What’s Your Hotel’s ROI? NO! Your ROE?

For some hospitality enterprises, it can be very low to nonexistent for those businesses that don’t strategically prioritize the guest experience. It has been widely talked about that the guest experience is the new amenity of the 21st century. There is also a general consensus among economists that we’re an experience driven economy. I’d like to take it one step farther, and state that I believe it’s a legitimate business differentiator for achieving a true competitive advantage, as well as generating sustainable financial performance for the hospitality industry.

The reason for my proclamation is there has been a major shift in the consumer’s behavior and perceptions of value in the marketplace. Back in the 80’s and 90’s, it was more about what people own, but now with the predominance of social media channels in people’s lives, it has become more about the experience they want to share with others, and the experiences they want to receive in their life that ultimately impacts their decision-making.

If we were to take a moment and ask the Ritz-Carlton, or other business segment leaders, such as Southwest Airlines, Whole Foods Grocers , Starbucks, and Nordstrom’s department stores, they would all say unequivocally that the customer experience is the centerpiece of their business model, and that it transcends through every business discipline and strategic initiative in their company. Each one of these businesses that has made this conscious decision and commitment has experienced tremendous growth and financial strength, as well as ridiculously loyal customers.

Their customers are inspired to share their devotion and experiences every opportunity they get. These advocacy rewards drive the business’s popularity, brand relevance, and online rankings as well. This in turn dramatically impacts the hotel’s occupancy and ADR performance, not to mention revenue and sales streams on a more sustainable basis.

So let me expand a little bit more on these ridiculously loyal customers. When it comes to generating return on the guest experience (ROE), all these businesses enjoy excellent ROI on their marketing efforts, spending one-third to two-thirds less than their competitors in most cases. As a matter of fact it, has been well documented and publicized that Starbucks spends only $20 to $25 million a year companywide on their marketing. Their next closest company comparison to Starbucks revenue performance and number of stores spends a minimum of $265 million annually. As you can imagine, this also creates a very favorable customer acquisition cost for these companies.

Hospitality enterprises that experience excellent ROE performance, also experience outstanding management and employee retention rates. There is a high level of employee engagement in delivering the guest experience narrative, initiative and brand promise, which also has a positive impact on recruiting expenses and talent management.

Let me give you a quick tip for helping your business on its path to a stronger ROE performance. In my signature program Achieving Customer Happiness, I talk about the importance of creating a personalized hospitality experience that makes the guest feel recognized, special and good about themselves from the experience with your business. It is critical in generating strong ROE performance. One of the best ways to achieve this is to personalize the guest interaction with the business. Managing the guest experience when and wherever possible is the key. Creating strategies and tactics that have the ability to generate unexpected, special attention from the staff. One approach you can adopt is to personalize the pre-arrival-arrival- guest stay and departure with personally signed communications from general manager or other staff members to the guests. These messages are strategically designed to connect the guest to the business on multiple levels, for generating future bookings, advocacy opportunities and loyalty to the business location and brand.

To achieve stronger ROI in your hospitality enterprise, it’s going to come through your ROE efforts. Thanks for tuning in to Brett Patten President of Five-Star Customer Experience Design.

Luxury Hotel Checkmate

What strategies is your hotel utilizing to avoid being placed in brand relevance checkmate by the competition?

The luxury hotel segment is becoming a very crowded and competitive place to do business in the 21st century. The battle for gaining customer relevance, preference and loyalty will not solely be won by the hotel’s luxury offerings, location, or best price. Eventually the luxury hotel segment is going to come to this realization that they are either going to run out of luxury amenities to buy for their business, or the money to buy them with, and are going to have to compete on the total guest experience of the business for winning the customer loyalty and brand relevance chess match.

In an article I wrote earlier this year, titled How Is Luxury Defined By The 21st Century Traveler, I talk about how luxury is being perceived and valued by the 21st century traveler. I’d like to expand on the 21st century traveler perspective by showcasing a customer experience business strategy approach that can help the luxury hotel segment differentiate themselves and build a sustainable competitive advantage over their competition.

