This story was co-written by Shawn Warmstein and Jeanine Karp.
If you had to sum up the year that was, and the year that will be, in the travel industry in a few words the trending phrase would be less is more.
Why do we say this? From hotels and airlines to the customer loyalty programs, travelers are being offered less.
Hotel rooms are getting smaller, in-flight freebies are disappearing and loyalty programs are scaling back on the points being earned for many travel transactions.
But will this negatively impact customer satisfaction? Not necessarily. Here’s a deeper dive into that question, and how travel companies are attempting to make less equal more.
The Incredible Shrinking Hotel Room
As the recent hotel building boom in major urban destinations across U.S. continues, it should come as no surprise that land prices have been trending upward. In fact, they are expected to rise another 10% in metropolitan areas in coming the year. The result, also not surprisingly is that hotel rooms are getting smaller.
The average size of a hotel room in the U.S. is about 330 square feet, only about eight percent smaller than it was twenty years ago. But over the next twenty years the average hotel room could be half that size.
There has been a new wave of micro-hotel chains such as Pod, Yotel and CitizenM with rooms as small as 50 square feet exploding onto the scene. Light on both size and price, these hotels are marketing the luxury essentials they’re offering like a large and comfy bed and the latest in-room technology with free, fast WiFi, and customers are responding.
After success in New York City, micro-hotels have now are expanding to other cities like Miami, San Francisco and Washington, D.C. where travelers place a premium on both value and smart design. And it’s not just newcomers that are playing up the less is more mindset. Legacy hotel companies are also getting into the action, launching new space-conscience brands and slimming down the footprint of older more established brands
Marriott recently launched Moxy Hotels, a three-star tier boutique-style hotel chain that operates on the smaller rooms (about 180 square feet) with large public spaces concept.
Even all suites brands are getting in on the action. Homewood Suites by Hilton now has a prototype that’s smaller and less expensive to build than previous incarnations. The brand still delivers on its pillars of full kitchens, and separate living and sleeping zones, but in about 20 percent less space.
Do customers feel cheated? Doesn’t seem so, especially when most recent guest surveys show travelers spending the majority of their time exploring their destination and very few hours in their hotel room.
Fleeting Flight Freebies
The past decade has seen airlines shrewdly cut services, flights and destinations to help a turn profit. American travelers have begrudgingly accepted this new normal, with the caveat that a few airlines – Southwest and JetBlue – were still playing by the old rules where most things (sans upgraded services) are included. Not surprisingly, this translated into both airlines being consistently ranked as favorites amongst the flying public.
However, this year saw a change from one of these carriers. JetBlue jumped into the fee fray, now charging for the first checked bag, a previous freebie. In 2015, it is projected that major U.S. carriers will collect a total of $18 billion in fees, so the economic pressure to join their counterparts was certainly something that had to weigh on the JetBlue team.
But the question is, will this impact the airline’s status as a flyer favorite? To study how the public may react, a good case study is Virgin America.
Offering inflight Wi-Fi, a wide array of entertainment and food options, and newer aircraft, Virgin America charges fees without the public seeming to mind one bit, as they are consistently named top U.S. airline. They maintain this by having a distinct voice, remaining true to their brand and by giving people exactly what they want. For JetBlue, this seems like the ideal model since they also feature a clear positioning and product similar to Virgin. All flights get us from point A to point B, but it’s the customer experience that makes a difference and is the takeaway for communication professionals.
Just like with slimmed down hotel rooms, Virgin America customers are paying for what they want. So, in subscribing to the same theory it would seem that JetBlue in all likelihood will remain highly regarded and more profitable, provided what they do deliver, they continue to deliver well.
Despite statements to the contrary, Southwest might be next.
More Doesn’t Mean More for Loyalty Reward Programs
“It’s going to take significantly more loyalty points to receive free <fill in the blank>.” Travelers can attribute this quote to a wide group of airline carriers and hotel brands.
Although at first it might sound like a big loss, the truth is that frequent travelers could finally be in it to win it with these changes.
While studies continue to show that the promise “of miles and points to be exchanged for free flights or hotel stays” rank low when consumers make decisions about what airline to fly and what hotel to stay in, that doesn’t mean travelers don’t like the programs.
In fact, there are some brands in the space already getting creative with these perks. Most recently, Airbnb joined forces with American Express to make it easy to book a home rental with AmEx rewards.
But what does this tell us?
Brands already know a lot about consumers, and that can and will be used as loyalty programs are reimagined. According to Adam Weissenberg, vice chairman of Deloitte LLP, instead of solely focusing on premium upgrades and freebies, travel brands are shifting to “enhancing the customer experience, making rewards personally meaningful, encouraging loyalty with unexpected rewards (to) boost consumer engagement, and ultimately building long-term customer relationships.”
Simply put, personalization will be the next frontier for the travel industry. When you understand your customer, focus on what they want and deliver it really well, less does mean more.