscription-based business instead of relying solely on onsite training and consulting services. It was a bittersweet opportunity that arose from the pandemic.
The change in our model opened up global opportunities for us. Previously, we focused on major cities and big-room inventory opportunities, as we provided consultants and trainers who worked on a performance-based payment system.
However, with our new technology-focused approach through our product – In-Gauge, utilising SaaS (Software as a Service) and virtual support, we could expand everywhere, even in far-off locations and across all chain scales. This exponential growth enabled us to engage in deals with various global and local brands, providing them with a worldwide solution.
Additionally, our expanded reach allowed us to cater to hotels of all chain scales. Whether it was a luxurious Pullman, a mid-scale Novotel, or a budget-friendly Ibis, we could tap into the revenue/ service enhancement potential. While the revenue potential in lower chain scale hotels may be lower individually, the sheer number of such hotels worldwide presents significant opportunities for GoPar improvement as incremental revenue improvement can be a significant margin contributor.
When presenting our proposition to a brand, we could demonstrate how they could generate substantial incremental revenue, reaching hundreds of millions of dollars across their entire portfolio. We offered tailored solutions for different hotel types, recognising that limited-service hotels have specific requirements that differ from full-service establishments.
TT Bureau: What are the learnings you have gained throughout this shift?
Paul McLoughlin: At Frontline Performance Group, we strongly believe in the potential of people. We understand that the individuals who greet and assist customers at the frontline can make all the difference and become a significant profit generator. Regardless of how much money is invested in branding, capital projects, etc, the interaction with the frontline staff ultimately shapes the customer’s experience and relationship with the brand. As we say” It’s the Art and Science of Frontline delivery”
Unfortunately, not every brand sees this opportunity in the same way. A couple of years ago, an insightful study conducted by PwC emphasised the significance of people in delivering an enhanced customer experience. Customers value knowledgeable, engaged staff and seek a more personalised and humanised interaction. Surprisingly, while customers desire a human touch, some players are moving away from investing in people and much more in automation.
The reality is that customers are willing to pay more for a more human touch, especially in the hospitality industry. However, the pandemic has highlighted the industry’s struggle to bring people back. This is not a coincidence, as it reflects the failure of some employers to cultivate and develop their workforce. On the other hand, there are notable success stories, such as Hilton and others, which have done an exceptional job globally by recognizing the potential of its people and prioritising their well-being.
These observations underscore the significant learning that there is still a long way to go in valuing and investing in frontline staff. Additionally, many need to recognize the profit-generating potential of the frontline. They often perceive them as mere order takers, needing more opportunity to develop, invest in, and incentivize these individuals who can make a substantial difference in areas such as revenue per available room (RevPAR) and average ticket prices across the property revenue touchpoints.
While there have been challenges in certain countries, such as India, where the focus on commercialising rapport and leveraging upselling opportunities is developing, other countries have embraced this concept. They have recognized the frontline’s value and actively sought ways to develop and incentivize their staff, benefiting both the customers and the business. These insights highlight some significant lessons we have learned in our journey.
TT Bureau: One of the reasons for the limited interest in upskilling manpower in India may be because of the easy availability of cheap labour and the necessity to upskill many staffers.
Paul McLoughlin: I entirely agree with you. But I will give you another example. The UAE serves as an interesting test case, mainly due to its history as a destination attracting many immigrant workers. Years ago, the service levels in the UAE were exceptional because staff-to-guest ratios were very high.
However, as the pandemic unfolded, owners began focusing on improving margins whilst facing wage demands, increased competition, and other challenges. Consequently, some immigrant workers chose to seek opportunities in their home countries rather than coming to UAE. This shift resulted in a decline in staff-to-guest ratios but did not significantly impact the quality of service.
Maintaining high service standards in Dubai was achieved through recognition, people development, accountability, and financial incentives, which are critical human motivators. Our success in this market can be attributed to our collaboration with around 70% of the hotels, where we have instilled a customer-centric ethos. While I understand your point about India, it is crucial to recognise that it is evolving.
