In the coming year, hotels will focus on enhancing guest experience through convenience and wellness initiatives, RevPAR improvement through direct bookings, and ancillary revenue streams. Hotels that innovate in response to evolving consumer preferences will find success in driving growth and profitability in 2015. Applied Predictive Technologies (APT) offers its top five predictions for hotels in 2015.
Introducing self-service and mobile check-in
Consumers widely use ATMs instead of tellers at banks and check-in for flights online – why not extend that same convenience to hotel stays? Leading hotel chains are experimenting with self-service check-in initiatives, including Marriott’s check-in kiosks and Starwood’s keyless entry via mobile devices. Potential advantages from these programs include more consistent upsell opportunities, labor savings, and, perhaps most importantly, alignment of the hotel experience with guests’ increasing preference for convenience. However, the impact of reducing face-to-face interactions with hotel staff on guest satisfaction and return bookings is likely to vary by guest segment (e.g., business vs. leisure). Given the associated risk, hotel executives will benefit from testing self-service check-in initiatives in a subset of hotels or markets prior to broad implementation.
Motivating guests to book direct through brand.com
Not all bookings are created equal, and hotel chains are exploring different strategies to drive bookings directly through their brand channels. Some hotels are offering free amenities (e.g., Wi-Fi, keyless entry) to guests who book directly. Others, like Accor, are investing heavily in their brand.com and mobile offerings. Hotels employ numerous strategies to drive direct bookings, including targeted promotions and best price guarantees, but without a data-driven approach to evaluating success, executives cannot be confident in the incremental RevPAR impact of each initiative. Additionally, hotels risk tarnishing brand reputation by discriminating between direct and OTA guests. Hotels can offer different incentives in a subset of hotels or to specific guests prior to broad rollout to understand the impact and minimize risk.
Expanding and refining ancillary revenue sources
Fees and surcharges, from mini-bar restocking fees to reservation cancellation fees, reached an all-time high of $2.25B in 2014, and will likely keep climbing in 2015. The key for executives is to understand the impact of each fee on key metrics in order to find the optimal mix.
For example, a business-focused property may find that guest demand is less impacted by Wi-Fi or mini-bar fees, while a property with more leisure guests may find that introducing or increasing these same fees may drive a significant decline in bookings. Hotel brands that rigorously test different fee combinations on a small-scale first are more likely to be successful in finding the most profitable mix and magnitude for fees.
Integrating wellness into the guest experience
An increasing number of travelers are focused on maintaining their health-conscious lifestyles while on the road. Hotels are responding with programs like MGM Grand’s “wellness rooms” and Westin’s partnership with New Balance to provide workout gear to guests. The shift towards “wellness tourism” provides the potential for hotels to attract new guest segments; however, a one-size-fits-all approach to these additions will leave dollars on the table and introduce unnecessary operating complexity. For example, converting traditional hotel rooms to “wellness rooms,” which includes mattress and shower modifications, may generate sufficient incremental bookings to offset the costs in one property, while at another location the same initiative may simply cannibalize traditional guest rooms without a resulting lift in bookings.
Transforming the traditional lobby
Increasingly, leading hotel brands like Sheraton and Marriott are transforming lobbies from dedicated single-use areas into multifunctional spaces interchangeably used for meetings, working alone, or dining. These changes are especially important for attracting business travelers, as corporate offices themselves move away from the 9-to-5 cubicle towards flexible and collaborative workspaces. However, before revamping their lobbies, hotel owners and brands need to measure the incremental ROI generated from room and F&B revenue as a result of capital expenditures and understand how the impact varies based on hotel and market characteristics.
For instance, an investment in a larger cafe may be successful in business-focused properties, while hotels with a higher percentage of leisure guests may be better served dedicating that space to a social lounge with couches and TVs.
Executives who are able to capitalize on these trends will hold a distinct competitive advantage. By testing each new initiative, leaders can accurately predict which programs will work, where they will work best, and how they can be tailored for maximum impact, all with minimum risk.
- Category: Hotel business