Can Call Center Consolidation Help the Burgeoning Hospitality Industry?

The bi-annual hotel survey conducted by the Hogg RobinsonGroup (HRG) reveals that

the international hotel industry hasshown signs of recovery in the first half of 2010. The surveyfound that a majority of the cities surveyed, although not yetin positive growth, certainly recorded an improvement inperformance. While the industry has begun to show signs ofrecovery, the need for disciplined cost management persists.

As we emerge from the recession, the corporate landscape ofall sectors has been undeniably altered. This holds true forthe hospitality industry as well. With sinking occupanciesduring the downturn, RevPARs (Revenue Per Available Room)and profits, hoteliers who had incurred large debts wereforced into selling. Thus, the hotel industry has witnessed aspate of mergers and acquisitions post-recession. Mid-August,2010, saw Sunstone Hotel Investors acquiring the RoyalPalm, located in Miami Beach, Florida. According to Reuters,CDL Hospitality Trust from Singapore is on the lookout foracquisitions in India, Vietnam and Japan, having set asideover USD 400 million for the same. Reuters also confirmedthat Accor, Europe's largest hotelier had set aside a war chestof over USD 130 million per year to buy hotels that wereforced to sell as a result of the economic downturn.

Fragmented Call Centers and the Need forConsolidation

While major hotel chains continue to grow their globalfootprint, along with the rooms and facilities, they alsoacquire fragmented reservation centers. Though many believethat 'localization' of call centers provides benefits of knowingthe native language and culture, the fact is that it translatesinto a significant cost increase and also affects servicedelivery. Increased infrastructure cost, delays in disasterrecovery, longer turnaround times to deploy new technologiesand processes, lack of standardization, limited labor pools,and inconsistency in service delivery and customer experienceare some of the issues that hoteliers can face withdecentralized call centers.

Further adding to the challenge of consistency in hospitalitycall center operations, is the complexity associated withmanaging diverse ownership structures of their hotels.REITs (Real Estate Investment Trusts), franchisees,management companies and owned properties often havediffering views and goals of how contact center operationsshould be conducted. However, consolidation andcentralization of fragmented centers remains a key solutionthat can provide economies-of-scale and cost reduction whileimproving performance.

Benefits of Call Center Consolidation

Cost Reduction

Centralization of activities in a call center means a significantreduction in real estate cost as investments are in onelocation instead of many. Next, centralized operations meanfewer managers, supervisors, reporting analysts and workforcemanagement analysts. The reduced overhead enables callcenters to bolster the front-line, customer-facing agents.Consolidation invariably means lower salary and costs peremployee at the central site as compared to the averagespend for all the fragmented sites. There is also reduction inequipment costs with fewer telephony systems, computingand networking devices. This means a drop in the cost ofsystem integration. Larger platforms are easier and cheaper tointegrate into customer relationship managementapplications, workforce management applications, networkingand other technologies.

Decreased Redundancy

Consolidation eliminates redundancy. With fragmentedcontact centers, there are several departments that aredesigning and working on the same function, such as payroll.A consolidated accounting department translates into creatinga single payroll system across the organization.

Increased Staff Efficiency

Along with operational efficiency (consolidating all employeesonto a single e-mail platform, or chat), hotels can benefit fromcentralized training and quality assurance throughconsolidation. For example, one centralized QA and training ofstaff can be deployed instead of separate groups at every site.A large site also enables a higher number of agents to reportto one supervisor when compared to a smaller site.

Simplified Technology Implementation

A consolidated call center means that it is easier to test andmaintain new technologies and processes. The center canhave dedicated IT staff, which is not always possible in afragmented set-up.

Bulk Discounts

Equipment costs are lower for a consolidated center.Telecom savings are possible as most carriers offer reducedrates for larger volumes. Similarly, there are also reductions inhardware, software and maintenance. Support costs drop astechnical resources are needed at only one site.

Spread Organizational Culture

An organization's culture is a by-product of its people.Increasing levels of diversity in fragmented centers posechallenges of effectively permeating the desired single culturethroughout the organization. Consolidation, on the other hand,ensures that the identity of the organization is consistentthrough all employee levels.

Brand Representation

Effective representation of the brand is as important as theculture. And, few can dispute the close relationship betweencustomer service and brand perception. A consolidated callcenter can handle customer service more effectively and thus,succeed in brand positioning.

Marketing Effectiveness

Hotel companies constantly launch campaigns and programsto drive increased occupancy, retain customers and earn newones. Communication of the numerous marketing initiatives isproblematic in a fragmented environment, and certainlyrequires more effort. Consolidation enables quicker executionon the targets of the campaigns thus increasing theeffectiveness and ROI.

Models for Call Center Consolidation

Typically multinational corporations have grown on a country-tocountrybasis. The same goes for the hospitality industry, wherecompanies have expanded organically or inorganically, and thishas led to call centers being set up in multiple geographies.Clearly, consolidation is a critical requirement and listed beloware the major models that can be considered.

Geographical Consolidation

In this model, all calls are routed to one central location Pan European, Pan American or Pan Asian. This centrallocation is equipped to handle calls in all native languagesincreasing efficiency.

Regional Hubs

This model is along the lines of the previous one, only that itis on a much smaller scale. For instance, setting up a NordicCenter that could handle all the Scandinavian countries.

Major and Minor Markets

In this model, larger countries such as U.K., Germany andFrance have their own centers. One call center serves thesmaller countries that have not yet reached critical mass

.Country Centers

Depending on the size of the operations of the company,different call centers are retained in every country.Networking techniques enable the sites to be linked togetherto form a larger pool of agents.

Follow-the-Sun

In this model, consolidation is on a global basis whereinworldwide centers are selected. Typically, three main locationslike Europe, America and Asia, house these centers. Being indifferent time zones, these centers are able to provide roundthe-clock service by routing calls to the appropriate location.

There is certainly a compelling case for consolidation of callcenters in the hospitality industry. It is sure to achievesignificant operational improvements. Economies-of-scale willimprove both cost and service performance, and this willprovide the much-needed competitive advantage in thecurrent economic scenario. Today, with a variety ofdeployment models and efficient service provider offerings,consolidation of call centers is definitely a practical solutionfor hospitality organizations.

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Can Call Center Consolidation Help the Burgeoning Hospitality Industry?

By: WNS Global Services

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