Opportunities arise, and people will explore other avenues. Speaking from personal experience, our offices in Pune and Ahmedabad, in particular, face challenges in retaining talent. Despite not outsourcing technology, we employ our people and foster a strong culture within FPG. However, as India progresses, competition and demand will increase, leading to fluctuating wages and a focus on survival.
To compete effectively more is needed to bring in people at the entry level; they must be developed, trained, and incentivised. Failure to invest in a people strategy will result in a significant service gap, undermining efforts to compete on price with competitors. Training alone is insufficient; recognition, incentives, and a progressive environment are equally important.
This approach extends beyond the front desk; we have recently introduced a service product that has garnered interest from major global brands. Following the pandemic, many of these brands disbanded their corporate training departments and now rely on e-learning. They have sought our assistance in training their staff on the fundamental service principles, such as expressing gratitude, and courtesy and being proactive to the guest’s needs. This need extends to various roles, including bellboys, housekeepers, and concierge personnel.
Service recovery, an area where hotels face challenges, incurs costs. A negative experience can lead to revenue loss or increased service recovery expenses, even with attractive rates and incremental revenue. The goal is to empower staff to proactively address conflicts and reduce the likelihood of disgruntled guests, thus minimising revenue loss.
In addition to driving revenue improvements through the frontline, our focus now includes fostering a sales and service culture throughout the hotel. By lowering service recovery incidents and enhancing net promoter scores, we aim to improve overall service quality.
This comprehensive approach is delivered through e-learning programs, and professional services onsite delivery and serves as an add-on to our core subscription program. By offering our services globally, encompassing all chain scales and catering to various languages, we are positioned to assist brands across diverse environments.
TT Bureau: Are you looking to expand beyond hospitality in other sectors like retail?
Paul McLoughlin: Yes. Our expertise extends beyond the hospitality sector into the retail industry. Interestingly, we began our car rental and automotive journey 25 years ago. Our origins can be traced back to Orlando, the car rental capital of the world, known for its attractions like Disney World and Universal Studios. Initially, we aimed to assist major American players such as Hertz, Avis, Budget, Nissan, and Enterprise in enhancing their service and sales performance.
In the car rental industry, incremental revenue plays a significant role, accounting for 30 to 40% of the total revenue generated at the frontline desk. Given the relatively thin margins in this industry, this incremental revenue can make or break a business.
Starting from there, we collaborated with all the major car rental brands. Personally, when I joined FPG after my tenure at Sixt as the Managing Director of the UK, I introduced our program to Europcar, Europe’s largest car rental company. Across their nine European corporate countries, the program generated an additional €100 million in revenue and improved NPS scores immensely within the first year. At that time, Europcar faced challenging circumstances, and I believe our efforts played a significant role in helping the company transform itself.
While we haven’t entirely focused on the retail industry, we have worked with notable brands such as Nissan and Toyota. Additionally, our involvement extends to theme parks, where we have collaborated with Universal Studios in Japan, Singapore, and the United States, as well as various SeaWorld parks and resorts worldwide.
Regarding hotels, we arrived relatively late just over 6 years ago but have since partnered with Hilton and over 50 brands, worked with call centres, and collaborated with airlines, including major European carriers. For these airlines, we assisted in engaging with customers between the booking and flying stages, recommending services, and enhancing the overall experience while driving revenue growth.
TT Bureau: Are hotels your key focus area now?
Paul McLoughlin: Yes. Hotels constitute our major focus at the front desk and across all revenue touchpoints at the property. But retail in the future will be a focus for us as the program has evolved significantly. While generating incremental revenue is the ultimate goal, it encompasses much more. It involves transforming frontline staff into brand ambassadors, which holds immense value. It also focuses on improving service levels and reducing service recovery costs, both of which are highly valuable in many verticals.
Additionally, there is a significant but often overlooked opportunity to engage, attract, and retain employees in the current climate. For instance, frontline agents who typically earn a specific salary can double their income through our program. We have witnessed first-hand how this positively impacts their lives, enabling them to make essential purchases or provide for their families. Beyond financial gains, they acquire valuable life lessons, techniques, and dialogue skills that can be applied to their relationships. We offer certification programs that add credibility and open doors for promotions and management positions.
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