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).

Click to enlarge

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

You’ve seen it on TV, you’ve read about it in newspapers – Americans have taken a complete 180 degree turn from the days of conspicuous consumption. The media calls this “The New Normal.”

So what exactly is “The New Normal?” Here’s how Deloitte and Harrison Group summed it up in a recent consumer research study called, “Americans The 2010 American Pantry Study – The new rules of the shopping game.”

Today’s consumers are, in a word, resourceful. Their shopping is, in a word, precise. They are using tactical tools and capabilities they have to perform better in the marketplace: coupons, loyalty cards, meal planning, shopping lists, delayed gratification, lowered standards (although not as often as one might think), brand switching, channel switching, store switching, cooking more, eating out less, buying fewer prepared meals, clarifying want versus need, reassessing convenience, larger packages, smaller packages, and more.

They feel their personal economic challenges have been challenges well met – their confidence has risen as a result. In short, cutting back has made them feel smart, not deprived, and they have no intention of returning to old habits even when the economy returns.

One of the more interesting findings in the study is that 55% of those cutting back suffered no decline in income, but simply felt they “should be” cutting back.

What Should A Small Luxury Hotel Do?

Don’t be fooled by all this talk about “The New Normal” – especially if you are a small luxury hotel. People are still buying high quality goods and services with a high level of perceived value. Need proof?

According to Bloomberg:

1. Unemployment is at 10%. That means 9 out of 10 people are working.
2. Apple (expensive/quality computers) saw net income jump 94% in the last quarter.
3. Starbucks (expensive/quality coffee) saw a 61% increase in net operating income.
4. Mercedes-Benz (expensive/quality cars) is having a record sales year; deliveries of new vehicles in the U.S. rose 25 percent in the first six months of 2010.
5. Even Mall of America in Bloomington, Minnesota saw sales increase 9%.

Ran Kivetz, a professor of marketing at Columbia Business School, has done research on consumer psychology and reports, “Consumers were quick to reduce spending when the recession arrived. Then the recession lasted longer than expected, and the new abnormal set in. The economy started to improve. Then it appeared to worsen. There is only so long we can suppress our need to spend.”

People are saying, “‘There is still risk. I gotta cut back.  But this is not a typical one-year recession. Life has to have some normalcy. I have to have some luxuries.”

Wells Fargo Equity Research:

Wells Fargo issues a weekly lodging analysis called “Room Service.” In its most recent report covering the week ending August 14, 2010 it reports:

• Higher end hotels reported stronger RevPAR and ADR growth than their lower end peers.
• The 3rd Quarter RevPAR change for Luxury Hotels is estimated to be +13.2% – significantly higher than Upper Upscale (+8.6%) and Upscale hotels (+8.1%).

2010 Portrait of American Travelers

Ypartnership in its recently released 2010 Portrait Of American Travelers reports  the U.S. leisure travel market has finally stabilized. The report goes on to say:

Among affluent households (those with an annual income greater than $125,000), fully 20 percent plan to take more leisure trips in the year ahead, while only 9 percent plan to take fewer, for a net (positive) difference of 11 percent.

Vacation travel has historically been viewed as one of life’s necessities – especially for affluent travelers. This is good news for hotels, but especially good news for small luxury hotels that provide a quality experience along with good value.

Small luxury hotels should concentrate on enhancing the “perceived value” of their particular experience rather than marketing primarily on price. People are looking for the best value they can get for their money – not necessarily the cheapest price. This is not new – only more acute as a result of the recession.

So don’t be fooled by all this media hype about “The New Normal.” Don’t throw out a perfectly good marketing plan if you have one – just fine tune it. The New Normal is the same as The Old Normal – you have to provide good product at a fair price (good value for the money).

It’s time to be creative, understand what motivates your guests and develop a marketing program designed to deliver a high level of perceived value. That will make your reservations phone line ring.

What do you think?

Safe Travels – Madigan Pratt

PS – Hospitality Marketing Blog has just entered its third year of publication. Thanks for reading and sharing your thoughts on topical hotel marketing issues.

The Great Recession placed tremendous pressure on hotels and hotel marketing professionals to maximize profitability.

The best strategy – control costs and maximize revenue. I’ll let the bean counters take care of controlling costs – just don’t touch that marketing budget.

I’d prefer to focus on maximizing revenue which, for small luxury hotels, requires getting the greatest number of guest rooms booked at the highest possible rate.

