How the Consumer-Led Economy is Disrupting the Hotel Industry
The hotel industry is being disrupted. Of course we know about Airbnb but they may actually be the least of the industry's problems. The real challenge is changing the culture of a business sector that has experienced tremendous success. History shows it's difficult and the result is that former household names may go the way of Borders Books. In today's digital age we've seen this dynamic play out in publishing, music, and even the electronics retail industry with the demise of the 94-year-old brand RadioShack.
The consumer is in the business driver's seat like never before. Social media, mobile and digital devices have changed the rules of marketing and customer service. Many of the traditional practices of the hotel industry are liabilities when targeting the most rapidly growing consumer segment, read that as millennials.
According to research from Hotels.com, millennials comprise 32 percent of US travelers, and are the fastest-growing age segment in travel. This is a tech-savvy group that is changing the way hotels, restaurants and entertainment venues do business. I'm looking at you global spa industry.
“Millennials are very used to getting things quickly and easily without the encumbrances that perhaps Gen X and the boomers grew up with,” said Tina Edmundson, global officer for luxury and lifestyle brands at Marriott International. “When you think about what companies Uber or Apple have done for millennials’ expectations—not just for product but also for service—it will be incumbent upon the hotel industry to understand how that changes what we do.”
And let's talk money. "It appears that by 2017 millennials will outspend baby boomers on hotels. This will be a defining moment given that many hotel brands grew rapidly because of the boomers and all of a sudden the people with wallets are the millennials," says Jason Dorsey. He's chief strategy office of The Center for Generational Kinetics, a consulting firm focusing on issues of millennial consumers.
This is today's omni-channel consumer who interacts with a brand both online and offline. This potential guest uses a computer at work, another at home, a mobile phone, a tablet and even an Xbox to research, send information and socialize with their personal network. In fact these cross-channel guests are on some type of digital device constantly. They're seeking customized choices, brand interaction and excellent value. And they love to share their experiences with family, friends and business associates using text, pictures and videos.
The global economic crisis made all consumers become more conscious of how they spend their hard earned travel monies. For millennials this means they've learned to pursue the best value for their travel budget whether locally or internationally. They're also constantly seeking authentic experiences while remaining budget conscious. This partly explains their attraction to Airbnb, boutique hotels, hostels and other non-traditional accommodations wherever they find them in the world.
Global hotel operators who want to remain relevant for this audience will need to adapt to the customer. Increasingly travellers are demanding services, languages and amenities that are customized to their needs. Geographically they're seeking to connect with local, authentic and individualized experiences. This authenticity of course makes for the best selfies and sharing on social media.
But this digital documentation could also wind up in the comments on review sites about the property or guest experience. Given the shelf-life and the fact that "digital" is the new word-of-mouth management at all levels should pay attention to delivering on the brand promise.
Historically branded hotels have worked from a one-size fits all model. The guest experience was essentially the same whether in Miami, Philadelphia, or Los Angeles. Even if you traveled abroad to Mumbai, Bangkok, Johannesburg or New Zealand hoteliers expected their guests to arrive, stand in line for check-in, present a credit card, pickup their room key and then head off to the elevators for a room with identical amenities across the property.
This format worked well for baby boomers but millennials will demand hoteliers change key aspects of their business model. Tomorrow's guests want personal attention. They are heavy users of online travel agencies (OTAs). And the majority of them will have a smartphone or similar device including wearable technology. Some of their demands may be shared across other demographic segments but as a group the millennials present the greatest challenge and opportunity.
These trends are not slowing up and some of the biggest hotel chains are already responding with research and testing new strategies.
"The trademark of the boomer was that they wanted familiarity, safety, and comfort," says Wolfgang Lindlbauer, chief discipline leader, global operations at Marriott International. He's on a mission to transform Marriott into a hip, sexy brand that will appeal to its next generation of guests.
With the help of an outside consulting firm Lindlbauer decided to begin introducing change to a few key locations. "It was very clear that we needed to create an environment where we could carve out incubator labs," he recently told Fast Company. "We wanted to try something from the bottom up, asking entrepreneurially minded individuals who had worked in our hotels or who were part of the local community to come up with new ways to do things."
Marriott to chose 14 hotel locations around the world—from Shanghai to Budapest to Dubai to London—where small teams could experiment with new concepts for their hotels. With this strategy, Lindlbauer was trying to introduce the thinking and outlook of a lean startup within a mammoth organization.
Take a look at the incubator lab experience in the video below.
And be sure to leave your comments on this new era of consumer power.