Hospitality: assumed mediocrity, even with the most loyal customers?

Like the rest of the travel industry, the hotel industry has paid a heavy price for the pandemic, and has had to implement severe measures to cope with the economic consequences of the crisis, most often by drastically reducing the services it offers its customers.

But some have taken a liking to it, and are already announcing that even after the crisis, customers won’t find the same level of service as before.

Reducing services makes good economic and health sense

When the pandemic arrived, we saw hotels make drastic cuts in the services offered to customers, decisions that were pure common sense, whether they were decided by the hotel or imposed by the authorities.

Eliminating mini bars, room service, housekeeping services, closing lounges, spas, gyms, restaurants… it was all common sense and logic. The aim was to limit interactions as much as possible to prevent the virus from spreading. And when these measures have not been dictated by local authorities, hotels have implemented them on their own for two good reasons: to avoid the spread of the virus and to try to survive economically. When guests are scarce, maintaining a full staff to run all the hotel’s services is simply impossible.

In some cases, this has led to the outright closure of properties. Again, sometimes imposed by local authorities, sometimes at the hotelier’s instigation.

It’s worth remembering that not all hoteliers around the world have been lucky enough to benefit from the same government support as in France, and that in many countries staying open, even minimally, was the only alternative to going bankrupt.

The local context was a major factor. The North American hotel industry, for example, was able to continue operating in a minimalist mode because travel restrictions were nothing like those implemented in Europe.

Different situations depending on whether you’re a hotelier or a hotel group

Like the rest of the tourism industry, the hotel sector has suffered, but with certain particularities due to the economic organization of the sector.

Independent hoteliers have suffered enormously, and their fate has largely depended on more or less generous governments.

Things were different for the chains. The hoteliers, those who run the hotels, suffered as did the independents. As for the groups whose brands they operate, depending on the geography, they have even managed to make money. The reason is simple: it’s the hotelier who bears the operating costs, since the group is, to caricature it, usually just a franchisor. Its revenues have fallen in line with those of hoteliers, but it does not have to bear the operational costs of hotels, unlike airlines, which bear the costs of staff and aircraft.

As the marketing director of a brand-new luxury hotel that has been waiting since the start of the pandemic to finally open its doors told us:

“Sizing activities is much easier indeed and we can control costs better, but the human cost is tragic. Either jobs were eliminated or wages were cut across the board. An estimated 6 million hotel jobs have been lost in the US alone.

And all this is not controlled by the big groups, but by the owners and operators.

So while the groups and brands haven’t lost that much, operators have been hit hard by the crisis, and the jobs lost are counted in the millions – I’ve lost mine twice in one year, for example! My last hotel before this one closed for good (300 people out of work) and the previous one lost 2/3 of its 555 employees. Ouch anyway.”

When the hotel industry becomes addicted to shock treatment

The shock treatments put in place by the hotels have not been all bad. Fewer services and fewer staff have sometimes meant higher margins! And like the patient who becomes addicted to morphine, the hotel industry is becoming addicted to service cuts!

Back in the spring, Hilton’s CEO set the tone by saying, more or less, “.we have increased our margins and finally we like it. Don’t expect a return to normalcy“.

His exact words are: “The work we’re doing right now in each of our brands is to make them higher margin businesses and create more labor efficiencies, particularly in housekeeping, food and beverage, and other areas. When we come out of the crisis, these activities will have a higher margin and be less labor intensive than before Covid.“

At first we thought this would only apply to entry-level brands, where customer expectations and margins can accommodate a more or less low-cost approach. Moreover, this would have mechanically boosted the value of loyalty programs by continuing to offer “elite” customers services that used to be free for all, but which are now charged or waived for the average customer. Not at all!

Of course, in all Hilton’s “non-premium” brands, cleaning will only be done on request, but not only. In its new “Signa” luxury brand, access to the lounge will no longer be offered to its best customers, even Diamond status holders!

Marriott plays hotel against customer

It didn’t take long for Marriott’s new CEO, Anthony Capuano, to follow suit in an interview with The Points Guy blog.

In a nutshell, he says: “there are customers who want a return to normal and hotel owners who have lost money and want more comfortable margins”. “We’re going to have to find a balance and it won’t be perfec[Pour le client]”.

He goes on to give the example of the optional housekeeping. He admits that this may sound like cost-cutting, but promises us that it’s to please customers “who don’t like having cleaning staff in their room”.

At this point, it’s impossible not to mention the merger between Marriott and Starwood and the absorption of the SPG (Starwood Favorite Guest) program, then considered the best in the world (for the customer), into the more disappointing Marriott Bonvoy.

Again, his point is that Bonvoy will never be SPG, and that’s OK. Why ? Because Bonvoy customers will get less attention and benefits from hotels than former SPG members, but since Marriott gives them access to many more hotels around the world, it’s a very good deal for them in the end.

We’re far from certain that customers, especially “ex-SPGs”, will buy into this. While the Marriott Bonvoy program, which takes over some of the old SPG benefits, is generally seen as a step forward for former Marriott customers, former Starwood customers see it as a step backwards. And it’s not going to get any better.

An eternal debate

While everyone agrees that a good loyalty program is essential for retaining customers and encouraging them to book direct rather than through OTAs like Booking, which is better for both the customer and the hotelier.

But a good loyalty program isn’t just a list of benefits, it’s the fact that they’re actually delivered. And for that to happen, hoteliers have to play the game.

Take Accor, for example, whose loyalty program has been undergoing constant transformation and name change for years, at a faster pace than that of its competitors. It may be criticized that in many respects what is now called ALL (Accor Live Limiteless) is a stingy program, and especially for its best customers and not at all designed for the customer as as we recently saw with the “Suit Night Upgrades”. but that’s not the most important thing.

From our experience, and even if we hope things will change one day, no matter how well-intentioned and creative Accor puts its program, it will always fall short of the best, and for just one reason: Accor does not control its hoteliers who do as they please when it comes to applying the program and its benefits. Hoteliers see profits as a cost, whereas the Group sees them as a long-term investment in the attractiveness of its hotels.

This tension between customer and hotelier exists everywhere, not just at Accor. But what sets leaders apart from the rest is their ability to strike the right balance, to create a customer-first culture and, above all, to enforce its rules.

Should we expect the worst?

After such statements, we might well wonder about the future of hotel service, and a fortiori about the attention that will or won’t be paid to the best customers (but not only to them).

There’s no denying that the context is difficult, that the demands of hoteliers are legitimate, and that recriminations that could have been ignored 3 years ago are now to be taken with the utmost seriousness.

But on the other hand, there’s the customer, who is the raison d’être of such properties. A customer they’ve done everything to retain through loyalty programs, even if they could not travel anymore. And there’s no evidence that customers have become less demanding as a result of the crisis. Quite the contrary.

What’s worrying is not so much the fact that they want to help hoteliers, business partners, get back on their feet. In these businesses, you win together or you lose together. No, what’s worrying is the message, which clearly puts the customer second or even third, and all the consequences this may have for the future.

In any case, we can

Hope that premium brands don’t fall into this spiral. They know what they’ve built their reputation on and how they’ve acquired loyal customers.
Consider that most of the damage is done to urban and suburban hotels, which cater to budget-conscious travelers.
Be prepared to go and see those who don’t seem to have decided to follow this path. Like Hyatt, which holds on to its standing, or Accor, which can see the gap with the others narrow without any effort on its part.

Image : guest servicesl by Dmitry Kalinovsky via Shutterstock