Hospitality X

THE SECRET REASON WHY DIGITAL TRANSFORMATION ISN’T WORKING FOR HOTELS AND RESORTS

By Robb Wagner

Even as world travel is on the rise, the US hospitality industry is facing more enemies than ever before. To survive, the entire industry will need a secret weapon in the battle to win the hearts, minds and bookings of today’s travelers. It turns out, there is no one-size-fits-all solution. Guests are complicated. But if there is a guiding light, it is that they are consistent in their complexity. 

It wasn’t always this way. There was a time when all travelers expected was a bed, a phone and a writing desk. A television was considered a luxury.1 Even as recently as the 1990’s, some travelers were forced to phone in their reservations because online booking wasn’t available.2 But thanks to the growing affordability of travel, an unprecedented access to guest reviews, the increasing presence and utility of the IoT (internet of things) and the relentless demand for innovation, the entire hospitality landscape has changed and it’s never going back. “Digital transformation” is now table stakes. And in some cases, it’s failing miserably. C-suite executives must step up with bold solutions right now — or risk falling off the map forever.

A PERFECT STORM OF CHALLENGES

U.S. travel from abroad is down. As the U.S. Travel Association reports: America’s share of the international travel market declined from 13.8% in 2015 to 12.2% in 2017.3 And a recent Tourism Economics report shows that there is reason to think that growth will continue to slow throughout 2019.4,5 Private rentals through platforms such as AirBnB and VRBO threaten to compete for the remaining business, and there is speculation that Google and Amazon are scheming to disrupt the industry further.6 Add to this the huge role online customer reviews now play into bookings7, and it is obvious why the industry is scrambling to use digital innovation to win the customer experience game.

“DIGITAL TRANSFORMATION” DOESN’T ALWAYS WORK

For hotels and resorts, turning first-time visitors into repeat guests is all about building relationships. But when it comes to today’s time-crunched, always-connected, experience-hungry traveler, the hospitality industry/guest relationship is best summarized in a two-word status update: “it’s complicated.”

Consumers want low-friction, high-access digital solutions like self check-in, keyless entry, smart rooms, etc. And in today’s economic landscape, the hospitality industry is eager to use automation as a way to meet those needs while cutting costs.8 For example, Hilton has been implementing a digital ecosystem that merges operations and service. Joshua Sloser, SVP, Digital explains, “The experience starts with allowing guests to select their room and use a digital key to enter a room they are able to personalize…everything from room temperature to content.9

It all sounds wonderfully efficient and high-tech. And CMOs and CTOs are throwing money at technology, in hopes of finding the perfect formula for guest retention. In fact, between 2017 and 2018, the number of hotels with heavy tech budgets doubled.10 Technology is clearly part of the answer…but it isn’t the whole story.

As some early hospitality tech adopters start to show results, we’re seeing time and time again that guests don’t want technology for technology’s sake alone. They want technology that addresses needs, but that isn’t a substitute for human service. As a prime example, the world’s first robot hotel recently fired half of its android staff, admitting that it simply wasn’t working for guests.11 

THE SECRET X FACTOR

It turns out, what’s missing from digital transformation is the type of authenticity that only comes from human connections. According to a recent Skift study, high maintenance, highly connected travelers want more humanity in travel.12 On paper, it makes no sense. Travelers increasingly want to be in control of their experiences, they want quick resolution, they want a digital experience that mimics their eco-system at home and at work. So what is it that real human connections are providing? That secret X factor is emotion.

According to PsychologyToday, emotions have far greater influence on customers than rational factors.13 It cuts both ways: if that new digital technology you’ve implemented throughout your hotel impacts guests in a positively emotional way, your brand will see the benefit. But if you’ve set your guests up for an experience that leaves them feeling disconnected — like insincere “welcome” text messages or in-room voice assistants that that offer more interruptions than help — then you’ve not only wasted money on technology, you’ve spent money to drive guests away.

When thinking about any new digital transformation initiative, the C-suite needs to put down their spreadsheets and turn up the empathy. For every single piece of technology, ask yourself, how will this experience make our guests feel? Although it may be uncomfortable to dive into this emotional territory, it is the secret X factor that will determine which brands win and lose at digital transformation.

