Reinventing the guest experience in hospitality
In light of recent mass layoffs—namely, Disney theme parks, Carnival Cruise Line and MGM Resorts—one might assume the guest experience should take a backseat to financial imperatives. But in an increasingly challenging travel and leisure environment, where the guest experience has been upended by COVID, improving and innovating is key to meeting customer acquisition and retention targets and sustaining long-term growth.
Developing a competitive and distinctive guest experience strategy in the hospitality industry requires conducting several key exercises:
- Using data to identify specific needs-based customer segments
- Identifying the current and prospective value from each customer segment
- Prioritizing these segments to optimize returns
- Understanding the customer journey for each prioritized customer segment
- Creating a robust test and learn strategy to test hypotheses and improve outcomes
Together these exercises will allow hotels, resorts, cruise lines and theme parks to identify the right business opportunities to improve the guest experience. However, having said that, there are elements of experience and engagement which are foundational—rooms should be clean, employees should be welcoming, invoices should be straightforward and accurate, etc. And additionally, the overlay of the pandemic and pandemic recovery needs to factor into experience determinations.
As customers react to restrictions and establish new routines with respect to COVID-19, the perception of the effort made by hospitality to protect their health and safety is key to loyalty. Based on a recent study from Wharton, customers who believe that a retailer has made the maximum effort to protect their health and safety are 2.2x more likely to be promoters than those who believe the retailer made little to no effort. Hospitality would likely see an even greater return on that investment.
Using data to identify needs-based customer segments
The most meaningful customer segments to target for unique experiences are needs-based. According to our own extensive research and work in the field, the guest experience is built on a foundation of meeting customer needs.
Hospitality should use existing customer data to start the process of identifying key behavioral and needs-based differences among their customers in order to identify their important customer groups to target. At first pass, factors to search for and consider in customer data include:
- Travel purposes (business vs. leisure vs. extended stay)
- Travel occasions (life events, visiting relatives, essential travel, weekend getaway, client meetings, etc.)
- Life stages (single professional, family with kids, retirees)
- Guest stay-frequency and volume (time between stays and total number of stays)
If insufficient data currently exists to identify these differences between guests, hospitality companies may need to consider investment in getting such data. Some research methodologies to consider:
- Opt-in programs targeted at specific customer groups to collect data about customers who choose to opt-in
- Direct customer research, like surveys and interviews
- Developing better data capture processes at booking, check-in, check-out, and beyond
Over time, further research and pilot testing may be necessary to develop a long-term guest experience strategy around well-defined segments.
Identifying the current and prospective value from each customer segment
The next step is to understand where the organization is deriving its greatest value and where the greatest opportunity lies. This will help with prioritizing resources and efforts. For example, if business travelers currently make up a very small part of the guest population, there may be low current value. But if there is weekday capacity to support this audience plus higher margins on room rates, and they are frequenting the area but engaging with competitors, they may have high prospective value. Alternatively, families with children may have medium current value and medium prospective value due to rate pressure, seasonality and greater safety concerns due to COVID.
Prioritizing these segments to optimize returns
Understanding where the value currently is and where it could be provides a prioritization mechanism to enable the organization to allocate scarce resources and optimize returns. Then this prioritization can be juxtaposed against the brand vision, organizational imperatives and any constraining factors to finalize the prioritization.
For example, if the value prioritization identifies business customers traveling alone as a high potential audience, but the organization’s brand vision is all-around family fun, the company may want to take a step back and reconsider placing the needs of the business traveler as the top focus. Or if families are a target audience, but the hotel has limited parking with no ability to expand, it may pose a roadblock that would take significant effort to overcome. That doesn’t mean that it should be completely discarded, but it may place this group further down the list of prioritized audiences.
Understanding the guest journey for each guest segment
Once needs-based customer groups have begun to be defined, it’s important to consider how these different groups experience the hospitality guest journey differently. Once a strategy for meeting customer needs is in place, companies must ensure that customers find the process easy and enjoyable, at every stage of their interaction with a brand. Guest journey mapping provides the additional customer insight necessary to provide easy solutions for needs-based guest segments at the right moments.
