The Bipolar World of Hotel Marketing
The Rip-off vs. a Ripping Good Time
March 16, 2006: Vol. 2, Issue No. 21
IN THE NEWS
Resort Fees: Hotel Rate May Not Include All the Charges
Hotel resort fees are making a comeback. With the decline in the lodging industry after 9/11, the fees, which cover everything from the use of a pool to housekeeping tips, began to vanish—if not from hotels' policies, then from guests' bills. A polite complaint was usually all it took to have a fee waived. No longer.
—Christopher Elliott, The New York Times, March 12, 2006
When Don Jackson and I sat down at his kitchen table to create an outline for our book, "2,239 Tested Secrets for Direct Marketing Success," Jackson came up with his Immutable Second Commandment:
You are in the business of acquiring customers (or donors) and then continually delighting them.
The hotel chain, RockResorts, boldly advertises a room at its Lodge & Spa at Cordillera in Colorado for $452 per night and then tacks onto the final bill a taxable "6% Resort Fee." The additional $27.12 is for high-speed Internet service, maid service, hotel concierge, valet parking, use of the spa and shuttle ski service.
An additional 4.4 percent tax takes the nightly cost of the $452 room up to $500.20 per night.
Does the customer feel satisfied or delighted?
A better term might be ripped-off.
It's not a lot of fun to be lied to in an advertisement. The hotel that adds a $27 "resort fee" is playing "Gotcha!"
RockResorts isn't an isolated case.
Writing in The New York Times of Aug. 30, 2005, Melinda Ligos listed some outrageous fees that top-of-the-line hotels are tacking on to the final bill:
Restocking fees for the minibar of $2.50 to $5.00. Thus if you open a $3 can of Coke, the real cost can be $8.00.
Room service fee of $7 plus 18 percent gratuity added to the bill.
A $12 maid service charge in Phoenix.
Faxes that used to be a buck a page are now up to $5.
One hotel advertised free high-speed Internet service and then charged $12.95 to rent the Ethernet cable.
According to CFO Magazine, some hotels are including automatic charges for bellhops and housekeeping and cites Sheraton as adding an automatic charge for charitable contributions.
Peter Greenberg, travel editor of NBC's "Today" show stayed at one hotel that charged him $15 for a FedEx delivery, and travel commentator Rudy Maxa was once charged for an in-room safe he never used.
According to PricewaterhouseCoopers consultant Bjorn Hanson, the hotel industry picked up an extra $1.4 billion from "nontraditional sources" in 2005, up from $1 billion in 2000.
Accountants love the idea because it's free money.
A marketer has to hate it. The idea that every time customers turn around they are being nickel-and-dimed for services that should be expected when paying hundreds of dollars a night for a room is simply wrong-headed.
A guest who leaves feeling ripped off will stay elsewhere next time.
"To Loiter, Perchance to Spend"
This was the title of Drew Limsky's marvelous March 7, 2006, New York Times piece that described how a number of hotels are making a real effort to create an ambiance that not only delights customers but actually persuades them to hang around and spend more money in the hotel, rather than going out. Some examples:
A Friday and Saturday night all-you-can-eat chocolate bar at the Peninsula Chicago.
A teatime harpist in New York's Ritz-Carlton and a jazz trio at the St. Regis, while the Mandarin Oriental in San Francisco opened a sushi bar with a jazz pianist nearby.
A Humphrey Bogart film festival at the Four Seasons in Miami and Fellini movies at London's Baglioni Hotel on the first Sunday of the month.
Beautiful art on the walls of public spaces rather than behind glass in lobby shops.
The Hilton Model
My wife, Peggy, president and publisher of the Target Marketing Group, travels a lot and is a Hilton Frequent Guest. Hilton treats her very well. Over the years, she has piled up points. When she stays at a Hilton, she's always made to feel special.
Last December, she cashed in some points and we had a wonderful complimentary stay at the Hilton Vienna Plaza on the Ringstrasse in Vienna, Austria, where we could hop a streetcar and be anywhere in town in a few minutes. Included were free breakfasts, and afternoon drinks and hors d'oeuvres in the concierge lounge.
Would Peggy consider staying in a non-Hilton hotel? Only under duress.
When I got into direct marketing 40 years ago, the rule of thumb was that it costs five times more to sell something to a new customer than to an existing one. My guess is that that number is higher today.
Chuck Cavannagh, the 6' 5" impresario of marketing conferences, came out of the insurance business where the working acronym is TARP—Total Annualized Renewal Premiums.
The other term for it is "lifetime value." What is the total amount of money that a customer will spend with you over the entire period you will be doing business together?
In the hotel business, it can be substantial. A guest who is loyal to a chain and runs up bills of $10,000 a year, could spend $100,000 over 10 years.
Is it really smart to charge this person extra for maid service or $12.95 per day rental for a high-speed Internet cable?
If you believe that, you're in the wrong business.
The Rittenhouse Model
Philadelphia's Rittenhouse Hotel manager, David G. Benton, has empowered all his 289 employees to make virtually any decision that directly affects a guest so long as it "isn't illegal, immoral or dangerous."
Front-desk manager Lucia Pernot was quoted in the Philadelphia Inquirer as saying, "If a couple here for their anniversary is checking in and they say, 'This is the first time we've been away from our kids,' you don't have to ask about upgrading them to a suite. You just do it."
As a result of this can-do corporate culture, the Rittenhouse gets huge repeat business. Celebrities that come to Philly stay at the Rittenhouse. Among them: Tom Hanks, Bruce Willis, Mary Tyler Moore, George Bush, Gerald Ford and Luciano Pavarotti. Benton's personal welcome note to conductor Ricardo Muti was in Italian.
European business moguls from Paris, London, Frankfurt, Madrid or Milan will find that morning's edition of their hometown newspaper under the door of their room when they wake up.
When Mary Tyler Moore arrived with her dog, she found flowers and a sumptuous gift basket. Her hound was presented with its own gift basket of doggie treats and a water bowl personalized with its name.
Does this TLC pay off? In 2004, the Rittenhouse placed second among urban hotels with sales per room of $166,091.
Takeaway Points to Consider
- In the mid-1980s, consultant Axel Andersson used to visit us in Stamford, Conn., to go through our direct mail archive and talk marketing. For his first visit he stayed at Stamford's premier hotel, the Marriott. On his next visit, he asked me to make a reservation for him at the Marriott. When I called, the telephone rep started asking me how to spell Axel's name and the details of his address and phone number. I said, "Wait a minute, Mr. Andersson stayed with you four months ago. You have all of his information in your computer." "No we don't," she replied. "We don't keep records of our guests." I was stunned.
- I get the sense that the accountants who institute these ugly little fees guaranteed to upset customers and bring in short-term gains don't think in terms of lifetime value.
- I also wonder if hotel chain accountants are smart enough to measure the acquisition cost of each first-time guest. If they knew the big bucks they had just spent to put a bod in a bed, would they tack on all these hidden charges and risk never seeing the person again?
- Big surprises on a bill can mean bad word-of-mouth, which can be poisonous, especially with the instantaneous worldwide reach of the Internet.
- In direct marketing, it's standard practice to break even (if you're lucky) or lose money on the first sale and only start making profits on subsequent transactions.
- Successful marketers know that profits are to be made by delighting existing customers and persuading them to spend more money.