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The Other March Madness

As hotels gear up for the 2012 spring/summer peak travel season the fundamentals
of the hospitality industry remain strong

by Derek S. White
President of Interactive & Media Networks, LodgeNet
April 2, 2012

For many, March, not January, is what marks the true start of the New Year as a young and uncertain spring begins to take hold. But what begins in fits and starts early in the month – a hint of a budding tree here and a bit of green there – is a full-on torrent by month’s end.  A similar “ramping up” can be felt with people too. “March Madness” takes hold while gas prices begin their all-too-predictable rise in anticipation for heightened traveling demand over the summer months.

The hospitality industry is no different as it similarly enjoys – and endures – a March Madness all of its own. But just as some springs deliver more promise than others, spring 2012 is poised to bring plenty of “green” for hotels in the form of new opportunities.  A bevy of good news ranging from average room rate increases to shrinking vacancy percentages all point to a robust spring and summer travel season – which for hotels (minus the holidays) is their busiest time of year.
March’s Full Court Press
March 2012 brings with it new opportunities and a lot of promise.  Unemployment has ticked down, falling to 8.3%, the lowest since February 2009, credit card usage has increased, jumping nearly 11% in 2011 Q3, and many economic forecasts are predicting more than just marginal growth, somewhere on the order of 2% expansion.  And on the heels of that forecast, economists have revised upward the country’s 2011 Q4 GDP to 3%, up from 2.8%.
Even Mickey Mouse, it seems, is feeling optimistic, as earlier this year the cheery mega-rodent welcomed President Obama to the podium in front of Cinderella’s Castle at Walt Disney World, Florida, where the chief executive discussed the importance of tourism to the US economy. “America is open for business,” he told the nation.
If America is “open for business” then so are hotels. People are lining up, waiting to get in.  And I'm not just describing the queue to hitch a ride on one of Disney’s many theme park attractions. Far beyond the confines of the Magic Kingdom, international tourists spent an estimated $140 billion in the United States last year alone.  And the President’s trip to Florida was in part to announce an executive order simplifying and expediting the procedural red tape associated with visas.  It’s just the latest in a number of indicators that presents a boon to the hotel industry as the measure is aimed at streamlining the process through which tourists from emerging economies such as China, India, and Brazil travel to destinations in the US where they stay longer than domestic guests and spend more (averaging $6,000 per trip). 
Improving Economy Creates More Opportunity
The pent up demand, and backlog of visa applications, in addition to heightened domestic travel thanks to an improving US economic outlook, promises a continued uptick in occupancy rates across the country. According to STR, (Smith Travel Research, Inc.), a hotel industry data analyst firm, the average US hotel occupancy rate stood at 59.7% for the week of February 12-18, the latest figures, and is an increase of 1.5% for the same period last year. Similarly, average daily room rates and revenue per available room (rev par) were up 2.9% and 4.4% respectively. 
This positive news will more than make up for any continuing European economic uncertainty, particularly as it relates to Greece’s debt crisis and domestic instability. Heightened room rates and hotel March madness demand also comes down to the increasing reach of “smart” mobile devices in the form of smartphones (whose adoption rates exceed 64% in some US demographics) and tablets – two devices at the heart of any successful hotel brand or chain’s marketing campaign. From the in-room TV or through an in-lobby digital sign, “smart” devices are essential to a hotel’s 2012 full court press promotional efforts.  
The Smartphone Meets the Smart Suite
 As the smart phone meets the "smart hotel,” and extends the service envelope beyond the room, there is the potential for the type of dynamic that will keep guests not only connected but also engaged as they’re able to utilize the type of technological infrastructure that will prove key as we head toward spring/summer 2012 and the seasons that follow. 
Like with other industries, from restaurants to retail to airlines, customers not only expect, but insist on “always on” access to their mobile devices. We say “devices” as plural here as an increasing number of users rely on multiple smart devices simultaneously, performing different aspects of product research, price comparison, and purchase. And just as customers have become comfortable with using their smartphone and tablets to do everything from ordering take-out, to shopping, to booking travel tickets, the recent positive economic news and heightened spending habits suggests today’s mobile and app-centric world’s next frontier is decidedly the hotel.
And the possibilities for hotel “appification,” are especially noteworthy.
To be successful, hotels must recognize that like airlines, a guest’s room stay (or in the airlines analogy, their ticket purchase) is only one portion of the modern revenue stream. Guests are shoppers too, and well-designed hotel apps and mobile sites that capitalize on that behavior are a must. While not addressing hotel-related spending directly, several recent studies by Google, For See and Nielsen underscore that mobile is an essential part of the shopping experience. Depending on the study in question, approximately 29% of smartphone owners used their phones for a “shopping related” activity that could have included buying. The Google study, however, found something even more striking; 41% of respondents researched and purchased a product on their mobile device.
For hotels the data speaks to the unmatched potential that apps and the mobile channel as a whole have on strengthening their business models, offering innovative ways to monetize and reignite both new and old hotel offerings. Examples include mobile applications that enable users to plan and coordinate itineraries within the hotel and TV or mobile-based e/mCompendium pages that facilitate upgrades and other amenities including room service, mobile check-in/check-out, and even augmented reality apps that can generate 3D maps, mixing real-world images with overlapping digital data to direct guests to everything from the restaurant, gift shop and pool, right to the ice machine, if they so desire.
The possibilities are literally endless, and going forward, are vital to hotels’ bottom lines. Even something as simple as turning a guest’s smartphone into a kind of “super universal remote,” able to control television channels and volume, play and organize movies, and even remotely turn on and off lights, or adjust the thermostat, are additional ways that “old” can be repurposed into “new.”
Fundamentally Exciting
As the expectation of fresh towels and wake up calls have become expected staples with real time activity updates and links to useful sites and information, something as simple as offering an in-lobby interactive digital sign with touch-sensitive features that can guide guests to nearby outdoor attractions or show the weather, could be the difference between a four and a five star rating on a review site.  I’m confident that these hotel 2.0 upgrades in software and technology will be worthwhile investments with substantial returns on investment going forward.
The first day of spring is upon us. For hotels, like other seasonal endeavors, the industry’s pre-season is rapidly drawing to a close. Very shortly it will be “game on.” Whether or not the coming spring and summer months unfold with “buzzer beater” excitement remains to be seen. But like any basketball game – March Madness or otherwise – whose opening first quarter is ripe with positive statistics and happenings, the hotel industry is well on track for an exciting, robust, and occupancy-packed season, with the mobile opportunity leading the way.
Let’s play ball and get ready for the hotel industry’s high season opening tip off today!

Derek White
President of Interactive & Media Networks
LodgeNet Interactive Corporation

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