There is nothing that irritates a hotel guest more than having to pay for Internet service. And herein lies a significant strategic competitive advantage for small luxury hotels.

Go ahead and do a Google Search for “What travelers think about hotel WiFi?” Then read a couple of pages of results and you’ll see how universally despised hotel Internet access fees are. USA Today, CNN, MSNBC, J. D. Powers, Hotels.com, The Daily Mail (and the list goes on) are all reporting on it. And bloggers are being merciless on hotels in their condemnation of Internet charges.

J. D. Powers just released its 2010 North American Hotel Guest Satisfaction Study which shows the number one hotel amenity is wireless Internet access. And WiFi use is on the rise – over three-quarters (77%) of respondents say they access the Internet through a WiFi device – up from just over half (55%) three years ago. And they don’t just want access they want high speed access – reliable quality service.

What I found most interesting in the study is that overall customer satisfaction of hotels that offer free Internet access is more than one full point higher than hotels that charge for it (8.15 vs.7.04).

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In other words, Luxury and Upscale chain hotels – those properties notorious for charging for Internet access – are willing to throw customer satisfaction under the bus to keep this revenue stream. The majority of hotels in other categories offer free WiFi. And now that even McDonald’s offers free WiFi it’s no wonder hotel guests feel it should be free.

In a BBC survey of more than 27,000 adults across 26 countries, close to four in five people believe that access to the Internet is a “fundamental right.” And by charging for Internet access, luxury chain hotels are inhibiting people from enjoying that fundamental right.

It’s easy to count the amount of money a hotel generates as a result of charging for Internet access. But it is more difficult to measure the amount of lost revenue as a result of people not booking because it is not free. Or those choosing to eat at a nearby Starbucks, McDonalds or the local deli because they offer free WiFi.

The other thing that can’t be measured is the damage these charges can do to a hotel’s brand. All you have to do is look though negative comments on TripAdvisor.  A quick check of several luxury chain hotels on TripAdvisor turned up the following comments – all made this year.

• “Another disappointment was that WiFi was an additional charge. For this class of hotel, one would expect it to be included.”

• “I would probably prefer a Holiday Inn or equivalent where you can get free wifi, free parking, nice pool, free breakfast, and convenience for $100 OR LESS A NIGHT.”

• “WiFi was expensive and we had to pay for the parking as well. Why don’t they include them in the room price?”

• “All the extras in the hotel are very pricy and WiFi is an extra USD 15 per day.”

• “Also like many have said on here, it’s crazy to charge $15 for WiFi when the room and everything else inside the hotel costs so much.”

Hotel guests clearly despise being charged for Internet access. It’s the number one complaint among 1,815 travelers recently surveyed by Hotels.com – 75% cited this as an issue.

Free WiFi is an emotional issue for a majority of travelers. Expect this issue to intensify as more and more people switch from regular cell phones to smart phones. The more they become used to universal Internet access the more they will resent hotels charging for it.

For small luxury hotel marketing folk the implications are clear -

to increase customer satisfaction you need to provide high quality, in-room Internet access for free.

And when you do you’ll have a very strong competitive advantage over the large, branded, chain luxury hotels. Market this highly charged, emotional issue like crazy while you can. Sooner or later those large competitors will have to offer free Internet service.

How long do you think it will be before all WiFi is free?  Share your thoughts – post a comment.

Safe travels – Madigan Pratt

Speaking before a conference of luxury Italian companies, luxury hotel operator Rocco Forte offered a stunningly concise summary of the toxic hospitality marketing strategies used by far too many hotels in these recessionary times.

“What happens in a hotel cycle [during a recession] is always exactly the same.  Revenue dissipates, occupancies go down, hoteliers then sacrifice rates, discounting to boost occupancy.  As they discount rates, they also decrease services and they cut back on every item of expense.  Rates continue to fall as occupancy rises.” [Bloomberg Report]

Despite research from Cornell University, Smith Travel Research, PKF Consulting and others stressing that this is absolutely the wrong approach, hospitality marketing professionals continue to follow the same tired, brand destroying marketing strategies every time a recession comes along.

While travelers are looking to save money, they still expect a quality experience – especially luxury travelers.  The experience is what most hotels advertised before the recession and what they built their brands upon.  But is it being delivered now?  With fewer staff to take care of their needs, reduced amenities, and more hidden charges, the quality of the experience is waning.  Also waning, no doubt, is guest loyalty.

The Price of a Poor Experience

On the Harvard Business Publishing Blog author Peter Bregman recently wrote a great article entitled, “The Price of a Poor Experience.”  In it Mr. Bregman presents interesting findings from research among hundreds of non-profit organizations and their successes and challenges to retaining members during the current economic downturn.

This is pretty much the same challenge luxury hoteliers face.  They want to retain customers, encourage repeat visits and generate positive word-of-mouth – the most powerful form of advertising.

Here’s what the research showed:

1. There is no correlation between membership and price increases.  In other words, customers didn’t leave simply because an organization raised its prices.
2.  There is a direct correlation between membership and how likely a customer is to recommend the organization to a friend.  This is known as the net promoter score – think of it as your word-of-mouth score.

If customers like an organization’s products or services enough to recommend them to others, then that organization could raise prices, even in a down economy, without losing customers.  But if the organization downgraded the customer experience, then even lower prices would not prevent customers from abandoning it.

One could argue hospitality is drastically different, but human nature is the same across all categories.  In the highly competitive hotel industry, people may be looking to pay less today but still expect to receive good value.  Cutting rates while diminishing the guest experience will decrease a hotel’s “net promoter score” and brand value, which makes it more difficult to recover when the recession subsides.

Following a toxic hospitality marketing strategy can prove fatal.  Cornell University, Smith Travel Research and PKF Consulting have written extensively on the topic recently.

Stay tuned to next post to learn what hospitality marketing strategies are successful in a recession and helped a small luxury hotel prosper in difficult times.

Companies need to change strategies as the economy changes from good times to bad.  This message was brought home when I read a White Paper from my friends at Peppers & Rogers Group.  The paper had a great chart highlighting the shifts companies need to make

As the economy expands businesses should focus more on acquiring new customers.  And as it moves into a downturn, where it is today, companies should be focusing more on servicing and growing their existing customers.

With budgets tight and research showing it costs 6-10 times more to attract a new customer than retain an existing one hospitality marketing professionals need to focus more on their current customer base – making them feel like VIP’s and inviting them back.

Hotels most successful at re-attracting past guests share common marketing philosophies.  They:

• Focus on capturing correct/complete contact data at registration
• Keep that information up-to-date with regular NCOA
• Understand the lifetime value of each guest
• Follow a strategic vs. a tactical approach to marketing
• Embrace Customer Relationship Marketing (CRM)
• Actively promote both offline and online word-of-mouth advertising
• Understand and employ direct marketing best practices

You’ll find plenty of customer retention ideas on the Hospitality Marketing Blog.  I’m sure other readers would love to hear your ideas.  Please feel free to share – add a comment.

Safe travels – Madigan Pratt