When times get tough (desperate maybe) there is a widespread hospitality industry knee-jerk reaction that kicks rate out the window.  “Heads in Beds!” becomes the operating mantra for most while those who yell “Hold Rate!” get trampled in the stampede toward deep discounts.

There’s ample evidence showing rate doesn’t necessarily stimulate demand in a recession – or at least not enough to compensate for the discounts. People who would have stayed at a hotel anyway (and pay a higher rate) are the real beneficiaries – not the hotel. And once one hotel in a destination drops rate or deeply discounts, all the lemmings follow.

The last thing any hotel should do is get in a price war with a property that doesn’t care what it sells its rooms for.

Snazzy marketing schemes and internet based companies entice hotels to “dump rooms” at 50% – 60% off rack. And hotel marketing pros leap at the opportunity to sell rooms for 40 cents on the dollar. Could they really be that desperate? This doesn’t help achieve maximum profitability – in fact it runs counter to it.

In a recent article entitled, “Love-hate relationship: occupancy, rate” by Stephen R. Hennis, Director, STR Analytics he reports that 80% of hotels in the US experienced declines in average room rate in 2009. With all the deals floating around in the marketplace for the past two years I would have guessed the figure would have been even higher.

It’s a great article and I recommend it highly to anyone involved in hotel marketing. The research shows that hotels with the steepest discounts suffered the least amount of occupancy erosion. Sounds good.  However, “The more properties dropped rates, the worse their RevPAR index change was, indicating that the upside in occupancy performance did not compensate for the sacrifice in rate.”

Amazing as it may seem, hotels that actually increased ADR saw the best improvement in RevPAR indices.

While we have been living through some pretty desperate times, it was not a time for desperate measures.

There are many better ways to market a hotel in a recession than by deeply discounting rates. That will be the subject for the next article.

What do you think? Safe travels – Madigan Pratt

As a regular reader of Hospitality Marketing Blog you know we have recommended hotels Advertise Aggressively in a Recession. We wrote an article about it on February 16, 2009 and followed it up with Advertise Aggressively in a Recession – Part 2 two days later.

There are numerous other articles on this blog, all full of research and case studies on how to survive in difficult times. A list appears at the bottom of this article.

So in the interest of piling on, let’s add another piece of research. This is a recently published Cornell University Study of nearly 1,000 hotels from around the world. Written by Sheryl E. Kimes the study is titled, “Successful Tactics for surviving an Economic Downturn.”

Cornell Study Findings – a Summary

• Discounting was the number-one tactic used to offset the effects of the recession. Most hotels that cut  prices agreed discounting was not particularly successful in maintaining revenue.
• One of the keys to success in a down market is to avoid offering across-the-board price cuts.
• Luxury hotels with an ADR higher than  competitors have the same or slightly lower occupancies, but have a 8- to 14-percent higher RevPAR than their competitive set.
• Hotels used 13 different marketing tactics which Dr. Kimes separated into four basic categories – Discounting, Rate-Obscuring, Marketing and Cost-Cutting.
• Performance – respondents were asked to evaluate the performance of each tactic on a 1 to 7 scale, where 7 = very effective. Marketing tactics were considered to be the most effective strategy (4.99). Responses did not vary by world region or hotel star level.

Questions for Hospitality Marketing Professionals

• If marketing is the most effective way to increase revenue in a steep recession why is it one of the first line items to be slashed when things get tough? There is more than ample research indicating it’s the wrong approach.
• If discounting is the least productive way to survive a recession why do so many hotels do it? My hypothesis? Far too many hoteliers think price is the only thing that matters to consumers.

The last thing any business should do is get into a price war with a competitor that doesn’t care what they sell their product for. But that’s exactly what hotels do in a recession.

Now I have to admit that Dr. Kimes’s study really doesn’t conclude that, “It’s Time For Hotels To Start Marketing.” Her research only says the most effective way to survive a recession is through marketing.

Isn’t it logical then to surmise that the best way to prosper during a recover is through marketing?

Let me know what you think.  Safe travels.  Madigan Pratt

Articles on How to Survive a Recession

Here is more ammunition for hospitality marketing professionals can use to defend their marketing budgets:

• Marketing to Succeed in Difficult Economic Times – published Feb. 13, 2009. Sounds very similar to Dr. Kimes Study doesn’t it?
• Lessons in Recession Marketing for Hotels – Published January 28, 2009.
• Wharton B-School’s Crash Course on Recession Marketing - Published December 9, 2008
• Marketing in a Recession – Retailers Respond - Published December 3, 2008
• Recession Lessons for Hotels – Published November 17, 2008

TripAdvisor is one of the most powerful hospitality marketing tools available today. Unfortunately more time seems to be spent complaining about it than developing ways to use it to a hotels advantage.

