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The Expectation Economy and its Implications for Hotels: Newsletter #29

The Expectation Economy and its Implications for Hotels: Newsletter #29


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In Newsletter #29: The expectation economy and its implications for hotels | Opportunities for hotels with Airbnb under threat in NYC | Guest satisfaction hits a plateau


We have three really great pieces below: Airbnb loses an important fight in NYC and the conversation on owning (and improving) your guest experience continues full steam ahead. Seems the one true north of the great OTA debates is that there is no substitute for improving your guest experience, however you look at it.

Some of you will be please that we resisted (just barely) writing about Pokemon as every single company it seems has an opinion. One thing I will say is that the power this game and those that follow it have, leveraging social and maps, is quite surreal. Think about if your hotel bar (or as one of our team suggested, your country’s tourism office) was able to purchase a rare pokemon breed, you could see an influx in the number of people only the likes of Kim Kardashian might get.

While not highlighted below, Sabre CEO Tom Klein gave everyone a very good account of B2B Travel trends at their annual customer conference. Definitely worth a read here.

Our industry created 20% of all US job growth in June (59,000 new recruits). Quite remarkable. 

- Alex Shashou





Can you get one back on Airbnb?
Blue Magnet Interactive | These 5 Missing Features from Airbnb are a Marketing Goldmine for Hotels 
Skift | Measuring the Impact of New York's New Short-Term Rental Law on Airbnb

Why it matters: As you’ve probably heard, the New York state legislature passed a bill in June with pretty sizeable implications for Airbnb and other short-term rental sites.

The new bill, which Governor Cuomo has until January to approve, would heavily fine hosts who post listings that violate the state’s laws on short-term rentals (which prohibit most apartments in New York from being rented out for less than 30 days without a host present). Airbnb has already made moves ahead of any decision by Cuomo, announcing earlier this month it had removed 2,233 listings that appeared in violation of their own “one host, one home” policy.


But, as many have noted, those 2,233 don’t make much of a dent in the number of Airbnb’s illegal listings, and if the bill passes, the company’s business in NYC could be seriously challenged. According to Airbnb’s own data, more than half of its supply in New York City - its biggest market in the U.S. -  is for entire homes or apartments and thereby, most likely, considered illegal if rented for fewer than 30 days. As Bradley Tusk, founder and CEO of Tusk Ventures and Tusk Strategies, told Skift, “How much of their business is really more than 30 days in New York? I think [the law] decimates their New York business.”

This is of course welcome news to our industry. So - now’s the time for New York City hotels to play to their strengths and reclaim some of the ground lost in recent years to the homeshare giant. Just in time, a list of marketing features missing from Airbnb, and advice for hotels to double down in areas where they inherently have the upper hand.


Is guest satisfaction on the decline?   

Skift | The 5 Biggest Takeaways for Hoteliers From This Year's J.D. Power Hotel Guest Satisfaction Rankings 
Hotel News Now | Amenity Creep Behind Satisfaction Plateau, Study Says

Why it matters: Results from this year’s J.D. Power rankings for North American Hotel Guest Satisfaction are in. Although guest satisfaction with hotels in the U.S., Canada and Mexico has reached a record high in 2016, the accepted wisdom (Skift, Hotel News Now, Luxury Daily, and J.D. Power themselves) is that guest satisfaction has likely hit a plateau, with a decline even expected in 2017.

What’s behind the gloomy prognosis? For one, despite record approval, the increase in guest satisfaction this year over years previous wasn’t “statistically significant,” and increases have been slowing in recent years. More fundamentally, however, is the observation that guests are increasingly coming to expect amenities that used to be special perks, such as free Wi-Fi, complimentary breakfasts and flat screen TVs. And for hotels in every segment of the market, except for the most luxury segment, the prevailing assumption is that hotels are offering as many amenities as they can offer at their particular price points.

