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The discerning consumer
March 12 2012

Changing consumer habits and individual preferences are creating opportunities and challenges in the hotel industry.

Highlights
  • A subjective perception of value has replaced the objective assessment of rate as the key factor in booking a hotel.
  • Instead of simply looking for a convenient place to stay, guests are looking for an authentic local experience that is highly personalized.
  • The forces of change are impacting all tiers of the marketplace, especially in the luxury segment.
By John Buchanan
HNN contributor

GLOBAL REPORT—Changing consumer habits and individual preferences are creating opportunities and challenges in the hotel industry, based on the fact technology is giving guests a formidable power to dictate—and get—exactly what they want.

“The speed with which things are changing today is exponential,” said Roger Hill II, CEO and chairman of Chicago-based hospitality design, procurement and branding firm Gettys. “And what was successful yesterday may very well not be successful today. So that means hoteliers have to make sure that they understand what is happening all around them so they can stay ahead of their competition.” 

That can be a daunting task, said Susan Helstab, executive VP of marketing at Toronto-based Four Seasons Hotels & Resorts. “The shift over the last three years in what consumers expect the companies they do business with to deliver for them is really frightening, in terms of how quickly those expectations have changed and how high they are,” she said.

The overarching general trend is toward the pursuit of perceived value, based on individual tastes and preferences, rather than just rate, said Peter Yesawich, a veteran hospitality researcher and analyst who is now vice chairman of Orlando-based hospitality marketing services firm MMGY Global. “And what that means,” he said, “is that shopping behavior is very aggressive now for consumers when they’re booking hotels.”

In fact, Yesawich said, the sweeping changes in consumer behavior represent a genuine sea change for the industry. “And it’s being driven by transparency in pricing and the consumer’s ability to find alternatives.”

Luxury segment leads the way
Although major trends such as a more informed consumer and a powerful desire for a personalized experience reach across all three basic market categories, nowhere has the change been more dramatic than in the luxury segment.

The biggest change in consumer behavior during the past year, Helstab said, is the ever-increasing use of tablet devices and smartphones. As a result, Four Seasons revenues from iPad transactions increased by 200% from 2010 to 2011, Helstab said, and she expects an equal jump this year.

In turn, partly as an aftereffect of the recession, “consumers have become much more resourceful in seeking and finding value,” said Janet L. Smalley, VP of portfolio strategy and research for luxury and full-service brands at Marriott International. “They have also aligned themselves more with luxury brands that have a truly differentiated brand value proposition. They’ve started to require hotels in the luxury segment to deliver an experience that is worth what they’re going to have to pay for it.”

A key element of that experience will be personalization, or customization, as it was identified in The Luxury Consumer in the New Digital World: Then & Now, a study completed by Four Seasons earlier this year. In the study, one-third of respondents said they expected products and services to be customized to their individual needs and desires.

Jonathan Frolich, GM of the Andaz 5th Avenue Hotel in New York, sees the same trend.

“Consumers are craving authentic local experiences and an emotional connection, whether that be through food, art, fashion, events or people,” he said. “They are moving away from a desire for traditional 5-star, white glove service and toward a more relaxed and personalized kind of service where staff are more like ‘local insiders’ and ‘hosts’ rather than people of servitude.”

Based on the findings of its recent research, Four Seasons is working hard to empower consumers to self-serve based on their own interests. “We have to give them both the tools and the content so that they can indeed customize their experience,” Helstab said.

On the Four Seasons website, Helstab said, they can gather information on how someone visits, serving those potential guests content on their next visit that is more relevant to them. For example, if a guest was on the site searching at spas at every hotel or was more interested in the destination, “… the next time they visit, we can bring forward the specific kind of information we already know they are most interested in,” she said.

Creating a guest experience
Hill cited
Gettys’ recent renovation work for the Jumeirah Beach Hotel in Dubai as another example of how distinct preferences are driving market trends and innovation. “At times, it’s very much a business hotel,” he said. “But at other times, it’s an extremely leisure-focused hotel. So, in our new guestroom design, we created a way for (the guest) to be able to maximize value by offering rooms that are more personalized, based on the type of traveler.”

Hilton Worldwide also is looking at the food-and-beverage offerings in its upscale Homewood Suites and midmarket Home2 Suites brands, said global head of brand management Bill Duncan.

“Food really matters in any hotel,” he said. “But it’s particularly important in the extended-stay category. It’s incredibly important to the value proposition and consumer decision making. And in our research, we’re finding that its importance is being elevated. It’s now a higher priority in a consumer’s consideration set, and they’re also becoming more vocal about it.”

Hilton is analyzing its menus and delivery of services for both brands. And among the upcoming changes will be more regional variety to address individual geographic preferences, Duncan said.

In a similar move, Hampton Inn recently regionalized its breakfast offerings on a market-by-market basis, said Gettys principal Dan Pierce. And client The Henry Hotel in Detroit, a member of the Autograph Collection, also is beginning to analyze its F&B product in a way that better matches up with identifiable guest preferences.

Gettys also is working with Hard Rock’s all-inclusive division. At the Hard Rock Punta Cana Resort in the Dominican Republic, Gettys helped the hotel develop a personalized wedding package with celebrity wedding designer Colin Cowie. “That’s a good example of how you’re going to see destination resorts address these changing consumer habits and a desire for personalized experiences,” Pierce said.

Guiding owner/operators
Given the profound changes and the business opportunities—and challenges—they represent, owner/operators are looking to their brands for leadership and guidance, Yesawich said.

“They’re waiting for their brands to lead the way,” he said. “It’s very difficult for them to address these issues on an individual property-by-property basis because what they might do could conflict with brand standards and so on. So they’re waiting for guidance.”

At the same time, however, Pierce said, the traditional way in which hotel companies dealt with franchisees also is changing.

“We’ve been working with the Hampton Inn brand for the last 18 months, and they are demonstrating that there is a new paradigm as it relates to the interaction between the hotel brand and the hotel owners,” he said. “Traditionally, that relationship was somewhat ‘top down,’ with the brand pushing things down toward the franchisee. But what we’ve learned from our Hampton Inn relationship is that consumer trends and patterns of behavior are evolving so quickly that it’s no longer viable to just pass stuff from the top down. It has to be a collaborative approach to identifying and addressing all of these emerging trends.”

Hotel brands should constantly be listening to their owner/operators and engaging them in constructive dialogue to make the brand stronger, he said.

Despite all the dramatic and ongoing changes that are the subject of so much analysis and debate, one thing has not changed, said Hilton’s Duncan: the well-defined market value of the old-fashioned virtues of the hospitality industry.

“The basics still matter—smiles, knowing a guest’s name, a clean suite and bathroom, and providing good service when a guest needs it,” he said. “Those are still the real drivers of the market and they are not changing. That is an incredibly important factor based on the research we’ve done over the last year. And we find that amazing because of all the talk about new trends that are having so much impact on the market. And we also find that the importance of those ‘basics’ is actually increasing in the marketplace. So we believe that you have to make sure you have those basics right before you start thinking about the ‘innovation du jour.’”

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