THE FUTURE IS EXPERIENTIAL TRANSFORMATION

Taking the bold step in thinking about guests’ feelings will ultimately allow the hospitality industry to transition to a digital age where a full staff of humans might be missing, but humanity isn’t. Here are three examples of how brands can think about implementing experiential transformation — a digital transformation that includes the type of emotionally-impactful experiences your guests will love.

1. BE THERE WHEN NEEDED

According to a recent survey, quick problem resolution is by far the most important aspect of customer service for today’s consumers (82%).14 For tired travelers attempting to navigate to their rooms after a long flight, well-placed intuitive technology can make all the difference between getting to bed quickly and happily…and a long, frustrating walk back to the front desk to ask for directions. But deciphering a confusing wayfinding screen or downloading a clunky resort map app isn’t the answer. Your guests might be digital natives, but that doesn’t mean they want digital-only solutions. They crave authenticity and efficacy, and sometimes help from a real human is the best way to solve their problems.What if a QR wall graphic was there to immediately connect guests to a real, live concierge who could help them find their room? Technology, meet humanity.

2. PROMOTE FEEL-GOOD SHARING

In an age where content is king and consumers are much more likely to post negative feedback rather than positive,15 hoteliers must be proactive in their attempts to spark genuinely positive feedback online. Creating on-site selfie opportunities can encourage guests to share photos of your destination, but surprisingly, it doesn’t always lead to positive brand experiences. Recent studies have found that people are less confident, more anxious and feel less attractive after taking a selfie, and the vast majority of their followers would rather look at other types of pictures anyway.16 Creating that type of negative cognitive link with your brand is counterproductive when it comes to establishing affinity and loyalty. So instead, try this at check-in: promote truly positive sharing by surprising your guests with a personalized, digital postcard that is formatted for all their favorite social platforms. This worry-free, brag-worthy content gift will trigger the release of the neurotransmitter dopamine, boosting their feelings of attraction and excitement.17 Now you’ve given that guest a great first experience AND a ridiculously simple way for them to promote your destination with gorgeous, professional photography. That’s a win-win check-in.

3. MAKE IT FEEL LIKE HOME

There are some ways hotels and resorts simply cannot compete with private rentals. But with technology and continually-evolving online entertainment platforms, the industry has a real opportunity to provide that “home away from home” experience. Imagine liberating your TV screens from the constraints of cable and timezones in order to connect with the guests on their own terms. For example, when a customer visits your lounge or restaurant, service personnel could tailor streaming content based on a guest’s favorite sports team or news program. With just a few clicks on their connected POS tablet, service personnel could use technology to cater to a guest’s entertainment preferences while sparking a real-life conversation. That’s the kind of digitally-assisted human experience that leads to lifelong brand loyalty.

Deloitte predicts that an economic slowdown looms and hospitality brands must prepare for a period of decreased demand. Customer experience initiatives are one important way hoteliers can stay relevant during a downturn.18 But they need to be emotionally-impactful to really make a difference. As the late Maya Angelou once said, “…people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” Show your guests you care about their feelings. Design experiences based on positive emotional impact, and then figure out the technology to achieve them (not the other way around). That is the secret to successful transformation.

WANT TO USE EMOTION TO TRANSFORM YOUR GUEST EXPERIENCE?

