Millennials have become the fastest growing customer segment within the hospitality industry:
Exploration, interaction and experience are the major focus of Millennials who are willing to pay more for a greater experience.
Many of them are looking for an overall gourmet experience for a reasonable price and this has produced all new lobby designs in the hotel sector. Lobby bars and hotel restaurants are wide open with combination work, play and eat/drink spaces designed with this Millennial customer in mind, one who is a “party of one” but “hanging out together.” They are looking for a unique and novel experience and this has and will continue to command change within the market.
Moreover, this customer segment is interested in utilizing technology to do things that many others have become accustomed to doing manually: checking in at hotels, paying their restaurant and bar bills and looking up places to eat, shop and play to name a few. In addition to wanting technology, Millennials have no problems speaking up. If what they are seeking is not handled to their liking, they will turn to Twitter, Facebook, Yelp or TripAdvisor to voice their complaints. And last but not least, 59 percent of Millennials stayed at independent hotels last year, 20 percent more than boomers and double those 70 and over, according to MMGY. They currently represent 32 percent of all US travelers and by 2025 will represent over 50 percent of all travelers.
Customer service will make the list every year but this year it must be a combination of “high tech, high touch” as coined by John Naisbitt in his best seller “Megatrends” in 1985. Service today must include enabling guests to be self-sufficient. As an example, if a guest wants to find information using his/her smart phone, providing an app or mobile website that accommodates that information will appeal to many. The rise of this digital traveler requires the hotel industry to balance the expectation of personalization while enhancing the need to remain independent.
For those who are either tech-challenged or prefer more service, that service must be genuine and of a high quality – good recommendations whether they be for food, shopping or activities delivered by a truly caring team member. “WOW” Service is the only way to ensure repeat business. By creating an impressive, unique guest experience that exceeds all expectations, we are able to capture the customer whether it be with or without technology. On the meeting and event side, planners are expecting hotels to have tools to assist them. These tools may include online requests for proposals, dynamic package pricing that allows the planner to pick and choose certain amenities and more.
Expectation of more international visitors has been talked about for two years but these travelers are here now. International leisure travel has increased markedly due to the visa waiver program introduced by President Obama in 2012 and this is moving more international tourists to travel to the United States. The U.S. Department of Commerce projects an annual growth rate of approximately 4 percent in international travel. This represents over 80 million visitors. China is preparing to send tens of millions of leisure tourists into the international market every year. With the new “10 year visa” agreement between the U.S. and China signed earlier this year, we will be getting more than our fair share of Chinese travelers. Considering the average Chinese traveler spends a week in the U.S., huge incremental demand is created. These Chinese travelers average spending over $1,000 per day when traveling abroad, excluding accommodation.
Moreover, the busiest times for Chinese guests to travel are in February at the time of the Chinese New Year and around Chinese Labor Day in May. Other popular months are April and July while European visitors tend to travel April to October. Again, specific to China due to their huge numbers, more than 618 million Chinese use the Internet, more than 80 percent of whom access the web via their mobile device! While they have been known in the past to travel in groups, 2 out of 3 make their own arrangements now. All of this is big news and comes courtesy of Chinese International Travel Monitor 2014, published by Hotels.com.
Booking more profitable business is critical as more revenues result from strong increases in occupancy levels, average rates and revenue per available room (RevPAR). This may suggest more profits, but the growth in distribution costs as well as other operating costs such as health care and the minimum wage increases can stunt profit growth. While the revenues are coming first and foremost from RevPAR growth, there are additional ways to increase both revenue and net income.
One is by less reliance on the online travel agencies (OTAs). By directing guests to your hotel’s website and telephones, the savings are abundant. The digital distribution costs are soaring and the number of players entering the market to compete with OTAs is rapidly rising (think Google, Facebook, Apple, TripAdvisor, Amazon and more). The key is to negotiate with your distribution team (yes, the OTAs can be an integral part of your team) and reduce your commissions. Then make certain that you have a strategy in place to earn the repeat business of every single guest…and get them to book direct next time. Think incentives!