For hospitality, it’s important to remember that a guest’s experience begins long before they actually interact directly with a brand, when they begin to research and explore their stay options for an upcoming trip.
Planning ways to make every stage of this complex journey easier and more enjoyable for each unique needs-based segment is crucial to delivering a great guest experience. For instance, guests exploring their next trip may find very different programs improve their experience than do customers in the planning stage that are getting ready to travel. And guests who are traveling for business will go through a much different travel exploration process than those planning a vacation. Not to mention the added layers of reassurance guests need during COVID, such as deep cleaning, contactless check-in and capacity limits. Finally, it is the guest’s perception of that experience that will drive booking, engagement and return, so all decisions must be viewed through that targeted guest’s lens.
Because COVID creates new challenges, hospitality must answer the question, “How in this entire journey are we ensuring that all guests will be safe?” Short-term, evolving the guest journey to directly address those needs may be the most critical for all audiences
Creating a robust test and learn strategy to test hypotheses and improve outcomes
Developing the experience is not the end but the beginning. Prior to design, organizations need to clearly quantify objectives that they expect to achieve and also assess the expected financial outcomes associated with the desired experience. This includes identifying leading KPIs which support the stated objectives
Once the new experience is in place, those KPIs need to be relentlessly measured, including evaluating both quantitative trends and qualitative feedback. The experience can then be fine-tuned through a test and learn strategy to continue to improve results and drive positive outcomes.
Forrester’s CX Index measures experience through this matrix:
Many hospitality companies have already begun to improve the experiences that bring guests into their pipeline, thus increasing customer acquisition. For example, trending improvements include:
- Streamlining the digital booking process
- Launching apps offering mobile booking, check-in and room keys
- Adding new benefits to loyalty membership programs
However, guest experience innovations designed to improve customer retention are less common.
Loyalty membership programs often form the bulk of a hotel’s customer retention strategy. However, they represent just one part of the guest’s experience, leaving many untapped options for increasing a guest’s emotional and financial loyalty to their preferred hotel brand.
PK’s 80/20 rule in integrated loyalty marketing states that 80% of customer loyalty is driven via the experience of the core product or service offering, and only 20% can be achieved through traditional loyalty marketing tactics (programs, communications, messaging, etc.).
For hospitality, this means that 80% of a guest’s choice to return is influenced by factors like the quality of their room, customer service, and the ease, simplicity and speed of every element of their stay (from search and booking, to food, fitness centers, transportation, local options, and personalized amenities). Put another way, every level of guest experience needs to be fulfilled to drive long-term loyalty.
To create a good experience at every stage in the customer journey, hospitality has a number of business levers under their control, which they can adjust, target, and personalize to better influence the guest experience. These levers include:
- Properties, services, amenities and features available
- Packages, product offerings, and personalization
- Membership programs for different customer groups
- Marketing and outreach
- Booking processes and channels
- Partner programs
- Staff training and enablement
As hospitality gains a better understanding of their important guest groups, and the behaviors and need-states that define these groups, they are poised to develop targeted experiences for each group—and give staff the training and tools to empathize with these different types of guests. Through a test-and-learn approach to piloting programs, hospitality can further refine what best improves the experience and results for each guest group.
Over time, this process will enable development of a strong guest experience strategy designed to target the right customers in the right way at each stage of the journey. Along the way, hospitality will develop a thorough understanding of key guest behaviors and needs—and the kind of services, packages, programs, benefits, marketing, and personal services that make a difference.
About the author
Stephanie Cohen serves as Senior Loyalty Strategist, Integrated Loyalty Solutions at PK, where she leads loyalty engagements to deliver innovative and bespoke loyalty strategies and experiences to customer-obsessed brands and their customers. Working with clients across industries, she is responsible for ensuring that clients meet their objectives and improve customer loyalty, engagement and profitable behaviors.Tags: Customer Experience, Customer Journey, CX, Hospitality, Hospitality Customer Retention