The hidden cost of customer complaints

Bruno

As someone who works in hotels, dealing with customer complaints is something that will always be part and parcel of your role. It’s simply the nature of the beast: customers who spend their hard earned money to relax and unwind at your hotel can be very demanding and where services don’t meet their expectations, they will (and should) be quick to express their dissatisfaction.

As a result, the issue of customer complaints arising, (within reason of course), is never really the issue for you, as a hotel manager. The real issue is (a) how you deal with the complaints in order to prevent them from re-occurring and (b) understanding the hidden cost that lies behind each complaint, in terms of a guest resolution.

Here are 4 simple tips to help you identify the hidden cost of complaints – and in the process, understand exactly where customer complaints are costing your business money.

1 If you don’t know that a complaint is a recurring one, you can’t fix it!

This sounds obvious right? Well, that’s because it is but yet it’s very often the simple things in business – which should be blindingly obvious – that end up being a blind spot.

Very often, in a busy hotel environment, a customer complaint is akin to fire-fighting: the staff member in the firing line wants a quick resolution to the problem to avoid it escalating, and invariably this will involve them giving a freebie (or some monetary benefit) to the guest to keep them on side.

The problem is that while this might seem like an appropriate response to a guest complaint, that is the only the case if you know the complaint is a once-off.

But if you don’t have any internal complaints reporting / recording system in place that every staff member is fully aware of, how can you ever know that a complaint is not recurring, and is not therefore costing your business a small fortune in guest compensation?

2 If you don’t monitor the cost of guest complaints, you won’t know if it’s worth addressing

Having a guest complaints monitoring / recording system in place is absolutely critical when it comes to identifying recurring complaint patterns. Because once you have identified a problem as a recurring one, you are automatically a step closer to addressing it.

By recording and monitoring all complaints on an ongoing basis, you can very easily calculate the real cost value of these to your business.

For example, if X problem has occurred 10 times in the past month, and each time the resolution was simply to deduct X amount from the customer’s final bill, you can very clearly see what the hidden cost of this recurring problem is, in terms of overall revenue and profit. So, instead of allowing complaints to re-occur, and rather than willingly give money back to your customer (because that’s exactly what you do when you compensate your customer for a complaint they have made), simply put in place a complaints monitoring system that will allow your team to do the following:

  • Log all complaints that are made, as soon as they are made;
  • Note the compensation that was provided to the customer;
  • Analyse all complaints on an ongoing basis and identify recurring ones;
  • Look at the cost of recurring complaints to your business;
  • Take action to rectify any recurring issues to eliminate future compensation.

3 Training your staff to understand the value & cost of what they give back

Understanding the mindset of your staff, in terms of how they view their role within the business, is the only way to fully appreciate the need for having good operational systems in place.

When it comes to complaints, unless clear procedures are in place, it is likely that some front-line staff will see a customer complaint as a headache, and as a negative experience that causes them untold stress.

As a result, if left purely to their own devices, there is a high likelihood of them giving disproportional compensation to guests simply to make their own lives easier.

And that’s where training comes in to play: often a guest will not expect to receive anything in return for a complaint, so giving something of value back without understanding whether it’s required, is simply bad revenue management.

Finally, your staff needs to understand the concept of proportionality, in the context of complaint resolution: knowing when to offer something (and when not to), and what to offer (balancing the cost with the complaint), is vital when it comes to managing your revenue and maximising per-customer profit.

4 Matching the cause to the cost

1. Repair cost Vs cost of incentives

Monitoring complaints on an ongoing basis, as discussed above, will help you to fine-tune your service offering right across the hotel.

However, knowing exactly what complaints are being made, and in what volume, will also allow to determine whether spending money to fix a problem is more cost effective than managing it through guest compensations.

For example, if your complaints log clearly highlights that air-conditioning is a recurring problem (and source of complaints) with guests throughout your hotel bedrooms, having full and up to date information to hand will allow you to assess the cost of repair, versus the ongoing cost of incentives:

  • Calculate exactly how much this problem is costing the business each month, in terms of freebies, bill reductions, and hotel upgrades;
  • Find out how much it will cost to fix the air conditioning system, spreading this cost out over a 12 month period.

2. Hidden cost of negative customer feedback

Recent statistics from statista.com show that, as of July 2016, 60% of consumers in the 34-54 demographic, booked accommodation through tripadvisor.com.

However, taking a more in-depth look at the figures makes for very interesting reading: 25% of this demographic (rising to 30% amongst the 18-34 age group), booked accommodation based on word of mouth, 15% (rising to 19% amongst 18-34 year olds), booked accommodation based on content posted by friends and family, and 22% booked through other travel review sites.

What these statistics clearly show is that increasingly, consumers are booking hotels based on referrals, and based on online feedback provided by their peers.

As a result, customer feedback is now incredibly powerful and can essentially make or break your hotel: that’s why you need to talk to your guests, during their stay as well as afterwards, to ensure that any negative experiences are addressed and quickly turned into a positive.

Remember, people have short memories: the thoughts they have at the point of check out are the thoughts they will express online for others to read. Make sure when your guests leave, they do so fully satisfied because you cannot afford negative online feedback.

3. Free or paid for services?

Very often, hotels still choose to charge guests for certain services – such as wifi – that many guests will expect to receive for free.

Let’s face it, wifi is no longer a luxury, it’s a necessity: whether for guests who are holidaying and looking to share their experiences online with friends, or guests staying for business purposes, good wifi gives great comfort to guests, helps them to relax and feel at home, and makes them think good things about your hotel.

For this reason, you should always weigh up the pros and cons of charging (or not, as the case may be), for services that will enhance your guests’ experience.

Remember point (ii) above re the cost of negative feedback: do not base any decisions regarding services of this nature, purely on the basis of the potential revenue it may bring to the business: find out what approach other hotels take, and weigh up whether the revenue generated will outweigh the negative feedback from guests.

Because, at the end of the day, if your guests must pay for a service but are unhappy to do so, they will not only make their negative feelings known to others, they will also most likely never return to stay with you again.

Dmbook Pro can help you monitoring and analyzing your customer complaints. Try it NOW at www.dmbook.pro and see for yourself how your hotel operations will be transformed!

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