The value proposition in the hotel industry has evolved to change guest behavior across generations. Though initial market research indicates that customer satisfaction is at an all-time high, hotels are going to have an increasingly hard time impressing their guests with the perks some of them have taken for granted. Additionally, hotels are facing increasing competition from other travel accommodation providers, such as Airbnb.
Customer Demographics and Value Proposition
In the past, hotel patrons were lured with various perks, such as free wireless internet and breakfast. These perks are no longer exciting, and guests require more amenities. The hotel industry is facing issues with customer demographics, whereby satisfaction differs depending on age. Satisfaction is highest among hotel reward program members. 66% of the reward members are baby-boomer clients, 56% generation Xers, and 39% millennials. Succeeding generations are less interested in becoming reward members (“North Americans Feel Better about Hotels than Ever,” 2016). Additionally, young hotel guests are driven by value proposition.
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Millennials are also influencing rapid changes in the hotel industry. This group has come of age during an era of technological change, economic disruption, and globalization. These events give millennials a different set of priorities and expectations. This generation is also the first generation of digital natives. Therefore, they are connected 24/7 and have unforgiving technology expectations. This generation’s affinity for technology has influenced how they travel. Millennials are keen to use technology to make their travel seamless. Therefore, millennial guests are tech-savvy and self-sufficient. They have higher expectations in discovery, mobile experience, and payments before and during their stay. Hotels have been forced to acknowledge millennials need to remain constantly connected. Therefore, they have embraced innovative platforms to foster better relationships with millennial guests. For example, some hotels now allow guests to access their hotel rooms with smartphones or smartwatches. They have also introduced applications that allow guests to order various services within the hotel (Pencarelli et al., 2020). Moreover, some hotels also offer automated check-ins and a virtual concierge service.
Millennials also crave meaningful experiences. They demand distinction and differentiation in their travel experiences. Millennials are also more likely to spend money on experiences than on material things. They value these experiences since they help shape their identity. By seeking these experiences, millennials are investing in themselves. The experiences help them feel connected to other people, communities, and the world. Technology has also allowed millennials to commoditize these experiences. They can document, upload, and share these experiences, thus further enhancing these experiences' values. The demand for unique experiential travel has forced hoteliers to reconstruct and develop a more personalized, immersive, adventurous, and culturally attuned product offering. The product offering aims to inspire and resonate on a deeper emotional level (Pencarelli et al., 2020). Some well-established hospitality brands have created new hotel brands with an experiential focus to attract millennials.
Today’s consumers are more sophisticated and educated than they were a few decades ago. Additionally, the availability of online ratings has given the customer the ability to understand their options or consider value propositions properly. Enhanced consumer awareness has forced the hotel industry to develop niches, such as extended stay products. Therefore, consumers anticipate more affordable services and amenities. For example, consumer demand enhanced in-room technology and entertainment options, and fitness centers (Pencarelli et al., 2020).
The Emergence of Airbnb and Value Proposition
The use of Airbnb by business travelers globally has increased substantially. The increase is associated with hosts’ enhanced capabilities in catering for people on corporate trips. Additionally, big companies have become accustomed to using Airbnb as an alternative to hotels. Travelers also prefer an engaging experience that is missing in hotels. The alternative is also cheaper and more convenient since guests can cook meals instead of eating out. The growth in the Airbnb platform could be blamed for the plateau in hotel appeal. The perks hotels offer pale in comparison to those Airbnb offers. The most important hotel amenities are breakfast, free wi-fi, and parking (Akbar & Tracogna, 2018). Airbnb has mastered these amenities and presents a greater threat to the hotel industry.
Airbnb’s success is attributed to the growing sharing economy. The hotel industry is vulnerable to the strategic disruption resulting from the emergence of peer-to-peer sharing platforms. Airbnb represents the epitome of this threat. The hotel industry is characterized by crucial fixed operating costs that make profitability susceptible to demand shocks. For example, the introduction of peer-to-peer sharing platforms led to a reduction in budget hotels' profitability. Therefore, current hotel business models should adjust by being more proactive and overcoming Airbnb's durable threat (Akbar & Tracogna, 2018).
The hotel industry has, therefore, been forced to adapt to emerging consumer needs. As a result, select-service hotels emerged. Select-service hotels are better positioned to adapt to consumer needs than traditional full-service hotels. Additionally, they are low-cost and take less time to develop and renovate. Therefore, the model increases profitability and yield on invested capital. Consumers drove the shift since fewer guests demanded full-service hotels (Akbar & Tracogna, 2018). They were less willing to incur additional charges for the extra amenities.
Conclusion
Customer satisfaction is dependent on age. Millennial hotel guests are driven by value proposition. They have unforgiving technology expectations that have prompted hotels to embrace newer services to build better relationships with millennial guests. Millennials also crave meaningful experiences. Some well-established hospitality brands have created new hotel brands with an experiential focus to attract millennials. Enhanced consumer awareness has also led to niches in the hotel industry. Airbnb offers a more personalized experience and is more affordable, hence a threat to the hotel industry.
References
Akbar, Y. H., & Tracogna, A. (2018). The sharing economy and the future of the hotel industry: Transaction cost theory and platform economics. International Journal of Hospitality Management , 71 , 91-101. https://doi.org/10.1016/j.ijhm.2017.12.004
North Americans feel better about hotels than ever. The goodwill is unlikely to last: Future reservations (2016, July 18). The Economist . Retrieved from https://libraryresources.columbiasouthern.edu/login?auth=CAS&url=http://search.proquest.com.libraryresources.columbiasouthern.edu/abicomplete/docview/ 1805954611/fulltext/D41E89BD9BFF4A3CPQ/8?accountid=33337
Pencarelli, T., Gabbianelli, L., & Savelli, E. (2020). The tourist experience in the digital era: The case of Italian millennials. Sinergie Italian Journal of Management , 38 (3), 165-190. https://doi.org/10.7433/s113.2020.10
