When New York’s biggest hotel announced last summer it was abandoning its traditional food and beverage (F&B) room service, the news generated much comment from business travellers, most of it adverse.
But the 1,980-room New York Hilton Midtown has not only remained firm about the decision, but Hilton is also now planning to roll out the strategy elsewhere. “We are definitely going to do it at other places,” said CEO Christopher Nassetta, speaking at Hilton’s recent US$2.4 billion stock market initial public offering on Wall Street.
Yet while the Hilton strategy may seem odd to many of its business guests who have, for years, embraced in-room drinking- and dining-on-demand, the move is a little more nuanced than the publicity suggests. Instead of a traditional round-the-clock food delivery service prepared by a separate kitchen, the hotel has opened a new ‘concept restaurant’ called Herb N’ Kitchen – a casual ‘grab and go’ eaterie offering guests “artisanal sandwiches and brick oven pizzas” to eat-in or takeaway to their rooms.
But for a fee of $15 (plus 15 per cent gratuity) guests can still get the food delivered to their room during breakfast hours and in the early evening if they prefer. So it really is a sort of ‘room-service lite’ rather any abandonment of the concept altogether, with Nassetta explaining that the move has “proved popular with younger guests” who wanted more casual dining and faster delivery.
This, in fact, is key to the whole reasoning for Hilton’s F&B revamp, highlighting the increasing influence of the market segment popularly known as Millennials, or Generation Y (see Rise of the ‘always on’ generation, p28). This is the generation born roughly between when Margaret Thatcher came to power in 1979 and the start of Tony Blair’s premiership in 1997 – those approaching their 20s
and into their mid-30s.
Millennial travellers, in fact, actually quite like room service: surveys (such as Expedia/Egencia’s recent comprehensive The Future of Travel report) suggest that many see it as a sort of ‘compensation’ when staying in a hotel on business.
But there is more to the Millennials’ influence than simply revamping room service. As Expedia CEO Dara Khosrowshahi highlighted in his keynote address at last month’s Business Travel Show in London, the Millennial generation is having – and will continue to have – a “huge effect” on corporate and leisure travel.
‘Y’s and wherefores
Millennials are generally both tech-savvy and tech-dependent – consumers whose tablet/smartphone approach to booking and optimising travel is forcing hotels, in particular, to reshape their future strategies.
The major chains are engaging in a race to develop new brands appealing specifically to this demographic, although with subtly different focuses. Surveys have revealed, for example, that Millennial travellers want to stay in hotels that are distinctive and exciting, but they also do not want to pay over the odds for their room. Additionally, this group is also attracted by a healthy lifestyle and an environmentally-friendly stance.
Marriott is adopting the ‘edgy’ approach with the launch in Milan this August of its first hotel under its new Moxy brand name, urban slang for those with a ‘gutsy’ attitude to life. It has plans for an eventual chain of 150 of these in key European cities.
The same month in the UK, Whitbread-owned Premier Inn is hoping to appeal to the budget/value consciousness of Millennials with the opening in St Martin’s Lane in central London of the first of a new sub-brand called Hub by Premier Inn. Rooms will typically be half the size of a traditional Premier room – and priced lower as result – but will maximise space with savvy design. In addition, Hub will also offer a smartphone app enabling guests to pre-set in-room functions, including lighting and temperature ready for when they arrive.
In the US, Intercontinental Hotels Group’s (IHG) take on the Gen Y market is its new ‘wellness’ mid-market brand called Even, with the first hotels opening this spring in the US. The hotel’s holistic-approach starts at check-in when guests will reportedly be directed to a ‘wellness island’ to complete the formalities, with staff offering them either a cool or heated hand towel, and a cup of water with a slice or lemon or lime.
Hoteliers, of course, have been aware of the changing market demographics for some time. The stylish urban brand, Aloft, was launched in 2008 by Starwood to meet the demands of the new generation, although it has focused growth in the US and Asia-Pacific rather than Europe so far. The second UK Aloft hotel (the first is at Excel in London) is due to open in Liverpool this autumn.
IHG also repositioned its midmarket Hotel Indigo brand in the late 2000s to attract the new young demographic, (new hotels are planned for Manchester and Cardiff to add to the eight already opened in the UK). And Hilton has found that a focus on good design and value-for-money has made its Doubletree by Hilton mid-market chain appealing to Millennials.