Who will win the chess match for customer loyalty in the 21st century?

I see more and more luxury hotel brands looking for new ways to differentiate or gain a competitive advantage over the competition, with a lot of emphasis and investment being made on the physical elements and amenities of their business, without first considering non-tangibles aspects of their business for better influencing those business decisions.

So, what will differentiate your luxury hotel identity and offerings over the crowded field of luxury hotel providers? I believe it’s the business’s ability to first make the guests feel good about themselves from their experience with the business, before the business attempts to make the guest/traveler feel good about the business itself. What can help support this approach is having a hospitality experiential value understanding of the customer/guest experience narrative and theme of the business’s brand. Let me share an example of what I mean when talking about experiential hospitality value, from one of my favorite luxury hotel groups out of New York in Manhattan called the Library Hotel Collection.

The David versus Goliath chess match

The Library Hotel Collection started their first year of operations in 2000, only to find themselves a year later in the heart of the 9/11 recession, which you would think a startup hotel one year in would be in serious trouble, but that was not the case. You see the Library leadership built their entire business on customer experience business platform with a hospitality experiential value mindset. The value proposition was built on providing a total hospitality experience, not a commodity position of being a hotel providing room in a good location, at a competitive price.

The leadership decided to utilize a narrative and theme to build hotel brand experience on with different educational identities for each floor, i.e. science, math, history etc. each floor has a different educational identity and feel to it, along with the rooms experience design. Each room has a little library section that plays on the theme, and the overall narrative of the floor, as well as aligning to the overall hotel brand experience.

Because this hotel group utilizes a nontraditional business platform approach that was more focused on experience and its people as their value proposition, this has allowed them the luxury of creating an outstanding service excellence program to support the brand experience narrative and deliver a much more personalized and memorable guest stay through the filter of a customer/guest experience initiatives for supporting the hospitality experiential value.

This business strategy approach was attached to all the other business disciplines as well, from HR to marketing for impacting the organizational culture and the brand dynamics of the business. This also allows the company strong accountability mechanisms throughout the hospitality enterprise for delivering the brand promise, message and values to everyone that comes in contact with the business.

King to Queen, checkmate!

They were able to differentiate themselves in the marketplace, and by doing so this little boutique hotel has been able to compete with all the major five-star ultra luxury hotel brands in Manhattan, in one of the most competitive hotel core doors in the world, during one of the most challenging 14 year span in the hotel industry history. They have full control of their ADR and don’t rely on the ebbs and flows of society, or business in the marketplace.

This strategic approach has also positively impacted occupancy levels that far exceed their competitors, as well as increase the relevance factor of the brand and locations of their hotels. They walk to their own beat, and have quite easily been able to stand out in the crowded field of luxury hospitality providers. This strategic approach has obviously elevated their online relevant factor for enhancing the search and pre-booking phase of the traveler’s decision-making processes.

The Library Hotel Collection is always in the top five hotels on Trip Advisor, with some of the highest rankings and ratings positions in the New York market, as well as in the virtual travel world. The guest loyalty towards the brand is so much like what you might find with leading national luxury brands like Apple or Nordstrom’s. They are considered one of the top five boutique groups in the country, if not the world, all within a 14-year span, in which they have grown and diversified into six hotel properties, with more on the way. The Library Hotel brand’s ability to connect their luxury amenities, services offerings and people with the theme and narrative of the guest and brand experience has generated a very sustainable competitive advantage that can’t be easily mimicked, procured or duplicated by the competition.

In summarizing the Library Hotel Collections’ strategic approach                          The leadership got crystal-clear on what they wanted to be great at and the value proposition offering, as well as brand dynamics of the business to be in alignment with their core foundational principles of the business. They also utilized the guest experience perspective throughout each and every discipline within the business for creating a strong service excellence culture that supports the quality consistency of the experience their delivering to the guest.

