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March 12, 2020

New Consumer Research on the ROI of Guest Experience

Happy woman looking at mobile phone walking out of hotel with lugage

In our 2019 Guest Service study, which analyzed how service and recovery impact the guest experience, we found that only 25% of guests report all issues that impact their guest experience. That was jarring, especially when you consider older research that showed the ROI of guest experience and the correlation between improving online reviews and increased revenue. 

When it comes to driving revenue, hotels face a confluence of challenging circumstances. Increased competition from next generation alternative accommodation providers, rising distribution costs, changing consumer demands and expectations, and unpredictable events that loom over the economy and society as a whole. While some of these challenges are completely out of operators’ control, we wanted to take a deeper dive into the transformative value that can be derived from something every hotel has control over: the guest experience. 

To do so, the team here at Medallia Zingle commissioned the Value of Service & the ROI of Guest Experience in 2020 study, a research survey to more than 1,000 American consumers. Here’s what we found:

In Service, Timing Is Everything

In the hospitality industry, no saying rings truer than this. In fact, 53% of guests say that the speed of response greatly factors into their view of hotel and overall experience. Let’s take a look at just how important speed is to guests today.

When we asked our respondents “When you’re staying at a hotel and have a question about the property or services, how much time are you willing to wait in line or on the phone to get a response?” Sixty percent reported they won’t wait in line or on hold for more than 5 minutes to get an answer to a question. Of those, 26% say they expect a response in under two minutes! While this isn’t necessarily surprising, when a hotel has hundreds or thousands of guests on any given day, handling expectations like these can become daunting. 

No business wants to make customers wait more than five minutes to answer a simple question, but when it’s 3 p.m. and a line is forming at the front desk for check-in, guests calling with questions aren’t going to be the top priority. 

But these are just wait times for questions. To take things a step further, we asked consumers how long they expect it to take for hotels to resolve their issues. More than half (52%) say they expect service issues or problems resolved in under 15 minutes. That’s not a lot of padding when you consider that some issues can be complex, requiring additional staff support or maintenance work. Only 1-in-5 guests say that it’s OK for hotels to take up to a day to solve their problem. 

So what happens when hotels can’t respond to guests or resolve their issues as quickly as today’s consumers want? Consumers have even less motivation to reach out with issues, as the previous survey indicated, and worse, those guests will never come back and could take to social media to air their grievances online. 

If service expectations aren’t met, 22% of respondents report they definitely would not return to the hotel and 55% say they would be less likely to return. On the other hand, 87% of respondents said they would definitely be more likely to return to a hotel if it solved their issue quickly.

Opening the Lines of Communication

In our 2019 Guest Service study we found that there were two main points of friction preventing guests from reporting issues. The first being that there’s “not an easy or quick way to do so,” and second is the fact that guests simply “don’t like confrontation.”

Seeing these findings reinforced what we thought: There’s a lack of communication between hotels and guests. We wanted to confirm that widely held belief and asked,“How often do you communicate with hotel staff during your stay beyond just in passing?” 

It turns out, not a whole lot. In fact, 84% of respondents say they don’t communicate with a hotel more than a couple times during their stay. For 30% of guests, their only interaction with a hotel is at check in and checkout. It’s no wonder issues are slipping through the cracks. 

Hotels aren’t making it easy for guests to communicate, and in turn, guests tune out the hotel and feedback — and the opportunity for improvement — is limited. It’s not surprising that 62% of guests said they’d communicate more with hotels if text messaging was an option. 

As traditional forms of communication have become marginalized, texting has become the most common form of communication for Americans under 50, according to Gallup. It’s fast, convenient and the way we talk to our friends and family. It’s why so many businesses across numerous industries are adopting text messaging as a way to establish direct and meaningful lines of communication with their customers.

For hotels, texting isn’t just a way to prevent issues from escaping notice and improving service response and recovery. Consumers say they are open to receiving special offers and discounts. An astounding 85% of travelers said they’d be likely to take advantage of special offers or discounts for dinner if texted to them, while 79% said they’d likely extend their stay if they were texted a special offer or discount. Guests are also likely more responsive to requests for online reviews if hotels make it easy for them: 39% say they are very likely to leave an online review if texted an easy survey and another 47% are somewhat likely to.

Value of Service and the ROI of Guest Experience

Service has always been a priority for hoteliers. However, with a greater understanding of the expectations their guests have and the friction that keeps guests and hotel teams at arms reach, organizations can improve service and deliver the kinds of experiences that drive more positive reviews and meaningful financial results.

Fifty-four percent of consumers say reviews are extremely important to making booking decisions. An older research study from Harvard found that a 1-star increase in ratings equals a 5% to 9% increase in revenue, while another from Cornell showed each 1% increase in a hotel’s online reputation score led to a 1.42% increase in RevPAR.

Our findings validate this, with 82% of respondents saying they’re willing to pay more for a hotel with a 4-star rating over one with a 3-star rating. On average, guests are willing to pay 9% more for the hotel with a 4-star rating and more than a third of guests (39%) said they are willing to pay 20% or more for a hotel with a 4-star review.

We also found that 86% of travelers say they are more likely to stay on property for food and fun if they are already having a good experience at the hotel. For properties with spas, restaurants and other on-site retail, that translates to more revenue and an increased ROI in guest experience.

Increasing consumer expectations and current events are putting hotels in a position where there is little room for error. However, as our research indicates, with these challenges comes an enormous opportunity. In this age of CX — rather, GX — the hospitality brands that invest in service and deliver exceptional experiences will be rewarded with more loyalty and revenue.

LEARN HOW YOU CAN USE TEXT MESSAGING TO IMPROVE THE GUEST EXPERIENCE AND IMPROVE FINANCIAL PERFORMANCE

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