Innovative technology, mobile check-in, and seamless connectivity across platforms and devices are no longer the future, they are the present. Today, mobile apps are being used as everything from a digital concierge to accessing big data. Geo-location can make it easy to sell guests something that is literally right in front of them. In a recent survey by Software Advice, guests desired local restaurant and hotel restaurant discounts when looking for deals as well as maps with coupons for other deals. At our hotels, we use 1App, which sends guests deals to do everything related to eating, playing and shopping. Additionally, monitoring guest use of the Internet relative to bandwidth can provide a different data set, perhaps one that will drive down your ever increasing costs of providing ridiculous levels of said bandwidth. Most importantly, when looking at the face of a changing consumer today, technology innovation is paramount. As most have heard, Starwood and Hilton will be having guests check in via mobile phone in 2015.
The sharing economy is a new reality hoteliers are still grasping to embrace. Over the past few weeks we have seen jurisdictions attempt to regulate this reality as evidenced by the San Francisco City Council implementing new legislation providing a legal avenue for Airbnb. Uber, Lyft, and other ride sharing companies are also in uncharted legal territory that will be legislated over the next few years. The challenge here is that users like these services, government legislation is not generally keeping up with these rapid developments, and hoteliers are unsure of how to react.
Is Airbnb a complement to hotels or is it a threat to the traditional hotel model? Given the penchant of Millennials to chart their own path and their increasing share of the traveling public, expect to see Airbnb, Uber, and other competitors continue to dominate the conversation. It would be interesting to see if STR is able to capture the impact of Airbnb and incorporate it into the competitive set of hotels, particularly in dense, urban environments where the impact may be the greatest.
Political uncertainty will continue to be an unfortunate reality because at the national level, it is unclear that the President and the new Republican Congress will be willing to compromise on anything leading into the 2016 presidential campaign. This impacts hoteliers on many levels but most crucially as it impacts two areas of vital importance to the hospitality industry: healthcare and the re-authorization of Brand USA legislation. Whether or not you agree with Obamacare and its implementation, now that it is reality the hotel industry is just getting its arms around incorporating the demands of the legislation into HR policies, legal ramifications, and the impact it has on the healthcare options available to employees. Continuing threats of repealing the legislation or defunding Obamacare create uncertainty about what resources may or may not need to be allocated in the coming years.
Reauthorizing Brand USA through a renewal of the Travel Promotion Act is something that the lodging industry will continue to promote because the initial legislation attracted more than 1.1 million additional visitors to the US that resulted in $3.4 billion in spending. This public-private partnership has been highly successful and the legislation’s renewal is critical.
Impacted by national, state, and local politics is the living wage movement and the uncertainty of how quickly the minimum wage will increase. But one thing is clear, the minimum wage is going up across the country and hoteliers need to plan accordingly. In San Diego where we run several hotels, the City Council recently passed legislation to increase the minimum wage above and beyond the already scheduled increase in the state minimum wage. Although that wage increase is now on hold pending a public referendum in June 2016, the confusion creates uncertainty in the business climate and does not allow businesses to forecast or budget accurately.
Reputation management continues its importance because it is no longer all about TripAdvisor. Although this platform continues to dominate in the hotel industry, it is easy to skip over the increasing importance of Yelp, Yahoo, Facebook, and Expedia for guest reviews and comments. Managing a property’s reputation is increasingly important and using tools to help this process is crucial. Many of our properties use Revinate as a complete, one-stop solution for reputation management instead of the cumbersome process of logging into each platform and spending an exorbitant amount of time on a crucial yet time consuming aspect of the hotel industry. Engaging with guests and responding to their needs publicly through these forums can go a long way in driving future bookings to your property.
Social is Mobile and maybe soon we will see social as a dominant booking engine. According to PhoCusWright, the term “mocial” may be among the most overused buzzwords of the past few years, but there’s no disputing the importance of mobile to social strategy. Hotel companies are likely underestimating traveler interaction with them via mobile. For most social platforms, mobile is becoming the primary means for travelers to access and contribute content.
Travelers’ ability to access social networks anytime, anywhere empowers them to create and consume more content than ever before. And this is not just for domestic travelers. Our international visitors are just as likely to have a smart phone.
