Forget star rating… we now have 3 types of customers…

With the potential of another strong Staycation year, what do our customers really want, and how do we meet those needs in what is quite frankly, yet another challenging year…

In my mind, our customers have moved away from judging our product or making a decision on where to stay based on star rating. My thoughts are that we now have 3 very distinct customer types and we as hoteliers need to understand that if this is the case, then we should evaluate our product offering and work out where we sit.

We are hearing in the news every day (and quite frankly I feel that the media is partly responsible for talking us into a recession…) that there is a cost-of-living crisis. I am not denying that this is true and that almost every cost, in almost every part of our life is increasing but as always that rise in cost affects everyone differently, hence my thoughts on 3 very distinct customer segments:

Customer Segment 1 are the customers that have available funds, and they are very happy to spend them. I am not referring to the super-rich but I am referring to folks who have built up savings over the pandemic when most of us had nothing to spend our cash on, or perhaps the lucky few that have a pension pot (the likes of which will never be seen by anyone under 55!), the customers who own their own homes and mortgage payments are a thing of the past or simply our wonderful customers who like to travel and are willing to save for that amazing experience.

These fantastic, but often elusive customers are looking for luxury – an experience and they are willing to pay for it. The lucky hoteliers who attract this high-end segment may have ADR’s that many of us can only dream about, but they have their own challenges. Balancing rate and occupancy for one and of course, these properties not only need to be fully staffed, but they also need to be over-staffed! A huge challenge in itself.

Jumping to Customer Segment 3, we have the opposite type of guest. They may not be cash-rich, but they are still very valuable to many of us. These guests want to travel but they need to travel on a budget and that budget is getting tighter. If your hotel falls within the budget sector then, like segment 1, I believe that you are in for a strong summer which will hopefully push into Autumn.

But for me, the segment which will be challenged most will in fact be the vast majority of us who fall between two stones… Customer Segment 2 – If you are a 3-star or 4-star property, you are not only in that middle market, but you are in a market which is often ‘oversubscribed’ and therein lies the problem. Not only will you be faced with the occupancy v rate question, plus the staffing crisis but your biggest challenge will be how on earth to stand out from the crowd.

There is no doubt that with rail strikes and chaos at the airports, our customers are warier of travelling abroad. The thought of cancelled flights or being stranded somewhere has the potential of making 2022 another boom Staycation year. But again, using the phrase coined by my wonderful friend and colleague Janel Clark, these guests are ‘Reluctant Staycationers’. Our wonderful customers want to travel and have money to spend… but they are choosing to stay close to home. But what do they want? Well, they want that amazing experience that they thought they were going to have in that gorgeous hotel in Tenerife or Rome or Dubai. And that, quite frankly is what most of us are missing… We are not providing an experience…

This middle segment needs to strive to not only meet but exceed guest expectations and believe me, I am not saying this lightly as I absolutely understand the challenge of rising costs and staffing, but what are the alternatives if we don’t? There will be hoteliers who risk going out of business and many will simply struggle with cash flow but there is a solution…

The solution is to sit down today and ‘walk’ every single part of your customer journey. Assess how you are currently doing things through every touch point and then work out how you can make it better. From the messaging on your website to the design of your rates and packages. From the service level in your restaurant, to the greeting on arrival, we all need to ‘up our game’. Our customers are looking for an experience. They want a memory. They want that ‘Instagram moment’ and something to cherish and perhaps even brag about!

We also have customers who are now much more environmentally conscious, so they want to spend ethically. They are making decisions on the food that they eat and making a choice of hotel based on their carbon footprint or their social responsibility. Where do you sit?

You don’t need to be all things to all people, but choices do need to be made. Whether that it is shouting about what you give back to your community and your environmental policy or the amazing experience that your guests will have, please do something. Even if it is as simple as designing great new packages or improving your guest communication, if you are a hotel that is currently positioned in Segment 2, then changes do need to be made. And most importantly, these changes should not be about dropping price. It is well documented and proven that dropping rates does not stimulate demand and pricing is often no longer in even our customer’s top three decision-making criteria.

If there has ever been a time to hold rate it is now but alongside holding rate, we all need to improve guest experience. I could list dozens of ideas that I have seen work recently when a hotel decides to set itself apart but my best advice is to take inspiration from others. Not necessarily those within your competitive set but market leaders… Look to amazing hotels in other countries and cities. Check out what market leaders are doing and adapt those ideas to suit your needs. If something works, great but don’t be afraid to try something new. If it fails, fail fast and move on…

The first line in this piece, mentioned a challenging year and there is no doubt that 2022 yet again will throw challenges our way but if the pandemic, Brexit, furlough and everything else in between taught us anything, it is that we are the most resilient industry in the world. Many of us have come through the past two years stronger than ever and whilst 2022 might have thrown us yet another curveball, I know that we will rise to the challenge. Why wouldn’t we? We are, after all, the best industry in the world!