Are you listening to how your guests define value?

True or False:  Before hotel owners/operators develop and implement strategies designed to deliver value to their guests, they work hard to research and understand just exactly what the word ‘value’ means to those guests.

How did you answer this question?

Undoubtedly, hotel operators work hard to make sure that their strategies and tactics will be as successful as possible.  However, this is not the same thing as hotel operators truly understanding how our customers define the word ‘value.’  

For example, today, the most frequently criticized component of a hotel stay is not cleanliness, food quality, or location, but a fee for accessing the internet.  The degree of customer frustration with this policy is exacerbated by the fact that our customers are well aware that they can receive free internet when they stay in three-star hotels but often cannot receive free internet when they pay appreciably more to stay in four and five star hotels.  The logic behind this approach is at least counterintuitive, if not outright bad business. 

With this said, many hotel companies have heard the relative rage of the customer on this point, and have adapted their policies.  Increasingly, members of major hotel brand loyalty programs (at least some with higher ‘status’) can receive basic internet services at no additional cost.  This is actually beneficial to both the hotel operator and the guest; the guest obviously benefits by not having to pay for connectivity, and the hotel operator benefits by gaining all-important guest contact information from his/her loyalty program membership.

However, there is also a downside to the relative “progressivism” of hotel companies when it comes to this issue.  Some hotel companies which charge a Resort Fee to their guests are now rolling internet into the resort fee menu, with the logic being that removing a line-item charge called ‘Internet Access Fee’ and including internet access in the resort fee will be appreciated by the guest.  While the guest certainly does appreciate not paying directly for internet access, the guest has never appreciated the concept of Resort Fee, a euphemistically-entitled excuse for hotels to charge their guests for items that have historically been provided on a complimentary basis.  As recently as today, there are five-star luxury hotels in the USA which apply a resort fee that ‘includes in-room internet, beach chairs and umbrellas, 24 hour access to fitness center”, and the list goes on.  The guest is far smarter than this, of course, and fully realizes that the use of such features as beach chairs and access to the hotel gym is free to all hotel guests, and therefore is not a ‘benefit’ of paying a resort fee that is often in excess of $20 per day.  The result is that we have effectively increased our room rates by the amount of the daily resort fee, with no thought given to the customer’s perception of value for price paid.

There are countless examples of ways in which the same “fee-creep” that has pervaded the US airline industry (as noted by Skift, airline fee revenue hit $6.4 billion in 2014) has taken hold in the hotel industry (BusinessInsider states $2.25 billion in 2014 for hotel fees).  While the owners and operators of hotels undoubtedly appreciate the benefit to their bottom line that such fees provide, what is completely missing from the equation is the concept of what our guests perceive as true “value for price paid.”  Hotels have an advantage here in effectively ignoring the customer’s concerns, as the reality is that the vast majority of hotels now charge these various fees; thus, while the guest may be highly frustrated with the practice, they really do not have much choice in the matter. It goes back to the age-old adage of ‘just because everyone is doing it, doesn’t make it right’.

From the owner and operators’ perspectives, simply “doing the right thing” and eliminating these fees is not likely to be practical, as the development of these charges over recent years has resulted in their significant role in the overall profitability of our assets.  So, we face a conundrum; if we listen to our customers and reduce or eliminate the fees that so upset them, do we risk turning our businesses into something less successful than they may be today?

The answer lies in our commitment as hoteliers to engage the guest in an effort to best understand what the word ‘value’ truly means to them.  Even if the reality is that fees and surcharges are unlikely to disappear from our business, we still have a responsibility to provide the guest with what he or she sees as important.  Proactive and strategic hotel owners and operators must learn more about their customers, and must then convert that knowledge into tangible actions and offerings that those customers will associate with value.  When we are able to accomplish this, we may be able to soften the negative impact of the various fees and surcharges that we apply, by returning to a relationship with the guest that is more closely based on ‘value for price paid’ and ‘personal preference.’

I’m curious to know your thoughts!  If we cut these fees do we risk turning our businesses into something less successful than they are today? Or is there still an opportunity to breed further loyalty and improve financial performance by truly giving the guest what they want?