So what are hotels to do, especially since guest expectations won’t be abating any time soon (see our comments below on the “expectation economy”)? As Deanna Ting of Skift puts it, “If this year’s study is any indication, it’s clear guests are expecting a whole lot more from hotels than they have before in the coming year.”

One obvious answer is to make service the differentiator. As Rick Garlick, global travel and hospitality practice lead at J.D. Power explains, “Hotels have been investing in their product and giving more freebies for things they used to charge for, but you can only do that so much to stay in your category and appeal to the type of customer you want. Perhaps we need to, instead, return to a service focus. It might not be free, but it’s less costly than capital investments, and with a focus on training and service, you don’t have to give away a lot of free things.”

And focusing on service makes sense, not just when it comes to these annual guest satisfaction ratings, but also for the thousands of everyday reviews hotels receive on TripAdvisor and similar sites. Indeed, more often than not, it’s not the Wi-Fi or the complimentary breakfast or the flat screen TVs (or the lack thereof) that make their way into a review, but rather the level of your hotel’s service. And this, like Garlick points out, is good news. With a focus on training and operations, improving guest service can be significantly cheaper, more effective, and more enduring than investments in any of the latest amenities. “Creating a strong service culture is a way to continually add value for … guests,” he asserts.


What the expectation economy means for hotels   
Recode | Platform Thinking in the Expectation Economy    

Why it matters: And talking about guest expectations...In 2013, a year after beginning operations in London, Uber commissioned a study to see how long their London users would be prepared to wait for a car. The answer? 7 minutes. One year later, in 2014, Uber ran the study again. This time the amount of time had dropped to 5 minutes. Since then, Uber has continued to do research on their users’ willingness to wait, all over the globe, and the results are always the same: the longer Uber has been in a city, the less willing to wait for a car everyone becomes.

Since its founding in 2009, Uber has been the quintessence of the on-demand phenomenon - the idea of near instantaneous fulfillment of customer requests (in Uber’s case, car rides), facilitated by the ubiquity of smartphones (to connect consumers and providers) and advanced logistical platforms (to coordinate these connections). Service on demand existed before Uber of course, but with company’s ascendance, an influx of capital and cultural currency have supported on-demand apps across every industry, fundamentally shifting consumer behavior and expectations of the businesses with which they interact.

Indeed, as Uber’s own research suggests, in transforming service delivery, the company has also transformed its users. And with this transformation, it becomes more instructive and - as it relates to hotels - more practical to move from talk of the “on-demand economy” to advance the idea of the “expectation economy.” As executives of Qubit expertly summate, “When consumers are exposed to superlative customer experiences or faster ways to action something online, they are quick to apply their newly-raised expectations to every other brand or industry. We’re changing as human beings. We’re getting more demanding. In an expectation economy that is customer-led and data-driven, disruption and innovation have ceased to be a "nice-to-have" or "some other company’s job." As far as consumers are concerned, the measure of value of any brand is how seriously it takes its responsibility to make their lives better or easier. Constant change for the better is now unconditionally expected.

Understanding this new expectation economy is essential for hotels, because changing expectations around service is what defines this movement, and it is service that underlies the guest experience. Ten years ago, before the advent of the iPhone, and later Uber, hotels could afford to deliver service the same way they always had. The expectation economy, however, changes this. We can no longer assume on-demand, platform-delivered service is the domain of other industries. As the authors write, consumers are applying “their newly-raised expectations to every other brand or industry.” Those same consumers who expected their Ubers 2 minutes faster than they did the year before are the same consumers staying at your hotel and the same consumers reviewing you on TripAdvisor.

The good news is with this new reality comes a massive opportunity for hotels that decide to meet these changing expectations. As the above piece on J.D. Power rankings notes, service will become of increasing importance to guest satisfaction in the years to come, and hotels that embrace the Uber-model of a platform approach** have the most to gain.

** ALICE’s Skift Trends Report, which discusses Operating as a Platform, will be published in early August.







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