In this much awaited next chapter, Starwood's former Director of Revenue Strategy provides a framework to adapt best practices from the airline industry to sell more hotel suites.
In the past few chapters I’ve talked about how hotels can sell more suites, raise average rate of reservations and make more money. After we’ve understood the problem, learnt how to spot demand and figured out who our real competition is, the next step is to try different strategies and solutions. To that end, a good place to start could be similar industries to see if there’s anything we can learn from them. What has worked for them in the past? And how can we adapt that to hotel suites? Also important is to check what hasn’t worked for them so we can stay well clear of the same mistakes.
We all have compared the airline industry to the hotel industry at one point or another. Both industries have a highly perishable product, both have very high fixed costs, both have segmented pricing, and finally, both industries are in the same category i.e. travel. But that’s just about where the similarities end. Airlines can react to demand changes with supply changes in a market relatively easily by swapping out larger planes for smaller ones and vice-versa. Hotels can’t exactly build 30 extra rooms for this weekend and knock down 15 for the next to react to demand. Airlines have one to four classes of service, while hotels can have up to ten or twelve room classes. Fuel is the single largest expense of an airline which hotels don’t have and if an airplane is sitting on the ground it isn’t making money, whereas the hotel is always open and making money.
But what about premium products? Can we compare Business Class or First Class (henceforth referred to as Business Class) to hotel suites? Yes, to an extent. Both are specialized luxury products, where space is at a premium. There’s an elevated level of service and that reflects in the price of the product. However, there is one crucial difference between the two industries that many overlook, and yet, it forms the basis of why airlines are more successful at marketing and selling their premium product than hotels.
Suite Class in hotels is a few steps above the entry level Room Class. Whereas, in airlines, Economy Class is many steps below Business Class. This essentially means that for someone looking for just a good night’s sleep, the bed in a room is the same as the bed in a suite. The economy seat on an airline on the other hand, is no easy ride. This major hard product difference accounts for more than half the premium that airlines can charge over Economy Class.
At the end of the day, the bed that the guest will sleep on, is the same in a room and a suite.
That makes it extremely hard to charge premiums over rooms. Yes, suites have more space and that can be one reason for guests to book a suite. It helps when you have six buddies on a trip to Vegas and want to accommodate everyone in a suite to bring the cost-per-person down. For the rest to buy suites, we must offer something significantly over and above what a room offers them. Moreover, with the commoditization of hotels, the differentiating point has to be a service because the product is about the same.
This is where the airlines do a superb job of taking a benefit from just inside the aircraft to every single touch-point in the customer’s journey with them. It starts with dedicated call center lines, airport transfer in some cases, separate and expedited check-in, higher baggage allowance, fast track at immigration and security, priority boarding and deplaning, preference in bags coming off the plane, and to top it off, additional loyalty points. Nothing in the long list above is from the inside of the aircraft. The difference can be smooth sailing from the moment the aircraft touches the gate to when you’re outside the airport with your bags in a matter of minutes rather than over an hour. This is the true benefit of Business Class for those who value their time more than the premium they will pay to travel up front.
So how do we take that and apply to the hotel?
First, evaluate the product difference between suites and rooms. For the most part, we do this already. The larger the suite, the more expensive it is. Same goes for view and location – ocean view at beach resorts or higher floor at city center hotels. Other differences include sitting areas, additional bathrooms, dining areas, closets etc. It is an important part of differentiation which will help justify the price. A decade or two ago, this was enough. That’s because hotel brands and particularly suites were less of a commodity than they are today. Select legacy hotel brands dominated the luxury space; just letting people know you’re staying in a suite at The Plaza, New York signaled the epitome in luxury.
Second, plot your customer journey end-to-end and create two completely separate journeys for suite and room customers. Each department in a hotel has its guidelines for important customers vs. the rest. But when was the last time everyone, including sales, marketing, reservations, front desk, concierge, housekeeping, in-room dining etc. came together and plotted a typical consumer’s journey through your hotel – right from searching for a stay in your market to leaving the city after completing their stay. Once you plot this, create verifiable, tangible differences that make the suite journey a lot smoother than the other. Dedicated call lines for suite customers, separate line at check-in, priority housekeeping, in-room dining orders jumping the queue, dedicated space with the best views in the lounge are just some examples of a differentiated journey. Remember, Business Class passengers experience air travel in a completely different bubble than the rest of us.
Third, suite customers should get a shortcut to loyalty tiers. That’s because they’re contributing more money to our bottom line than a room customer. If loyalty points were to be awarded based on how much we take to the bank at the end of the day, we all know that a suite customer will contribute more to our bottom line. So why not reward them for it and give them an added incentive to book more? I should point out that there’s a myth about truly luxury customers not caring about points and loyalty programs. That’s probably true for the top 0.1% of spenders, but you’d be surprised how much of a St. Regis Hotel’s occupancy is from SPG program’s stalwarts.
Finally, re-imagine your marketing for suites. I believe that the hotel industry has backed itself in a corner by publicizing only our top suites – the $10k, $15k Presidential Suite and so on. The message we’re sending to our consumer is that only a few can afford these suites. The reality as we all know, is that we rarely sell these suites at full price and have a whole lot of other suites that are far more affordable. If there’s one shift in expectation from baby boomers to millennials, it’s the one of tangible value. Millennials are not impressed by brand names as their parents’ generation was. Attract the new generation with all of the above changes and your brand will build a reputation for itself.
In the end, hotels want to do right by our customers while making money and beating their competition. In a commoditized environment facing competition on all fronts, it’s imperative for hotels to differentiate themselves. You don’t necessarily need to always be innovative, there’s no shame in taking good practices from other industries rather than re-inventing the wheel.