Perhaps that’s why last month’s article – TripAdvisor makes an “offer you can’t refuse” – generated the highest number of emails we have seen for some time. Most of the emails included questions about how to get the most out of TripAdvisor. Some even asked for “our secret!” Okay, I’ll tell you.

The truth is, there really are no secrets to getting the most out of TripAdvisor.

There are however ways to use TripAdvisor to your advantage. And they are all based on approaching TripAdvisor with the same objective marketing thinking one would expect from a smart hospitality marketing professional.

Here are seven tips on how to get the most out of TripAdvisor to improve your product, customer satisfaction, revenue, number of reviews and ultimately your ranking relative to your competitive set.

1. Take the Customer’s Perspective – A novel idea in some corners of hospitality – customer focused marketing! It doesn’t matter what you think about TripAdvisor – your customers and prospects love it and now have access to over 30 million reviews. If you have a problem with TripAdvisor – get over it. The sooner you do the better off you will be.

   Read the reviews as if you were a traveler and not a hotelier.

2. Listen To Your Customers & Take Action - Reviews are nothing more than online comment cards. You should read them and listen to what your guests have to say about the quality of your product, value for money and the delivery of your services.

   If you are one of those hoteliers who don’t like TripAdvisor, perhaps you don’t like listening to what guests have to say. Or perhaps your “issues” with TripAdvisor prevent you from hearing the many valid comments that could help you improve your product and thus your ranking versus competitive hotels.

3. Develop a Plan & Measure – I have yet to see a smart marketer inside or out of hospitality who, when faced with a potential threat hasn’t developed a plan to either minimize the threat or turn it into a competitive advantage.Your plan needs clearly defined and measurable goals. Here is a sample:
   • Be listed in the top five hotels for your destination before the end of 2010
   • Double the number of five-star reviews in 2010
   • Cut the number of 3-star (and below) ratings to less than five in 2010
   • Sensitize staff to how their actions are portrayed on the web by the end of the first quarter
   • Generate 50% more positive reviews than your nearest competitor every month for the next year

   In addition to the desired result you must set specific deadlines. Tasks with specific deadlines or timelines get done while those without do not.

   You need to measure progress to know how well you are doing. Are you tracking ahead or behind your goals? Do you need to adjust your strategy? Do you need more resources?

   I love this quote because it rings so true. You need to measure and report for the best results.

   What gets measured gets done, what gets measured and fed back gets done well, what gets rewarded gets repeated. – John E. Jones

4. Identify Strategies for Implementation - Goals will never be achieved without an effective implementation plan.The first step is to make someone ultimately responsible and accountable for achieving the goals. It will be up to that individual to marshal the human and financial resources necessary to succeed.

   Normally it shouldn’t take much, but if a part-time or full-time person is needed then hire someone. Obama will love you! Better TripAdvisor reviews and the resulting revenue it should generate will more than pay for a dedicated individual. Putting the onus of generating and managing TripAdvisor reviews to an already overworked or frazzled salesperson is doomed to failure.

5. Be Proactive & Be Creative – If you want more (and more favorable) reviews of your hotel then actively ask each guest to write one. (It’s okay if you forget to ask the fellow in 314 who you know had “issues.”)

   This is where you can get really creative. Many hoteliers ask guests to post reviews when talking to them on property. Guess what? Everyone says they will and very few ever do.

   Ever thought about calling them, thanking then for staying with you, asking how their vacation was (actually engaging them) and then asking if they would post a review? How about making it easy for them and sending an email with a link to your page?

   Sure it takes time and time is money. But what are positive TripAdvisor reviews really worth to your bottom line? Smart hospitality marketing pros know the answer. And those who complain vehemently about TripAdvisor seem to understand how negative reviews impact occupancy and revenue.

6. Understand TripAdvisor – You really do need to know the ins and outs of TripAdvisor and make sure you don’t violate any of their policies when implementing your plan. Violate these policies and your hotel could be penalized with significant downward movement in popularity. You also risk having a red badge added to your listing warning travelers to be suspicious of your reviews.

   With Management Responses you should know when to respond and when to just butt out. TripAdvisor is a social media tool – a way for guests and potential guests to exchange ideas. Hotels shouldn’t be seen as interfering with (or taking over) the conversation.

