The New Customer Experience Lifeline: Text Messaging as a Service Game Changer
By Geoff Dutton Co-CEO, Kipsu | January 06, 2013
I have bad news for you. Though our U.S. hospitality industry is clearly rebounding from the economic collapse of 2008, looking at the long term data will lead you to only one conclusion: we face significant headwinds. On an inflation-adjusted basis, we have not moved the needle over the last fourteen years. Let me demonstrate with the American Hotel and Lodging Association's historical statistics: Industry pre-tax profits for the 2010/2011 years compared to 1996/1997 are down about 4%. The average room rate is down about 2% and RevPAR down about 10%.
It's true that we have increased overall industry revenue by about 30% , the number of rooms by 35% and the number of properties by about 10% over those fifteen years, but that has not translated into improved profitability for the industry. And while that has been happening, the rest of the U.S. economy has managed to grow about 35%, even after taking into account the effects of inflation. So while we are growing on the top line, our profit per room is shrinking and we are far from taking advantage of the growth exhibited in the broader economy over this relatively long time horizon.
Why are we struggling? There are many driving factors but a significant trend that is hard to ignore is the role of the internet in generating demand. In the early days of the web, the period between 1996 and 2003, we saw an emergence of new aggregators and web-based research sources, such as Travelocity. The traditional travel agent industry was crushed as consumers found it more suitable to perform that role on their own. Today, we see close to 60% of new bookings made through the internet. Buried in the results of TripAdvisor's recent Travel Industry Index survey was a very telling statistic: under the category of "How U.S. Accommodations Win Guests," the top strategy, garnering a whopping 58% of the responses, was room discounting. The internet is forcing the industry into commoditization by allowing consumers to more easily benchmark options and, specifically, drive them to make choices based on price. Traditional marketing tactics like product differentiation, including loyalty programs and offering unique amenities, are becoming limited in their importance as they take a back seat to price cutting.
A second wave of internet influence initiated around 2000 when vertically oriented social media sites like TripAdvisor started to garner significant followings. Today, Facebook and Twitter also play substantial roles in influencing consumer choices, and many predict that we are in the early stages of that trend. TripAdvisor's recent survey found that 30% of hotel operators manage social media monitoring at least once a day. Increasingly, the voice of the consumer is playing a greater role in doing the job of communicating key messages about our offerings. What's particularly challenging about this trend is that only a subset of guests, oftentimes those most emotionally charged, are part of this voice, and a full picture is not presented to other prospective customers. The bottom line: we need to play a more active role in shaping the message that others are communicating about our properties.
Customer Service is the New Marketing