Now, for those of you who don’t want to completely renovate your entire hotel or brand, here are a couple of tips to help create a stronger hospitality narrative and brand experience to break through the checkmate scenarios your brand might be experiencing.

  • Find an aspect that you think your business can be great at, as hospitality enterprise, and also would engage the guest or travelers you would want to market to. It must generate strong relevance and differentiating qualities in the marketplace.
  • Build out the narrative and theme to be in alignment with that value proposition offering of your business, So that your business and organization has the ability to conceptualize hospitality experiential value in the guest experience. I.e. move away from the commodity position of just offering around and shift the value proposition towards competing on an experience offering.
  • Having a guest experience strategies immersed into every single business discipline in the hospitality enterprise, as well as in the service excellence program, for better supporting the organizational culture that is responsible and being held accountable for fostering the guest experience narrative.

The perception of value for influencing preference is being measured by the total experience the guest receives from the business, not just the commodity-based position, price or location etc. of the business. Luxury is going to be defined by the total experience the guest receives and the care in which it’s delivered. In the 21st century travel consumers are more informed and focused on the total experience their receiving, and are also quantifying and qualifying the value in that total experience.

About the author


Brett Patten is approaching 35 years in the hospitality industry where he has spent those years accumulating invaluable experience in a variety of leadership positions, and business enterprises. Brett has becoming known as one of the top executive leadership and organizational engagement coach on the subject hospitality intelligence, and customer experience design. Brett is also a feature writer for global hospitality, a national and international publication on the subject customer experience design.

Brett’s unique management and business approach consistently transformed hospitality enterprises with sustainable growth results from his days with the prestigious four and five-star hotel brands, such as the Stouffer’s hotels, Pan Pacific Hotels, and Le Meridien hotels, as well as working with prestigious five-star club resort enterprises like the very prestigious Longboat Key to the launching of a nationally award-winning hospitality brand in 2007.

Brett then turned this business processes into a company called “Five-Star Customer Experience Design.” Today, after spending the last 15 years researching, studying and developing customer experience design strategies for the hospitality and tourism industries, he has become an industry pioneer and the foremost authority on the subject of Hospitality Intelligence. Brett’s company engages with some of the top hotel brands and hospitality groups both nationally and internationally in the industry.


Does your red carpet treatment roll out to all guest touch points?

It is essential for the hotel industry to possess a strong hospitality perspective, awareness, and intelligence for the type of guest experience they want their business to generate and execute for their guest. Many of the leading institutions that measure and rate guest experience and customer satisfaction performance have stated that the number one reason for a hotel guest’s loyalty was in the personal experience they received from that business.

In a recent survey, JD Power stated that there was a direct correlation with the hotel staff personally engaging the guest to the increase in the customer satisfaction scores from an industry average of 64 points to a high 77 points in the more personalized scenarios. Trip Advisor has stated that positive advocacy ratings and reviews translate into increased rankings position in the online OTA marketplace, which can enhance the ADR position for the business.

So, it’s become quite apparent that the hospitality industry is presently in an customer driven economy. It is critical for the industry to be present to this new business reality, in how they strategically design their business model value proposition for creating a differentiating competitive advantage. It is important if the industry has any hopes of positively influencing the KPI positions of their business, especially when it comes to the financial viability and the brand’s level of relevance in the marketplace.

The hospitality presence cannot be just at the front doorsteps or with the front desk staff anymore, it has to immerse itself into the entire hotel enterprise for it to have a positive impact in the way the guest perceives the value of the business. It’s in every department, employee, leadership position, business discipline, vendor relationship, decision making process, core values, hirer, expenditure, etc. When it’s not, it creates gaps that negatively impact the guest experience chain for influencing guest preference and trust factors in the business’s ability to provide them with an experience that gives them a sense of optimism about the business offering and themselves.

