Marketing Review - Spring 2008 - (Page 52)

NEW CUSTOMER REPORT BROUGHT TO YOU BY THE HSMAI FOUNDATION AND HSMAI’S HOTEL DIRECTORS OF SALES & MARKETING SPECIAL INTEREST GROUP (SIG) A Careful Balancing Act In softening economy, hotels must weight rate increases with consumer acceptance. [ LISA M. ALLEN] he gloomy outlook for the U.S. economy is leaving travelers financially stressed and hoteliers in a quandary: at what rate can they increase hotel prices to help manage rising costs while maintaining strong guest satisfaction and value levels? The latest research from HSMAI/DKSA TRAVELER ACCEPTANCE/IndexSM (TAI) reveals that consumer acceptance levels with hotel stays has leveled off in line with the increasing hotel room rates and the softening economy. T changes in the combination of consumer satisfaction and value ratings over time by trip purpose, lodging segment and hotel brand. While the TAI for high, mid and economy hotel segments showed a steady rising pattern since 2000, acceptance levels began to taper off in 2005 and may continue to remain flat or fall, according to the DKSA data. “If the economy continues to soften while hotel rates increase, we expect traveler acceptance levels to cascade down, based on historic patterns,” says Shifflet. “We’re “Economic downturns heighten people’s sensitivity to costs, so after years of hotel improvements and rate increases their hotel experience expectations are high. –DKSA PRESIDENT DOUG SHIFFLET increase sharply, overall guest ratings are only flattening, with their guests awarding high TAI scores in 2006 and 2007. Travelers choosing to stay in high-end hotels are better able to handle the high room rates, while those who find rising rates too high have already begun trading down (Chart 2-A). In the mid-level hotels, guest acceptance improved significantly from 2000 through 2003, driven largely by increasing product quality acceptance (Chart 2-B). Mid-level hotels are faring relatively well as travelers trade down from high-end properties, putting this segment of hotels in a strong position to retain customers during a flat economy. “Mid-level operators need to be sensitive to the fact that they are now attracting guests who are used to superior service,” says Shifflet. “As occupancy levels start to drop off, the mid-level segment tends to cut costs by “It’s really a double whammy,” says DKSA President Doug Shifflet. “Economic downturns heighten people’s sensitivity to costs, so after years of hotel improvements and rate increases their hotel experience expectations are high. Any hard product or service failure is exaggerated in a soft economy, so hotels need to be hyper aware of the balance between raising room rates and delivering good product value.” As part of the TAI, a new tool to assess how well hotels deliver consumer satisfaction and value, DKSA asks over 50,000 U.S. households each month to rate their most recent hotel stays on satisfaction and value based on a 10-point scale. The HSMAI/ DKSA “Travel Acceptance Index” tracks 52 already seeing trade-out from the most price sensitive, ‘economy’ segment. When the country’s economic picture is bleak, we see trade-down as mid-level guests begin to move down to the economy segment and high-end travelers move more of their business to the mid-level.” Shifflet says high-end guests with more resources hold out the longest and typically slow their rate of travel rather than trade-down to less expensive hotels. But if the U.S. economy is weak long enough, Shifflet says the industry can expect even high-end travelers to trade-down. Not surprisingly, high, mid and economy-level hotel segments are experiencing the economic downshift differently. Even as room rates in the high-end segment About the Series This is the second in a series of articles highlighting the HSMAI/DKSA TRAVELER ACCEPTANCE/IndexSM (TAI) findings. Future issues will look more closely at destination, airline, and rental car acceptance indices. D.K. Shifflet & Associates Ltd. has the industry’s largest historical, syndicated consumer travel database, which includes travel usage data for lodging, destinations, airlines, credit cards, cruises, and attractions. HSMAI MARKETING REVIEW • SPRING 2008

Table of Contents Feed for the Digital Edition of Marketing Review - Spring 2008

HSMAI Marketing Review - Spring 2008 Contents COLUMN: The Online Marketer COLUMN: Success Stories COLUMN: Guest Column Ten Trends Now Shaping the Future of Hospitality Turning the 2008 Consumer Tax Rebates into Hospitality and Travel Sales 25 Extraordinary Minds in Hospitality and Travel Sales and Marketing The Lure of Lore: Connecting with Customers Through a Unique Brand Story A Careful Balancing Act A Meaningful Relationship: How Technology Affects the Connection Between Hospitality Marketers and Meeting Planners SPECIAL SECTION: The 2007 HSMAI Adrian Awards Building Five Star Imagery

Marketing Review - Spring 2008

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