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Opt out may lead to drip pricing

Housekeeping has always been a cornerstone of guest experience, but now it appears hotels rendering opt-out exchanges might change the paradigm behind this integral service.

Known as decontenting, guests are prompted at check-in to opt out of daily housekeeping services with primary compensations including additional loyalty points, room discounts or food-and-beverage vouchers. Many independents and a few major brands, notably select Westin hotels, are already employing this alternative tactic.
Decontenting can pertain to much more than just housekeeping—bathroom amenities are another obvious occurrence, but also think basic cable, breakfasts, newspapers and even the comfort of meeting a person at check-in instead of completing this process via a mobile device. Ask yourself: At what point does a hotel stop being a hotel and become an a la carte service?
The fear is decontenting will act as a preceding action toward drip-pricing accounting models, which means gradually removing all the content from the product then adding surcharges to reintegrate them into the hotel experience. Drip pricing has been widely shown to frustrate travelers and ultimately discourage brand loyalty. You need only look to the airlines as a cross-example of this effect. But decontenting does not directly lead to opt-in drip pricing; it’s a precursor built around the choice to opt-out.
This leaves plenty of wiggle room to argue the merits of decontenting on a case-by-case basis, especially given the spectrum of hotel brands across different price points. Housekeeping is one of the most sensitive cases given the potential for massive labor cost reductions. To help settle this debate, it’s handy to know a shrewd marketing and branding researcher already tackling the matter, and that’s precisely where I stand with Laurence Bernstein, a managing partner at Protean Strategies, a research innovation and brand development company.
From a study conducted earlier this year amongst a sample of 320 U.S. business and leisure travelers covering the gamut of budget, 5-star, boutique and lifestyle hotels, there were many definitive conclusions. First of note is 24% of business travelers and 13% of leisure travelers have been offered this alternative at some point in the past.
Significantly, almost 80% of respondents were willing to barter for the daily cleaning, although sensitivities varied tremendously across all key variables such as hotel type (no frills, luxury etc.), travel purpose (solo business, couples leisure etc.), type of compensation offered (average-daily-rate reductions, F&B coupons or loyalty points) and the amount of compensation to opt-out of services.
Nearly one in three said they definitely would forfeit having their room cleaned everyday in exchange for $10 off room rate. While 45% said they would opt-out of housecleaning for 1,000 extra loyalty points. When you add together the “probably would” responses, the percentages for both of these incentives almost doubled (71% for rate decreases and 79% for more loyalty points, respectively). However, when the reward was listed at 250 points, only about one in 10 said they’d definitely bite.
The least motivating reimbursement came with F&B discounts, which was attributed to the fact that many participants likely don’t use a hotel’s restaurants or bars when traveling. Outside of extra loyalty points, there also appears to be some elasticity in room rate and F&B incentives. A $5 room rate markdown prompted 42% of both the “definitely would” and “probably would” categories. Applied to F&B, $5 only elicited a combined 38% affirmation from those surveyed. So, thinking in general terms, a cap of about 50% of guests are highly inclined toward this tidiness tradeoff, with loyalty points valued most followed by room discounts and then F&B vouchers.
Supplementary questions showed many respondents weren’t into the alternative pricing because they weren’t involved in the points program, rendering loyalty rewards worthless, and that they were traveling on an expense account, so there was no real benefit to monetary discounts. In addition, of those unwilling to consider the housekeeping opt-out, 54% surveyed believed the rooms required daily cleaning and most of the remainder believed the counteroffers simply weren’t high enough.
Of particular importance was the phrasing of the offer, although this didn’t necessarily parallel the underlying reasons for accepting the exchange. It’s de rigueur to wrap daily cleaning substitutions as an environmentally friendly alternative, but only 20% of those surveyed accepted on these grounds; the rest came from those seeing the inherent value in the reward.
Regardless of whether they took the offer, the delivery of it influenced how travelers perceived the hotel. One in two felt better about the property because they believed the hotel was more environmentally conscious; that the rooms didn’t need daily cleaning; that the cost savings were being passed onto the consumer; that merely having the option was a plus; or that it was just nice of the hotel to ask.
Contrarily, describing the offer in the wrong way can alienate guests. Around 11% of respondents cited this form of decontenting was a vessel to improperly cut corners or a blatant suspect of greenwashing, while 39% were unaffected either way.
Taken purely by the numbers, the overall percentages speak in favor of making this alternative available to guests. Contextually, opt-out services are far more lucrative to those staying at budget properties versus luxury hotels. Business travelers were less likely to eschew the daily maid over leisure travelers, with double digit spikes in disapproval ratings as the jump was made from economy and 3-star to luxury and boutique classifications.
After all, if you’re paying upwards of $500 a night, striking $10 off is hardly worth the trouble. However, that same deduction from a $75 rate is a dramatically greater consideration.
It comes down to housekeeping and cleanliness as a part of the overall experience and interaction with the brand. By removing amenities, you are removing physical points of interaction and dehumanizing the hotel. Treating services with an a  la carte approach means guests are less prone to discover the fascinating nuances of your full experience. For instance, a special note and chocolate left on the bed with turndown service. You’ll never have the chance to sweep your guests away and give them the fulfilling stay they truly desire.
As a more transparent comparison, think of an upscale sushi restaurant. Does such an eatery rise in acclaim for its a la carte sashimi menu or for the savory rolls only the chefs know how to make? When a friend recommends a new sushi joint, are they more likely to laud the individual nigiri pieces or the special in-house creations? Keep an ear up the next time someone describes a restaurant and note what they fixate on as the distinguishing factor.
I agree wholeheartedly with Bernstein’s dire warning that too much decontenting will commoditize the hospitality industry into something far similar to that of the airlines, and consequently, a far less profitable beast. Housekeeping opt-outs might be logical for budget hotels as their average guest is more price sensitive and receptive to these tradeoffs. But as you ascend the ladder, differentiated service becomes a key impediment to commoditization and driver for long-term growth.
(Article published by Larry Mogelonsky in HotelNewsNow on December 18, 2012)

Larry MogelonskyOpt out may lead to drip pricing