2022 Will Be A Year Of Experimentation For Hotels As They Reconsider Guests' Needs And Wants
The spread of vaccinations throughout much of the past year reignited leisure travel in many cities and brought the hospitality industry back from the brink. But business travel remains largely suppressed, and with the omicron variant officially in the U.S., hotel operators may have to continue without that key source of revenue for even longer.
And the pandemic isn’t the only factor limiting revenue.
“I can remember when room service was a big moneymaker for hotels, but all that has dried up,” according to Maverick Hotels and Restaurants CEO Robert Habeeb, who in March opened the 223-room Sable at Navy Pier hotel on Chicago’s Navy Pier. “With the advent of Grubhub and Uber Eats, guests now have the option of picking their favorite restaurants and having the food brought to their room.”
The costs of operating a hotel are rising as well, creating yet another challenge in 2022, said Andrea Grigg, senior managing director of JLL’s Hotels & Hospitality Group. Labor is the largest fixed cost in a hotel, and the widespread shortage of available workers has led hotels to pay higher wages and spend more on human resources to address higher turnover. Supply chain troubles subtract even more from the bottom line.
“The list goes on and on, and as an industry, we need to make sure that if these cost increases are permanent, we can figure out ways to cover it,” Grigg said.
Many hotels are bringing in new revenue by adopting practices now common among airlines, which typically charge customers for baggage, meals or drinks, along with other services once provided for free. Grigg said going that route can be an efficient way to boost revenue, as long as the fees are transparent and reasonable. But operators should be wary of annoying customers with too many charges and make sure to bring in additional revenue by also offering new amenities and programming.
Hotel owners say creating new perks for travelers will be one of the big tasks of 2022. And many of those add-ons may take advantage of how the pandemic has changed people’s behaviors and work habits. Some hotels, for example, are providing new high-tech tools that allow guests to work out in their own rooms and avoid possibly crowded fitness centers. And the new hybrid work environment may mean business travelers don’t have to rush back to the office, giving savvy operators the chance to entice them to stay longer, perhaps for the upcoming weekend.
Sable's Habeeb said it is going to become far more common for hotels to provide sweeteners such as apps that can be used to order in-room massages or deliver Peloton bikes and other advanced fitness equipment to guests’ rooms. But the pandemic is just one factor driving this, he added, as many in the industry were launching such experiments several years ago.
“These are not new features; we’re just taking better advantage of them,” he said.
Other hoteliers agree.
“We did not view the pandemic as a change agent for our business model, rather an accelerant to areas we were already investing in beforehand,” said Ernest Lee, the North American managing director of development and investments for boutique hotel operator citizenM. “For example, really ramping up the digital journey for our guests, which ranges from offering a great mobile app to better ways to build more complete customer profiles.”
His firm plans to open five new U.S. hotels in 2022, including the 280-room citizenM Chicago Downtown at 300 North Michigan Ave.
The Residence Inn Chicago Downtown/Loop, a 381-key hotel at 11 South LaSalle St., will offer, for an extra charge, rooms designed to accommodate workout equipment such as Peloton bikes and free weights in the new year, according to Prime Group CEO Mike Reschke.
“You’ll find a lot of people want to work out in the privacy of their room rather than going down to a fitness center at 7 o’clock in the morning when many of those machines are being used,” he said.
But as guests occupying these rooms will be charged around $40 extra, Reschke said he doesn't expect such perks will end up being big moneymakers. Instead, it is a way to entice people back to hotels after a long absence and keep them coming back.
“This will ultimately drive occupancy and higher room rates,” Reschke said.
Holding onto guests for more extended stays will be another key to thriving post-pandemic, he added. Many of those extended stays could come from converting business travelers into leisure travelers. And even though the spread of teleconferencing may permanently shrink the overall number of business travelers, it also means those who do travel aren’t tied to an office anymore.
“Take the typical young couple in their 30s with no kids, and one of them has to attend a conference,” Reschke said. “Both can now travel and work remotely at the hotel, and then spend the weekend in Chicago, which has proven year after year that it’s an attractive place to visit.”
Reschke said he expects to offer more weekend packages and deals. CitizenM also plans to explore ways to hang onto this new breed of customers, according to Lee, although there are still many unknowns.
“We are particularly interested in two second-order effects of hybrid work,” he said. “The first is volume and length of stay: Does teleconferencing cause the road warrior to decrease the number of overall trips but now add a night or two when they are traveling?”
In addition, Zoom calls and other teleconferencing tools may allow work teams to spread out and live in other cities rather than everyone commuting to the same office each workday.
“And does this now cause them to fly in and stay at hotels every month in order to get together in person?” Lee said.
Habeeb said many hotel owners are also asking such questions. All the new technology available, along with the pandemic’s effects on both business and leisure travel, means 2022 could be a year of experimentation as the industry tries to better understand the needs and wants of guests.
“I don’t think the industry has answered that yet,” he said.
Part of the answer, though, will surely include more and better services and amenities, Habeeb added. Guests have mostly been patient throughout the pandemic, accepting that labor shortages meant hotel restaurants and bars were forced to shorten hours, and sometimes service wouldn’t be as fast. Those days are ending, however.
“I don’t see that as permanent,” Habeeb said. “They want the hotels to be fully staffed and to get great services in return. We shouldn’t make ourselves believe guests in the future will be willing to pay more for less.”