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Footnotes

  1. https://www.stayntouch.com/blog/hotel-technology-through-the-ages-1950s
  2. https://intelity.com/blog/2016/a-brief-look-at-the-history-of-hotel-technology/
  3. https://www.ustravel.org/system/files/media_root/image/Research_Fact-Sheet_International-Inbound_Market-Share.pdf
  4. https://s3.amazonaws.com/tourism-economics/craft/Latest-Research/Notes-on-US-inbound-TE-1-2019.pdf
  5. https://www.forbes.com/sites/andrewbender/2019/01/31/worrying-trend-as-u-s-loses-international-tourism-market-share/#4abaedaf14d2
  6. https://www.forbes.com/sites/suzannerowankelleher/2019/06/30/google-and-amazons-disruption-of-the-online-travel-industry-is-looking-inevitable/#22bd69dc8e0f
  7. https://www.siteminder.com/r/marketing/hotel-online-reviews/influence-travellers-reviews-hotel/
  8. https://www.hospitalitynet.org/opinion/4086677.html
  9. https://hospitalitytech.com/innovative-hotels-focus-frictionless-ops-service?from=gate
  10. https://hospitalitytech.com/2019-lodging-technology-study-hotels-gear-age-augmented-authenticity
  11. https://www.hotelmarketing.com/articles/worlds-first-robot-hotel-loses-love-for-robots
  12. https://skift.com/2017/01/13/travel-megatrends-2017-humanity-returns-to-travel/
  13. https://www.psychologytoday.com/us/blog/inside-the-consumer-mind/201302/how-emotions-influence-what-we-buy
  14. https://www.liveperson.com/connected-customer/posts/ideal-online-experience-what-it-takes-consumers-click-not-abandon
  15. https://www.inc.com/andrew-thomas/the-hidden-ratio-that-could-make-or-break-your-company.html
  16. https://blog.allpsych.com/the-psychological-toll-of-taking-a-selfie/
  17. https://splinternews.com/science-explains-why-surprise-brings-us-pleasure-1793846784
  18. https://www2.deloitte.com/us/en/pages/consumer-business/articles/travel-hospitality-industry-outlook.html

Redefining Retail

USING EXPERIENTIAL TRANSFORMATION TO SAVE AMERICA’S BRICK AND MORTAR STORES AND MALLS

By Robb Wagner

Every moment of crisis is an opportunity. When a threat arises in the primal world, we have two choices: Fight or Flight. But smart C-suite leaders know that in business, there’s a third option: Fight, Flight or Transform. Transformation is how companies like Netflix1 and IBM2 continue to remain relevant in a rapidly changing consumer landscape. Transformation is how Play-Doh3 went from being a 1930’s wall cleaner to one of Hasbro’s top-performing toy products.4

And transformation is how America’s brick and mortar stores can go from barely-surviving to traffic-driving in the next five years. 

What analysts are now calling the Retail Apocalypse has been a topic of much speculation. Thanks to a perfect storm of factors — the Great Recession, a digitally-inspired exodus from brick-and-mortar shopping, changing cultural attitudes and values — it is estimated that 75,000 stores will close by 2026.5

But not all retail stores are struggling. Some are even gaining market share.6,7 To be among the profitable few, retailers need to take an honest look at their own purpose and the consumer needs they meet. It is only in examining the past and taking stock of the present that we can write the future.

The very first mall… wasn’t. As far back as the eighteenth century, the word “mall” meant a “shaded walk serving as a promenade.8” This definition would serve it well until 1954, when architect Victor Gruen debuted what is considered America’s first modern indoor shopping mall in Edina, Minnesota. He called it a “mall” because it was modeled after the fountain-filled promenades and gathering spaces of his youth in Vienna, Austria.9 In response to growing post-war suburban sprawl in the U.S., Gruen had envisioned a purposeful “third place10” where Americans could spend quality time in peace, away from traffic and smog. And virtually every shopping mall built since has been modeled after that first creation. 

But here’s where this history lesson gets really relevant: the inventor of the Great American Shopping Mall meant for it to be about so much more than shopping.11 Gruen originally envisioned malls as mixed-use facilities that could address environmental, commercial and sociological problems. He imagined them as true mixed-use spaces, filled with shops, apartments, offices, medical centers, child-care facilities, libraries and bomb shelters (it was the fifties, after all).

Although the consumer-driven, retail-heavy model Americans got instead was ultimately a success for several decades, it’s now time for the industry to do some serious soul-searching.

HOW TO SURVIVE: REINVENT OR REVIVE?

