Choosing the right amenities for your hotel
Whether it’s bottled water, toiletries or Wi-Fi, hotel guests nowadays are accustomed to receiving amenities. While guests get to use these amenities for free, the cost of providing these is something every hotel has to take into account. Additionally, hotel owners and managers also have the task of selecting the amenities that bring the best returns.
‘Return on Service Amenities,’ a new study by Cornell University explores the topic of picking the right amenities for a given hotel. The authors focused on three common amenities: in-room bottled water, Internet access, and fitness-centre availability.
According to Cornell University’s School of Hotel Administration’s website, “The hotel industry provides fertile ground for such a study because of the ways in which competing interests within the industry grapple over amenities,” said one of the four authors of the study; Chekitan S. Dev, associate professor of strategic marketing and brand management at the Cornell University School of Hotel Administration (SHA).
“Brands seem bent on engaging in ‘amenity wars’ as they compete to hit on the next offering that will drive business to their properties, increase market share, and engender customer loyalty.”
The authors of the study note that return on service amenities may arise from two sources; increasing initial choice and increasing revenues from repurchase. The study presents a return on investment model to capture how service amenities produce financial return from these two sources.
The research was conducted by using data provided by a global multi-brand hotel company and the model was applied to compare return on investment for three amenities across six brands.
“Our methodology can be adapted quite easily to compute the financial returns of offering amenities in related industries,” Dev said. “For example, service providers in the hotel industry and the airline industry maintain detailed customer databases, tracking customer purchases and revenues over time. By offering test amenities, they could measure the effect of the amenity on both initial purchases and on repeat purchases.”
The study shows that while some amenities have the effect of boosting revenues and profits by increasing initial visits and repeat business, companies must take a close look at the return on investment for each free product or service before making a decision whether to offer it.
The study concludes that offering bottled water provides a good return on investment while the return on providing free Internet varies across the hotel brands. The study also shows that offering free fitness facilities have little impact on attracting initial or repeat customers.
The research suggests that hotel managers should consider the long-term benefits of every free offering rather than investing in them based on initial sales projections. It also advises business managers to conduct brand level market tests for amenities prior to introducing them and notes that positive or negative returns on a given amenity could be site specific.
The other authors of the study are Rebecca W. Hamilton, the Michael G. and Robin Psaros Chair in Business Administration and professor of marketing at Georgetown University, Roland T. Rust, Distinguished University Professor and the David Bruce Smith Chair in Marketing from the Robert H. Smith School of Business, University of Maryland, and Michel Wedel, Distinguished University Professor and the PepsiCo Chair in Consumer Science from the Robert H. Smith School of Business, University of Maryland.
The study is to be published in the Journal of Marketing Research.