In addition, nearly 50 percent of hotel companies have a booking engine or widget on their Facebook page, according to PhoCusWright’s “Social media in travel: Mayhem, myths, mobile and money” study. Bookings generated through the channel, however, are generally low, with 45 percent of companies surveyed saying they receive less than 1 percent of total bookings through the site.
Real time marketing and providing content on an ongoing basis will dominate the industry. Although it would be unwise to discount the impact of traditional marketing, real time marketing must take place on a regular basis and incorporate guest-generated content, especially via social media. This must be a crucial component of the marketing mix.
Think of your property’s Facebook page as a second website with the option for guests to contact hotel staff and make reservations. At RAR we use a Facebook app provided by buuteeq, one of our digital marketing providers, that pulls information about the property from the hotel’s website onto its Facebook page. This app also provides a link through which guests can book a room directly on the property’s website. Facebook pages also need to take advantage of custom apps that can highlight a hotel’s unique features, characteristics, and charm. Whether it is Facebook or another social media outlet, guests should be able to contact the hotel with an expectation that they will receive a response in a timely manner.
Video campaigns on social media, when done properly, are proving to be successful for hoteliers looking to generate guest engagement. We are anticipating the use of video campaigns this year and have already introduced the use of Flip.to to engage future guests in social media conversations. Flip.to allows for hotels to connect with guests from the moment they make a reservation and to create a unique experience upon arrival. By connecting with the hotel, guests are able to share with their friends and family about their upcoming trip. Flip.to then creates a custom experience for their social media connections that can help lead to future bookings. In the first few months since we partnered with Flip.to, we have seen an increase in interactions with the hotel, shared experiences with friends and family and future rooms booked directly from the engagement.
Finally, the days of “walk-in” reservations are dwindling. With mobile apps such as Hotel Tonight and others, guests rarely walk in to inquire about room availability. Instead, they turn to apps and mobile websites, so remember, “mobile is the new walk-in”…tighten up your mobile displays!
Health and wellness trends will continue to drive customer decisions. Healthy food options are one of the easiest ways to cater to this trend. The Chicago Marriott O’Hare recently implemented a test pilot in partnership with Farmer’s Fridge, a Chicago start-up, to provide a healthy vending machine. At the suggestion of a guest, soda, candy bars, and ice cream were replaced with a “detox salad” made of kale, quinoa, Greek yogurt, berries and locally sourced honey.
Although the response to the healthy vending machine has been positive, the hotel’s best-selling food item is still the Marriott burger. There is a need to balance health and wellness with tasty options that are cost effective.
One of the successful ways I catered to the health and wellness of my guests was through a weekly “Run with the Owner.” Repeat guests especially enjoyed the opportunity to provide a consistent program to maintain their exercise routine while away on business, not to mention having a nice “chat.”
As I wrote in my recent forecast, 2015 is poised to be the best year the hotel industry has ever experienced. Understanding these trends and planning accordingly will provide you with the opportunity to experience a record-breaking year ahead on both the revenue and net income side of the equation.
Robert Rauch, CHA, is a nationally recognized hotelier and President of R. A. Rauch & Associates, Inc., a leading hospitality management and consulting firm. Rauch has over 35 years of hospitality-related management experience in all facets of the industry. Widely recognized as the \`hotel guru,\` Mr. Rauch maintains a blog where he expounds upon insights and trends in the hospitality industry at www.hotelguru.com . Along with the blog, he also publishes Hospitality Innsights, an electronic newsletter that is distributed monthly.
Mr. Rauch held nearly every position in the hotel business including General Manager of full-service Four Diamond hotels for Hilton and Embassy Suites. His education includes a bachelor’s degree in Hotel Administration from Western International University and a master’s degree in Tourism Administration from Arizona State University. He is a Certified Hotel Administrator and has served as chairman of numerous tourism organizations nationally and in the western U.S. He has been directly involved in developing several leading brand hotels, some of which the firm still owns and manages. R. A. Rauch & Associates, Inc. currently operates hotels in California, Arizona and Colorado with several under development.