Yet the impact of the new generation on hotels goes deeper than just new brands: the way hotels are perceived, planned and utilised is changing as well. Hotel lobbies, such as in the newer Doubletree hotels, are being remodelled to provide more casual places for those wanting to work, eat or simply network with colleagues or contacts. Hoteliers now think lobbies should become the heart of the hotel and not simply a place to pass through – something that surveys suggest appeals to the younger generation, which wants to relax and/or work in
a public space rather than be isolated in a room.
This trend, of course, is forcing the pace of free wifi in hotel public spaces as well as in rooms – something the Millennials see as a non-negotiable part of hotel life rather than a special privilege. More gadgets also influence room design (more conveniently located charging sockets are needed, for example) while mobile room check-in via smartphones is already on the way. Marriott, for example, is linking mobile check-in to its frequent guest scheme later this year.
A good investment
The Millennials’ fondness for their smartphones and tablets is not only being felt in the hotel industry but among airlines. At its most obvious, the pressure to relax restrictions on the use of phones and tablets on aircraft has been led by a generation who believe such curbs do not make sense.
But there is also a clear impact ahead on airline distribution. A recent IATA report, The Future Of Airline Distribution, emphasises the “substantial business opportunity” the Millennial/Gen Y passengers represent, “as they have a lifetime of buying airline tickets ahead of them”.
And by 2020, according to a Boston Consulting Group study, Millennials will become the largest single group buying business flights in the US with a 46 per cent share (up from 35 per cent in 2013), overtaking Gen X (currently 38 per cent) and Baby Boomers (25 per cent).
Yet, perhaps surprisingly, one of the key aspects of flying that is a high priority for Millennials (according to the Expedia/Egencia survey) is airline loyalty programmes. Over half were influenced by these compared with around three out of every ten for those aged between 46 and 65. This again reinforces one of the underlying
trends among this younger group: that value-for-money is very important.
But is all the focus on Millennials justified? Some travel managers/buyers contacted for this article suggested that focusing on this younger group might indeed be excessively fashion-led. “They will eventually grow up and become real business travellers,” said one, somewhat sarcastically. Others admitted that there were perhaps potential adverse implications of Millennials’ behaviour, although this was not yet a major item on the corporate agenda.
However, others involved in managed travel are more concerned. A travel manager at a mid-scale London advertising agency, which has a higher proportion of Millennials on its staff than most companies, said there “are issues of compliance, because this group want to get more involved in their travel experience to make it more personal”.
Ryan Johnson, head of land products for FCM Travel Solutions and Corporate Traveller, also suggests that this demographic’s computer savvy skills and awareness of travel websites makes them think they can probably do a better job than a travel management company (TMC). “They think that by booking independently they will impress their bosses and save the company money – although they are probably unaware of the benefits a TMC can bring from route deals and hotel programmes, which will generate much greater savings overall.”
Some Millennials may also prefer a travel policy “that sets financial limits on how much they can spend, allowing them a degree of choice within cost guidelines and an ability to book via a smartphone or another device”, suggests Chambers Travel Group sales director Paul Broughton.
Yet Millennials can also affect corporate travel policies in other ways, which travel managers are perhaps not fully taking into account. For example, they are more likely to voice their displeasure online about their business travel experiences – potentially creating possible legal issues of defamation if they go too far with their comments. Last autumn, for example, a young businessman made headlines by paying for a ‘promoted tweet’ to lambast British Airways online for losing luggage on a flight to Paris.
The Future of Travel survey also found that Millennials “were freer with their company’s money when travelling”. Some 42 per cent of the Millennials surveyed globally said they frequently spent more on expensive meals when travelling on business than they would with their own money. But only a quarter of those aged 46-65 said they would do likewise. This clearly has expense management implications. And this survey also revealed that Millennials were more comfortable mixing business with pleasure than their older counterparts, being more likely to extend a business trip into a personal holiday.
This suggests some confusion among younger business travellers as they appear to not only regard travel as something to be enjoyed but also feel an entitlement because of the impact on their personal lives. Not surprisingly, Millennials believe strongly that they should receive the benefits from loyalty programmes even though travelling at their company’s expense. And that, perhaps, sounds more Generation Me than Generation Y.