Chekitan Dev, associate professor of strategic marketing and brand management at the Cornell University School of Hotel Administration
Hotel guests expect some freebies, whether it’s bottled water or a well-equipped fitness center.
The challenge for hotel owners and managers, then, is to select the freebies that appeal to their customers, give them an edge on the competition, and provide the highest return on their investment, according to research available from the Center for Hospitality Research at the School of Hotel Administration in the Cornell SC Johnson College of Business.
As explained in the study, “Hotel Brand Standards: How to Pick the Right Amenities for Your Property,” while some amenities boost hotel revenues by increasing initial sales and others influence repeat business, companies must take a close look at the return on investment from each “free” product or service before making a decision on whether to offer it.
In the paper, my colleagues and I note that, despite the widespread use of free offerings, customers want even more while hotel owners complain of “amenities run amok” and resist investing in them. The other authors of the report are Rebecca W. Hamilton of Georgetown University and Roland T. Rust of the University of Maryland.
The hotel industry provides fertile ground for such a study because of the ways in which competing interests within the industry grapple over amenities. Brand managers seem bent on engaging in “amenity wars” as they compete to hit on the next offering that will drive business to their properties, increase market share, and engender customer loyalty; operators resist implementing new amenities because of added service-delivery challenges; and owners resist paying for them for fear of eroding their profit margins.
Our report focused on three common amenities: in-room bottled water, Internet access, and fitness-center availability, using data provided by a global multi-brand hotel company. We found that free Internet access generates a positive return on investment by its impact on attracting first-time guests, bottled water provides a good return on investment by its impact on increasing repeat guests, and a fitness center has little impact on attracting initial or repeat customers in the short run (one year) but can yield a positive return on investment over a longer term.
The three biggest implications for business owners, operators, and brand managers from our research are that hoteliers should consider the long-term, and avoid investing in amenities based simply on initial sales projections; positive—or negative—returns on an amenity may be site-specific; and business managers are advised to conduct market tests of amenities at the brand level.
Our methodology can be adapted quite easily to compute the financial returns of offering amenities in related industries. For example, service providers in the airline and restaurant industries maintain detailed customer databases tracking customer purchases and revenues over time. By offering test amenities on selected routes and locations, they could measure the effect of the amenity on both initial and repeat purchases.
Chekitan S. Dev is an associate professor of strategic marketing and brand management at the Cornell University School of Hotel Administration.