   The Track Performance tab in the owners’ center makes it easy to track both your performance and your competitions – the number of reviews is compared along with the Customer Satisfaction Index (CSI) – measuring the 7 top criteria that track to guest satisfaction.

7. Take Advantage of TripAdvisor Whenever Possible – A great example is the new Business Listings that allow you to include a link to your hotel’s web site, your reservations 800# and email. This is new and I think it’s a great marketing opportunity for hotels. Drive consumers directly to your hotel when they are in the buying mode. Why let the biggest travel web site out there send visitors to third party booking engines without giving up a fight?

   Sign-up before February 28th and get 50% OFF their published rates. Time is short – only 3 days left to save. (Editor’s Note: The Introductory 50% OFF Special is over, but TripAdvisor does run other Specials from time to time.)

   Just click Business Listings to take advantage of TripAdvisor.

There are many different ways to implement a TripAdvisor strategy. And there are no “secrets to success.” If you approach TripAdvisor from a marketing perspective your chances of increasing your rating and ranking vis-à-vis your competitive set will definitely improve.

Set specific goals, marshal your resources, measure and report performance and adjust where necessary to succeed. It’s basic hospitality marketing.

What do you think?

Safe Travels – Madigan Pratt

What hospitality marketing professional hasn’t been caught up to some degree in Twitter Mania?  Let’s sell some rooms!  So & So just sold 400 room nights through a promotion on Twitter.  We should be out there.

I’ve read the same articles you have about a hotel that unloaded gobs of rooms through Twitter (usually at a steep discount).  But what I haven’t read yet is an authoritative Twitter Case Study showing the manpower investment actually provided an acceptable ROI.

Sometimes it’s best to step back and see what others are doing.

I did read an interesting story in Brand Week saying major marketers are somewhat underwhelmed with Twitter. According to the article:

• Hyundai, which was named “Marketer of The Year” by Advertising Age is ready to write the microblogging service off.  Joel Ewanick, group VP of Marketing says he finds Facebook, which has copied most of Twitter’s best features, to be a superior platform.
• Procter & Gamble execs recently told venture capitalists that they didn’t think Twitter was “particularly relevant to what they’re doing on the brand-building and advertising side.”
• Verizon, a company that spent more than $1 billion on advertising in 2009, has around 5,000 followers. Coca-Cola has 15,000.
• Apple’s not even on Twitter.
• Some corporate Twitter accounts suffer from prolonged neglect. Delta Airlines’ Twitter page went from June 17 to December 22 last year without a single Tweet.

One Twitter success story cited in the article comes from Dell Computer which traces $6.5 million in 2009 revenue to its outlet store as a result of Twitter – an asterisk in the balance sheet for a company with $50 billion in sales last year.

The article does point out that companies like Dell, Comcast and Best Buy are using Twitter successfully for customer service.  And others like Dell are using it to promote specials.

It’s true the number of followers for celebrities like Ashton Kutcher or Oprah Winfrey have helped create Twitter Mania. Someecards which has 1.7 million followers vs. Hallmark’s 2,000 shows how a small company can use Twitter to outflank an older, bigger rival. But Someecards has a “voice,” a definitive edge to its Tweets that few hospitality marketers might find appropriate for their properties. You’ll have to read the article for more on this.

Now I’m not saying Twitter can’t find a place in your overall hotel marketing program.  But remember – it’s a marketing tool.  Evaluate it like you would any other tool.  Set objectives.  Determine how it will impact your customers. Decide what resources are required.  The service may be free, but the manpower requirements to create and manage a successful program are not.  How will you measure success?  What’s an acceptable ROI?

Safe Travels – Madigan Pratt

PS – If you know of a great Twitter Success Story – one with proven ROI, please let me know.  I will be glad to feature it in a future post.

TripAdvisor may be the most controversial service in hospitality marketing today. Some hoteliers love it, while others have issues.

No matter what you think, TripAdvisor is making an offer you can’t refuse. A Business Listing on your TripAdvisor page at half off the regular rate. Sounds like they’re in the hotel business, doesn’t it? In any case, the listing includes 1) a direct link to your site, 2) your 800# and 3) an e-mail link to reservations.

Here’s what we’re advising clients:

1. Get a Business Listing on TripAdvisor and do it today! This is a limited time offer.

Our research shows nearly 100% of guests in small- to mid-size luxury hotels read TripAdvisor reviews before booking. How much is it worth to have your hotel’s direct contact information right in front of travelers when they are seriously shopping and want to book a trip? Priceless!

