Written by Pamela Carvell, Lifestyle Consultant and President of the Hotel Marketing Association.
I recently listened to a Webinar organised by HOSPA, called ‘Less Contact, More Engagement’. https://www.hospa.org/less-contact-more-engagement It was an interesting session with 5 panellists and was very much focussed on the hospitality industry when it re-opens. Much of it was relevant to Operations, but the key messages that I personally took away from it, as a Marketer, were:
- Capture the guest as soon as possible in the booking journey.
- Keep the customer informed.
- Technology is not the silver bullet.
- There is scope to monetise services, due to social distancing measures.
Monetisation of Services
The point was made by several speakers, that there will be opportunities, especially in F&B, to charge customers premiums for such things as visiting the bar at a certain time (as guests won’t just be able to descend to the bar en-masse as they have traditionally done) or to book a table in the restaurant at a peak time. These points were made to reassure Operators that they will be able to recoup some of the not insignificant costs of creating a safe environment post-Covid19. However, in my marketing brain, it raised serious concerns. So I raised a question, asking the panel if they considered it ethical to be charging customers to do things that are only in place to enable the operation to open and run safely. I obviously had no idea what response this would produce, as I don’t know any of the speakers personally. I was however surprised that they unanimously said that it didn’t raise any issue of ethics, as customers are used to dynamic pricing and to paying a premium for the most desirable options.
I have had time to reflect on this issue, and below are my thoughts.
It really comes down to four key issues: meeting the financial needs of the business, the ethics of charging premiums, the communication of any supplementary pricing and the impact on your brand.
Hospitality operators will have to incur significant costs to make their establishments safe. They will also have to operate at a significantly reduced capacity. And they will need to engage in far more customer communications, as every establishment is likely to be handling things slightly differently. I say that both because Government guidelines aren’t yet available for hospitality , and also because based on my experience at the weekend of 4 different retailers within 1 retail park, every one was handling things slightly differently. So I assume the same will apply within hospitality, that everyone will handle things slightly differently, for a variety of reasons.
I have already seen online receipts (which I believe to be genuine) from establishments in the USA charging not just State tax and Service Charge, but a Covid Supplement. In principle I guess this is a smart idea, as it is totally transparent and would make sense to consumers, as they will experience for themselves what this supplement is funding.
However, when it comes to charging customers strategic premiums for doing what are really the basics of staying in a hotel i.e. going to the bar, dining in the restaurant, checking in whenever they want within designated hours, I have a problem. Having said that I can see some of the large chains doing precisely this because of the strength of loyalty to their brands. So, if Premier Inn start charging supplements for checking in at certain times (within the usual check-in time parameters) I can imagine their loyal customers will still choose to stay with them. Similarly, if Hilton, Marriott or InterContinental start charging supplements to attending the bar at a certain time and to dine at a certain time, again, I suspect that loyalty to such brands is so great that it will not deter customers- especially those on expenses! However, charging this sort of premium could be very challenging for the independent sector & I can envisage their customers not being happy. They may well feel that they are returning to your business and you want to charge them all sorts of extras for a service level that is inferior to how it was pre-Covid19!
Operations and Revenue Management may well feel happy to levy such strategic premiums, but I feel that Marketing should challenge how that will impact customers’ brand perceptions, and if in fact it will deter customers, especially from repeat visits. It may just leave a ‘bad taste’ in their mouths, because they feel that we are penalising them for making basic choices. I can just see someone checking in and being asked if they want to dine in the restaurant that evening and being presented with various fees, depending on what time they want to dine. And I consider this kind of pricing far removed from dynamic pricing for rooms, which is done at booking level.
I have personally noticed that my weekly food shop, which is fairly similar week in week out, has increased in price in the past 12 weeks. I assuming that this is down to supply and demand and the availability of products, as well as the additional measures that retailers are having to put in place.
I would therefore rather see hoteliers increasing their pricing overall, or giving fewer and lesser discounts than in the past, so that a bit like my food shop, I am experiencing higher prices, but am still happy.
Or I think it would be acceptable for operators to charge a Covid levy of a certain percentage. In a way it would be great if there became some sort of industry standard, in a similar way to service charges and tips.
I see both of these latter options as ethical in a way that I don’t view strategic supplements.
Hospitality is a very transparent industry in that customers can easily make comparisons as to what they are getting for their money. Also, in areas like the Lake District, there is very much a family feel between the hospitality and retail businesses. As an independent hotel, if you were the only one in your area levying strategic premiums, it could seriously damage your reputation. However, if it is part of the ‘new normal’ customers may be completely accepting. I imagine that the large brands will set the precedent and others will follow.
The key to generating additional revenue through pricing is clarity of communication with customers, especially in these unprecedented times. Clarity, transparency and honesty are even more important than they have ever been. It is a huge challenge for Marketing to find the best ways to communicate both safety and pricing messages to reassure customers and ensure that they know what to expect. We have to be upfront with what we will be charging, so that there are no unpleasant & unexpected surprises for the customer during their stay or dining experience.
Pricing decisions have an inevitable impact on your brand. And Marketers are in essence the guardians of those brand values. The reason I used ‘Marketing Ethics’ in the title of this article is because we have a responsibility to maintain the integrity of brands and pricing can play a major part in that. I believe that strategic ‘dynamic’ supplements have the potential to damage those values, in a way that a straightforward price increase or blanket Covid19 supplement won’t.
Hospitality is facing a new normal, with increased costs and fewer customers. Those higher costs and lower revenues will require strategic thought as to how revenues can be optimised, and Marketing have a vital role to play to ensure that the integrity of the brand and its values are not damaged in the process.
This article has been written by Pamela Carvell, Lifestyle Consultant and President of the HMA.
It may be reproduced on part or in full, so long as full credit is given to Pamela, as author.