Hilton, Marriott, Hotels – Customer Experience Index (CXi) & its quantifiable benefits

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Customer experience as a concept is not alien to the hotel industry; some might suggest that Hotel industry actually invented customer experience. From its star-ratings to brand consistency as envisioned by Marriott, Hilton, Intercontinental, etc. to standardized ratings by TripAdvisor, hotel business has always been about creating experiences – positive and memorable. From weddings, birthdays, conferences to prom nights and honey moons, almost every consumer of the world has had some of his/her most memorable experiences in a hotel. So what is this hype about Customer Experience and can a hotel really make more money out if it? At least Forrester thinks so…

Forrester’s Harley Manning in his blog dated Nov’ 2012, has defined Customer Experience as “How customers perceive their interactions with your company”. It encompasses all touch-points while aiming to distinguish customer service and marketing from Customer Experience. Forrester has measured Customer Experience Index (CXi) since 2007 across 12 odd industries including Hotels. Hotels typically perform well in these measurements and are also one of the greatest benefactors from further improvements. Of the 150+ brands covered in the 2012 measurements, the “Good” performers from hospitality included “Hampton Inn/Suites” and “La Quinta Inn & Suites” among the top 10 Customer Experience brands. Additionally, Forrester estimates that if a hotel were to move from a below-average CXi score to an above-average score, it could see more than $1.3 billion in total revenue benefit. This roughly translates to slightly over 6% in projected increase of topline. Really? For business already excelling far beyond any others in terms of customer experience, is such a significant increase even possible?

Whether you like it or not, change is a good thing. It creates possibilities. With internet, the information and the digital age, rise of the Gen Ys and Zs, things are more dynamic than ever. With multiple channels of customer experience and competition nipping at the heels of every major hotel in the world, it is no longer about just consistency and quality. It is also about differentiation and expectation. So where do we start?

First, let’s look at the different channels of customer experience:
1. Physical channels – Print Ads, Billboards, on-premise, in-room, restaurant, facilities, employee interactions, etc
2. Digital channels – Delivered online through internet, via a laptop, Mobile, Tablet, etc. This is sometimes specifically referred to as “Digital Experience”

Hotel Customer Journey Hotel Customer Journey

Next – the different stages of customer experience. A generic hotel customer engagement lifecycle would consist of the following stages:

1. Inspiration (Awareness of Need and Discovery of Info)
2. Planning (Evaluation of Options)
3. Purchase
4. Preparation
5. Stay
6. Engagement (Advocacy or termination of relationship)… think social media and online sharing here

And then there is the how to achieve and who should be responsible? Whether you like it or not, employee engagement is a key to creating memorable customer experiences across touch-points, especially in a people intensive business like hospitality.

So the three key features, which generally experts agree on, to maximise customer experience for a hotel would be as follows

* Relevance through Personalisation – As popularised by Netflix and Amazon among others is the key to creating unique experiences

* Ease of use – Everything from booking to check-in to ordering room service should be easy to use from the customer perspective. So obviously your IVR system asking guests to choose from 5 options for at least 5 questions before letting them talk to a customer service agent is a BAD customer experience
* Fun to use – People like to repeat doing things that create pleasurable memories. We mortals are pleasure-seeking creatures and things that are fun to use and leave us with happy memories automatically draw us back to them. This is why we love our theme parks so much.

But the big question still remains, why should a hotel align its product with personalisation, ease and fun concept? The answer is simple – it makes business sense, it has a significant returns.

Assuming we take a hotel with following characteristics
1. Revenue – US$300M
2. RevPAR (Revenue per available room) – US$120
3. ADR (Average Daily Rate) – US$150
4. Customer base – 1 million annual visitors
5. Average stay – 2 nights
6. Percentage of customers willing to repurchase again who actually do – 20%
7. Percentage of unhappy customers who actually switch business away – 50%
8. Upsell potential – 1 additional night per 5 customer
9. Ancillary potential – US$2 per room night sold
10. Sales from online channels – 37%
11. Sales from offline channels – 63%

Using a hotel industry specific adaptation of Forrester’s revenue projection methodology for CXi, a hotel would be able to generate up to US$14M in additional revenue including ancillary sales. Furthermore, it could get cost savings of US$0.2M per annum. That is 4.67% in top-line increase and 0.06% in cost savings.

Both Hilton and Marriott have embarked on their respective customer experience journeys in accordance with their strategies.

Hotel Customer Experience Business Benefits QuantificationHotel Customer Experience Business Benefits Quantification

As you can see, it pays to be rated highly on Forrester’s CXI ratings. Do you still need another reason to embark on a customer experience journey?

Footnotes:
Hotels, their relative rankings and their CXi scores as per Forrester’s “The Customer Experience Index, 2012”
1. Hampton Inn/Suites – 84
2. La Quinta Inn & Suites – 83
3. Courtyard by Marriott – 83
4. Hilton Garden Inns – 82
5. Comfort Inn – 81
6. Marriott Hotels & Resorts – 79
7. Hyatt Hotels & Resorts – 78
8. Wyndham Hotels and Resorts – 77
9. Holiday Inn Express – 77
10. Holiday Inn – 75
11. Hilton Hotels – 74
12. Sheraton Hotels & Resorts – 71
13. Days Inn – 66

Abhishek Singh
Currently, Abhishek holds the responsibility for conceptualizing, implementing and managing the IT product strategies for Infosys subsidiary, EdgeVerve, in the Digital space. Prior to this, several years at Singapore Airlines as well as his years of entrepreneurship ingrained in him the importance of customer experience.

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