Speaking before a conference of luxury Italian companies, luxury hotel operator Rocco Forte offered a stunningly concise summary of the toxic hospitality marketing strategies used by far too many hotels in these recessionary times.
"What happens in a hotel cycle [during a recession] is always exactly the same. Revenue dissipates, occupancies go down, hoteliers then sacrifice rates, discounting to boost occupancy. As they discount rates, they also decrease services and they cut back on every item of expense. Rates continue to fall as occupancy rises
." [Bloomberg Report
Despite research from Cornell University, Smith Travel Research, PKF Consulting and others stressing that this is absolutely the wrong approach, hospitality marketing professionals continue to follow the same tired, brand destroying marketing strategies every time a recession comes along.
While travelers are looking to save money, they still expect a quality experience - especially luxury travelers. The experience is what most hotels advertised before the recession and what they built their brands upon. But is it being delivered now? With fewer staff to take care of their needs, reduced amenities, and more hidden charges, the quality of the experience is waning. Also waning, no doubt, is guest loyalty.The Price of a Poor Experience
On the Harvard Business Publishing Blog author Peter Bregman recently wrote a great article entitled, "The Price of a Poor Experience." In it Mr. Bregman presents interesting findings from research among hundreds of non-profit organizations and their successes and challenges to retaining members during the current economic downturn.
This is pretty much the same challenge luxury hoteliers face. They want to retain customers, encourage repeat visits and generate positive word-of-mouth - the most powerful form of advertising.
Here's what the research showed:
- There is no correlation between membership and price increases. In other words, customers didn't leave simply because an organization raised its prices.
- There is a direct correlation between membership and how likely a customer is to recommend the organization to a friend. This is known as the net promoter score - think of it as your word-of-mouth score.
If customers like an organization's products or services enough to recommend them to others, then that organization could raise prices, even in a down economy, without losing customers. But if the organization downgraded the customer experience, then even lower prices would not prevent customers from abandoning it.
One could argue hospitality is drastically different, but human nature is the same across all categories. In the highly competitive hotel industry, people may be looking to pay less today but still expect to receive good value. Cutting rates while diminishing the guest experience will decrease a hotel's "net promoter score" and brand value, which makes it more difficult to recover when the recession subsides.
Following a toxic hospitality marketing strategy can prove fatal. Cornell University, Smith Travel Research and PKF Consulting have written extensively on the topic recently.
Stay tuned to next post to learn what hospitality marketing strategies are successful in a recession and helped a small luxury hotel prosper in difficult times.Madigan Pratt is Managing Director of Madigan Pratt & Associates, Inc., an innovative CRM company dedicated to acquiring and retaining profitable customers for luxury hotels. Prior to founding MP&A in New York two decades ago he held senior management positions overseeing marketing communications for several Fortune 500 companies.