Value is Your Hotel's New Metric
By Bonnie Knutson Professor, The School of Hospitality Business/MSU | May 15, 2011
From hotels to resorts to bed and breakfasts, the 2008 economic tsunami hit every property in some way. While people typically cut back during downward economic cycles, the suddenness, severity, and future uncertainty of this crisis is going to have a longer and deeper effect on attitudes and behaviors than previous slumps. This marker has left all consumers with a psychological scar. They no longer have a sense of entitlement; conspicuous consumption for consumption's sake is no longer in vogue, and virtually every purchase has gone from "yes" to "maybe" – including travel. Their prudence in discretionary spending is likely to continue, even after the economy rebounds.
All this has led to a heightened focus on Value, making it your hotel's new metric. Whether business or leisure travel, people are still willing to buy, but in a more discriminating way. For the last decade, experts have been touting the need for innovation to increase Value. The venerable Harvard Business Review proclaimed the belief that "pursuing incremental improvement while rivals reinvent the industry is like fiddling while Rome burns" while Business Week added that "what's likely to kill you in the new economy is not somebody doing something better, it's somebody doing something different." In fact, Peter Drucker, probably the most notable business guru ever, called innovation the one business competency needed for the future.
More and more properties are now starting to catch on. They are realizing that they must innovate to provide Value. And they are realizing that innovation is more than just getting an idea. It is putting the idea into action. This belief is akin to the old adage that you can have the best product in the world but if you can't sell it, you still have the best product in the world. Nowhere is this truer than in the lodging industry. As we all know, a room unsold tonight is unsold forever. It is the same for innovative ideas. You can have the greatest idea in the world, but if you can't or don't put it into action, you still have it. To provide Value, then, your innovative idea has to be creative and implemented. And to be competitive, it has to take your guest's Value experience forward.
Just as in the electronic industry, hoteliers are pushing the innovative envelope to enhance guest experience and value. Take, for example, Hotel Costa Verde in Costa Rica where guests can book a suite in a refurbished Boeing 727. Then there is the Hobbit Motel in New Zealand (yes, the Lord of the Rings trilogy was filmed there) where each hobbit hole (room) can comfortably accommodate six people. Or there is the Dog Bark Inn, a little Bed & Breakfast tucked away in Idaho that touts an enormous gift shop that looks like an overgrown beagle sitting on the plains. And, of course, there is the venerable Madonna Inn, a landmark resort hotel on California's central coast where each of its 110 guest rooms sport a unique theme, ranging from Krazy Dazy to Mount Vernon.
On a "smaller scale," at Hyatt's Andaz Liverpool Street in London, hosts meet guests at the door, checking them in with a tablet PC on the way to the room. Tokyo's Peninsula is rolling out room phones that guests can carry around town as they would their personal cell phone. And if you want to see some beautiful scenery in Silicon Valley or Honolulu, guests staying at the W can take one of two Acura MDXs for a drive – at no cost. And, the first take of gas is on the hotel! Now that is an enhanced guest Experience and a great guest Value!
So just how do you know if you are providing Value to those who stay with you? There is a host of general accounting formulas that have been used to calculate the value of a loyal guest to your hotel's bottom line. There is, however, no such definitive formula to calculate the value of being a loyal guest. Why? Simply because the value of being your guest is so individualized. What is valuable to this person may not be as valuable to that one. One may value your convenient location; another may prize your award winning service; a third may attach great importance to a funky decor or flexible break out space for meetings. Since time immemorial, one of the biggest challenges managers have had is answering that age-old value-equation question.