The going away party

I’d like to share an experience I had while attending a going away party that was being held at a very nice, national hotel brand. I believe by sharing this experience with the hospitality industry, it will open up a conversation in your businesses around the level of hospitality intelligence your enterprise may or may not possess.

My wife and I arrive to the hotel and were greeted by the hotel’s front door team in a very friendly manner. We also received the same level of greetings from the front desk, as well as the restaurant’s hostess where the party was being held. The hotel’s decor and the level of cleanliness were excellent. The food and beverage service for the party was à la cart style, so my wife and I decided to order an appetizer. We had noticed that everyone was ordering the buffalo chicken dip during the cocktail hour, so we decided to order one as well. Our waitress provided us with good service in a friendly and down to earth manner.

Now here’s where things became a little inhospitable, and you’ll never guess who the culprit was for delivering a poor guest experience. It was the buffalo chicken dip of all things! Let me give you the rundown on the appetizer experience. It was served with tortilla chips, in a classic casserole style au gratin dish, with melted mozzarella cheese piled on top. So when you try to dip your chip into the appetizer, the chip would crumble sending your fingers into the boiling hot dip concoction, and if you were lucky enough to break through the cheese gauntlet, you were then faced with another challenge, giant chicken strips that were more suitable for a Caesar salad than in a dip style appetizer with tortilla chips.

The appetizer was so difficult to eat and enjoy that it ended up turning everyone off who had ordered it, and I notice when it came time for everyone to order dinner they were somewhat sarcastic and cynical about the ability of the business to provide them with a good dinner experience.

So to summarize, it was extremely frustrating experience because the dip tasted pretty good, but you just could not make sense out of the way it was put together, i.e. poor customer design. There was no thought given to managing expectations or anticipating the customer’s needs both in the practicality and the customer engagement sense.

That was a very internally focused business approach by the hospitality enterprise. It was probably cheaper and easier for them to use mozzarella cheese. It took less time and effort to just roughly julienne up the chicken breast into large pieces. The taco chips were probably used with other appetizers. Essentially, the dish was designed on what was in the best interest of the business, not the customers.

A guest experience design recipe

A more externally customer focused approach by the organization might’ve been to dice up the chicken really small or even shredded (an empathetic approach for the guest experience). Maybe they should have considered using bagel chips or even a house made country style kettle chip that could handle the dips consistency (i.e. anticipating the guest’s needs). They could have considered using blue cheese crumbles, which would have perhaps better complemented the theme of the dish (i.e. managing expectations) and would have made the appetizer more manageable, as well as creating a more hospitable experience for the guest.

Now, I know we’re talking about an appetizer experience, but this is a great example for the industry to consider looking for chicken dip scenarios in their business. Where are you internally focused on the processes, policies and procedures that could be taking away from the guest’s enjoyment? Where are your blind spots in the guest journey that are hurting your effectiveness for creating a stronger connection with your guest for earning their trust, and showing how much your business truly cares about the experience they are receiving from their business?

The three missing ingredients

There were three main ingredients missing in this hospitality scenario: Anticipating the customer coming into the enterprise, managing expectations, and being or having empathetic perspective for the guest journey, and the experience they were receiving in every touch point of the guest’s encounters with the business.

The customer experience design take away is that hospitality can be felt in many ways by your guest. It can come through in the most unlikely aspects and encounters – a helping hand, a genuine heartfelt greeting, or the quality of the hospitality offerings. And when an enterprise does not manage the guest experience, it can really hurt the business’s ability to generate relevance, loyalty and a strong return on the business’s daily operational expenses and efforts. Understanding the emotional impact of one’s business on the guest and the guest experience elevates the level of performance in every discipline within the business.

How is luxury defined by the 21st century traveler?

Knowing the answer to this question might be the greatest luxury a hotel company could possess.

Because today’s travelers can easily obtain luxury at a very reasonable price, the hospitality industry has unknowingly affected the level of significance that luxury has on influencing the customer’s preference towards a hospitality brand.