2. Measure your marketing ROI.

Anyone can track where Web visitors are coming from, but now you can track what marketing is driving phone calls to reservations and impacting your bottom line. And it’s surprisingly affordable.

Track your TripAdvisor listing and measure the effectiveness of all your marketing efforts – PPC, PR, advertising, direct mail, banner ads and e-mail newsletters - with Marketing Tracker. Detailed real-time reporting and call recording help you identify what marketing and sales efforts are working.

If you want to take advantage of this TripAdvisor offer, you better hurry and act now. The offer expires January 31, 2010.

The cost for a TripAdvisor Business Listing varies depending on teh size of your hotel. Click here to see your rate and sign up. Have your credit card ready!

And don’t get stuck wondering what you’re getting for your money. Measure your marketing ROI with a program like Marketing Tracker. So when it comes time to allocate marketing funds you will know what works.

Your decision to advertise on TripAdvisor again or anyplace else will then be based on the proven value your hotel receives – not simply the price of the media. It’s a much better way to approach hospitality marketing decision making.

Safe Travels – Madigan Pratt

Many readers have ask which Hospitality Marketing Blog posts were the most widely read in 2009.  So, by popular request, here is a list of the Magnificent Seven.  Please enjoy the practical advice and marketing insights as you gear up for 2010.

1. Hotel Case Study – Prospering in difficult Times – Good news was hard to come by in hospitality marketing circles in 2009.  Here’s a story about a small luxury hotel on an island difficult to get to that offers inspiration and hope.  Very worthwhile.
2. 85% of Hoteliers Just Don’t Get It – Back in August I reported on a Market Metrics’ Research Report that found only 15% of hotels have policies or guidelines for how to manage user-generated reviews (aka TripAdvisor).  Can you imagine that?
3. The Media Are Killing Us – The most overused hospitality phrase for 2009 may well be (unfortunately) “The AIG Effect.”  One bad move by a major government bailout recipient created a media frenzy followed by a Congressional dog pile that literally destroyed the meetings and conventions business.  Government was trying to create jobs on one hand while simultaneously throwing tens of thousands of loyal hospitality employees out of work.  Go figure!
4. Are All Hoteliers Liars? – I like this one too.  Oyster.com, a new online hotel review site launched in July and called hoteliers and hospitality marketing professionals liars.  It sure created headlines, but couldn’t save a failed business plan.  They ended up letting most of their staff go some six months later – read No Pearl in this Oyster.  Just rewards.
5. Thinking Beyond Hospitality – Many found this story about John Wallis, Head of Marketing and Brand Strategy for Hyatt eye-opening.  His goal – to become a database driven company that’s in the hotel business. Revolutionary in hospitality marketing?  Yes, but it shouldn’t be.
6. Why I Hate TripAdvisor Sometimes – You gotta have fun when you can and it’s not often you have a chance to poke TripAdvisor in the eye.  Here’s what makes me mad about TripAdvisor – sometimes.
7. Marketing To Succeed In Difficult Times – A practical guide of proven strategies that have helped companies survive and even excel in past recessions.  Written back in February, 2009 there is still some good advice to help 2010 planning.

Thank you for reading and commenting on Hospitality Marketing Blog.  It has been a real pleasure for me to publish this blog and I look forward to continuing into 2010 and beyond.

Wishing you a very Happy, Healthy and Prosperous New Year.

Safe Travels – Madigan Pratt

PS – if you would like to receive a short email whenever a new article is posted simply subscribe on the right.

Last July I posted an article entitled, “Are All Hotel Marketers Liars?”  It talked about the launch of a new and different hotel review site called Oyster.com.

The article outlined numerous reasons why Oyster.com would not “fundamentally change the way people make hotel decisions,” as the site’s founder claimed.  Basically it had a failed business plan.  Imagine hiring 10 “professional” reviewers to travel throughout the country, stay in (and pay for!) each hotel night.

I mean, what were these guys thinking.  It was like a time warp to the Internet Bubble Hay Days when business plans were written on the backs of cocktail napkins and investors threw millions at boy wonders.

How could they possibly afford to pay salary and travel costs for reviews when TripAdvisor gets millions of reviews for free?

Well Oyster.com hasn’t gone out of business…at least not yet.  But Gawker recently reported Oyster is going through a major consolidation and firing  a good portion of its staff.

As a hospitality marketing professional it may be a good time to update your TripAdvisor Strategy.

What do you think the chances are Oyster will be with us in 2010?

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.