One effort to save shopping malls realigns with Gruen’s original intent. “You’ll find DMVs, town halls, and libraries in malls increasingly… Main Street was killed by the mall, so developers are trying to build new downtowns inside the malls,” explains June Williamson, author of “Retrofitting Suburbia.12” 

The average shopper used to spend hours in a mall, but today they spend less than an hour.13 Housing non-retail services is one way to lure consumers back into malls and keep them there. But is it really an effective tool to promote retail sales? After being held captive in a line for twenty minutes waiting on your Driver’s License renewal, how inspired do you feel to buy a new outfit?

Savvy developers have realized that in order to create a successful retail environment, entertainment must be built-in. According to Richard Florida, author of The New Urban Crisis, “…the stores that are drawing in customers are those that emphasize experiences.14

 One case in point is The Grove in Los Angeles, an outdoor shopping mall complete with a mini main street, retro-style trolley, dancing fountain and Summer concert series. You could say it’s been a success — the center sees more visitors per day than Disneyland.15 Another is American Dream in New Jersey, an upcoming three million square foot center that boasts a ratio of 55% entertainment to 45% retail. When completed, it will house a ski run, DreamWorks water park, Nickelodeon Universe theme park, Legoland Discovery Center, ice-skating rink, Ferris wheel and indoor garden.16,17

According to Uma Karmarkar, a neuro-economist at University of California San Diego, these types of fun activities attach a brand memory to a positive experience, potentially giving the same type of adrenaline-rush that happens when one makes a purchase.16 But does all that adrenaline lead to actual retail purchases? The Walt Disney Company’s financial statements say that it does. Their theme park retail sales continue to drive significant revenue growth18 at a time when America’s overall retail purchases see only minor gains.19

But here’s the thing. You don’t need to build a theme park to generate more store traffic. Here are 5 ways you can use the power of experiential transformation to enhance your environment and boost revenue.

1. BECOME AN ENTERTAINMENT LEADER.

Marketing expert Sally Hogshead puts it bluntly: “Different is better than better.20” As more online and offline experiences compete for a slice of consumers’ attention, retailers need to continually innovate in order to stay relevant. Cruise lines, in a parallel industry you could call the “mall of travel,” have seen steady growth, thanks their agenda of relentless innovation.21 Take a cue from their playbook and invest in a flexible entertainment infrastructure that includes LED screens and convertible spaces in order to deliver fresh entertainment that keeps shoppers coming back for new experiences.

2. REINVENT USEFULNESS. 

The best business innovators solve a problem.22 For shopping malls losing sales to online retailers that are perceived to offer lower prices23, solving consumers’ budget-woes and unemployment issues could offer a surprisingly synergistic fit. Housing co-working spaces and job training centers is one way to support and build your customer base, but replacing retail tenants with corporate ones isn’t the only option. Hosting one-off seminars, immersive tech training experiences, job fairs and networking events is another. At a minimum, boosting your work-friendly infrastructure (wi-fi, laptop lounge spaces, 360o teleconferencing rooms and caffeinated food court options) will help attract mobile workers and business travelers to your facility.

3. BE SHARE-WORTHY.

Create experiences that are meant to be seen, heard, felt & shared. At Stimulated-Inc., we call these Ultra-Sensory Experiences™. Selfies and online sharing aren’t going anywhere, and full-fledged Insta-destinations are now being built around them.24 Installing a few wall graphics isn’t a sustainable way to garner repeat visits, but it does provide a clue about where to start. Today’s shoppers are inherently visual. But to create an ongoing share-worthy relationship with them, your installation should be both flexible and emotional. According to a recent Deloitte report, “In an industry shifting toward experience-based models, retailers should look to make emotional connections, not just transactional ones.25” For CEOs and CTOs, delving into the world of “feelings” can seem like shaky ground. That’s why it’s imperative that you work with partners well-versed in the language of storytelling and emotion.

4. INSPIRE ACTIVITY.

In the middle of what many consider to be a public health crisis, malls could offer a unique solution for the nearly two thirds of America’s population that is overweight26. Mall fitness, in the form of “mall walking” isn’t new. But creating transformative, virtual in-mall experiences where guests could spin through through the backroads roads of Europe, meditate in Crater Lake National Park or dance at a pop concert could incentivize healthy activity and draw more consumers to shopping centers.