I can go online, and in less than five minutes, I can book a four to five star-rated oceanfront hotel stay with a high end hotel brand for a very reasonable price with major discounts off normal rates. I can do the same with luxury cruise liners, as well as all-inclusive Caribbean resorts, etc. So luxury in this sense has become much easier in the 21st century to gain access to in the travel industries. With this being the case, then the impact that luxury has on influencing travelers is going to have to be achieved in a more meaningful way by the hospitality industry.

I have been in this inquiry around what luxury is. I live in a resort beach town, which affords me the luxury of having pristine beaches at my disposal. I have also decided to drop my baseball package on DirecTV this year, and it is a real luxury for me when I can watch a Red Sox game on TV. This really got me thinking about the positioning of luxury and the perspective by the hotel industry that every guest has a different perception of what luxury is to them. Yes and no? I’d like to challenge that thinking for a minute. Is it something we possess, or is it something that makes us feel good about ourselves? Is it something we’re trying to obtain in the tangible sense, or is it more how it makes us feel about ourselves? Is it more about a want or need for acknowledgment, or to be validated by our peers, or to be seen as unique and interesting?

Through my work around Hospitality Intelligence, I think luxury is anything that makes someone feel good about themselves from that experience. I also feel confident in stating that it’s a need that has to be fulfilled from something to do with the customer’s past, for example, the need for certainty, variety or connection, etc. The want aspect, is wanting to satisfy an aspect in their life for growth and abundance. If you buy into this assertion, then luxury is more about the emotions it generates, rather than the tangible entity of its existence. It’s an intrinsic value. So for a hotel enterprise, luxury could be achieved in making your guests feel good about themselves from your ability to create an emotional bond during their stay. Elevating the experiential value of the guest stay would generate a sense of luxury and happiness in the personal experience of the guest.

The non-tangibles, for elevating the tangible luxuries of a hotel.

I have stayed at some really nice four and five-star luxury hotels and resorts and have received a one-star personal experience. Sometimes having a four and five-star luxury rated hotel can create a situation where the organization is resting on their laurels of the brand ratings, reputation and all the high-end tangible luxuries of the property. Here are some non-tangible customer experience design luxury items that your business could consider adding to your hotel for making it a five-star luxury personal experience. I believe by elevating the non-tangibles of your business, you will inherently impact the hotel’s tangible luxury value, effectiveness and ability to connect in a more meaningful way with the guest.

  • Let’s start with caring about the experience the guest is receiving from the business. One could say that over-the-top luxuries may lack the empathetic design and caring touch in making a truly impactful connection with the guest that has the ability to make them feel good about themselves. Focus on anticipating the needs of your guests coming into your business versus internally focusing on your product offering.
  • Create more of a theme to your hotel experience, in which you’re instilling the emotions that you want your guest to experience, i.e. the elusive luxury of experiencing happiness and feeling good about one’s life.
  • Create a business culture that is very empathetic to the guest journey. Look at all the touching points throughout the guest stay, before, during, and after their engagement with your business. Look to see where the opportunities are to touch the guest’s heart to generate connection.
  • Create a culture where everyone understands the role and expectations of their position, for impacting the guest’s stay in a very positive and emotionally engaging way. This is a performance that you’re orchestrating within your business.
  • Create a level of intuition that allows your business to manage the expectations of the guest in a very organic and natural way for creating a seamless guest experience.
  • Create a high level of hospitality intelligence in your organization with a stronger listening for the guest on a more intuitive level, with a sense of genuineness, as well as an attitude of gratitude for the customer identity in your hospitality enterprise.

The trick for achieving successful implementation of these non-tangibles is indexing your level of Hospitality Intelligence throughout your entire hospitality enterprise. It is also critical to have an understanding of your Hospitality Climate. If your hospitality business is not generating experiential value in making the guest feel good about themselves, then all the high-end tangible luxuries and services of your business will not generate the type of results you would expect to see from those investments. Having a luxury hotel and being a luxury hotel experience are sometimes two totally different worlds of hospitality.