5. WELCOME FAMILIES.

Most children’s areas are superficially-updated versions of generations-old playground designs. And they are no match for today’s handheld devices. But opportunities abound for creating original, twenty first century family-friendly IP that can attract and sustain repeat visits. Imagine a character on screen that is able to speak directly to a young mall visitor in real time. This illusion erases the line between fantasy and reality, and is achieved by a live actor who controls the character remotely. This is just one example of how shopping malls could leverage technology and storytelling to implement a uniquely engaging experience.

The bottom line is that in order to redefine themselves, retailers need to throw away the blueprints of the past — and the present. Although it might feel reassuring to cut and paste what’s working for other malls and stores, this much is certain: your content must be 100% original and relevant in order to succeed. What drives visits and sales for a small town in Minnesota will be different from what works in an urban district in California.

It’s time to get comfortable with the fact that modern retailers will need to become entertainment companies in their own right, working with knowledgeable partners, investing in flexible infrastructure and deploying the technologies and stories that are specifically suited for their target market and experiential goals. They’ll need to work from a creative strategy driven by customer research, and build new blueprints based on the relentless pursuit of authentic, emotional connections. 

The survival of retail is at stake. But if shopping malls succeed, they’ll go beyond merely pursuing the perfect anchor store… to actually becoming an anchor for their communities. 

LEARN MORE

WANT TO REDEFINE YOUR RETAIL ENVIRONMENT?

LET’S TALK

Footnotes:

  1. https://www.businessinsider.com/how-netflix-recreates-itself-2016-9
  2. https://www.forbes.com/2010/07/07/ibm-transformation-lessons-leadership-managing-change.html#6029636a3afb
  3. https://www.huffpost.com/entry/play-doh-was-originally-meant-for-something-very-different_n_5ac51703e4b09ef3b24300db
  4. https://hasbro.gcs-web.com/financial-information/quarterly-results
  5. https://www.washingtonpost.com/business/2019/04/10/retail-apocalypse-now-analysts-say-more-us-stores-could-be-doomed/
  6. https://www.businessoffashion.com/articles/intelligence/a-new-model-for-shopping-malls
  7. https://www.businessoffashion.com/articles/intelligence/a-new-model-for-shopping-malls
  8. https://www.etymonline.com/word/mall
  9. https://www.smithsonianmag.com/arts-culture/death-and-rebirth-american-mall-180953444/
  10. https://en.wikipedia.org/wiki/Third_place
  11. https://99percentinvisible.org/episode/the-gruen-effect/
  12. https://www.businessinsider.com/what-will-happen-to-closed-malls-2017-12
  13. https://www.businessinsider.com/what-will-happen-to-closed-malls-2017-5
  14. https://www.citylab.com/design/2017/12/the-great-retail-retrofit/548753/
  15. https://www.architecturaldigest.com/story/palisades-village
  16. https://www.nytimes.com/2019/05/30/fashion/disney-fashion-lady-gaga-tyra-banks.html
  17. http://www.americandream.com/press/american-dream-wwd_10-30-18.pdf
  18. https://www.thewaltdisneycompany.com/the-walt-disney-company-reports-first-quarter-earnings-for-fiscal-2019/
  19. https://tradingeconomics.com/united-states/retail-sales
  20. https://www.howtofascinate.com/different-is-better-than-better
  21. https://www.f-cca.com/downloads/2018-Cruise-Industry-Overview-and-Statistics.pdf
  22. https://www.inc.com/greg-satell/if-you-want-to-innovate-you-need-to-focus-on-this-one-thing.html
  23. https://www.bain.com/insights/perception-beats-reality-in-pricing/
  24. https://www.cbc.ca/news/business/instagram-playgrounds-business-1.5024545
  25. https://www2.deloitte.com/us/en/pages/consumer-business/articles/retail-distribution-industry-outlook.html
  26. https://blogs.scientificamerican.com/observations/the-biggest-health-problem-obesity/