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The Young Traveler Conundrum

Younger folks are not nearly as loyal as older folks and the hotel industry needs to start worrying about this alarming trend immediately. Here’s why you need to care.

Thursday, January 09, 2014
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Here’s confirmation of what many of us already knew: Millennial travelers don’t express hotel brand loyalty like their older brethren when it comes to booking leisure travel. And that could be a problem in the coming years for hotel industry executives trying to pin down this increasingly important group.

Leisure travel makes up more than 75 percent of all hotel bookings in the United States, says U.S. Travel. So this emerging trend has the potential for massive upheaval of the status quo in the coming years.

Millennials are becoming an increasingly critical part of the hotel room buying mix, and at some point during the next decade will supplant the importance of Gen X travelers and Baby Boomers to the hotel industry’s bottom line. Millennials currently drive billions of dollars in spending decisions with many of those dollars going to hotels and travel related activities. And they have yet to reach peak spending!

And their travel buying behaviors are way different than the aforementioned older groups. Remember, this is the first generation that has never known a world before the internet and the way they have integrated technologies into their lives is wholly different than older generations.

That’s going to make it tricky for hoteliers to capture Millennial’s loyalty for the long term, but they are trying! Worse yet, the problem seems to be seeping into the Generation X mindset as well which is making online bookers inherently less loyal as they are increasingly driven by factors such as price more than loyalty.

Dara Khosrowshahi, CEO, Expedia said it best last month what a new study regarding online travel booking habits from Adara and Hudson Crossing travel industry analyst Henry Harteveldt proves. "As Millennials increase their decision-making power at work and at home, they'll be increasingly disruptive in both [leisure and business] areas of travel," said Khosrowshahi.

The new study “Who’s Sleeping with You? A Detailed Look Into the U.S. Online Hotel Guest,” reports that 123 million travelers researched hotel options online in 2013, with 92 percent subsequently booking rooms online. And by looking at an incredible one billion monthly travel transactions per month over a three month period, the study determined that because of an “expanding array of hotel options”, a “let-the-best-deal-win” mindset is now in place among the younger class of travel consumers.

“In 2014, hotel chains face a fiercely competitive environment on the web,” Harteveldt said. “Their customers are becoming more demographically fragmented and most don’t belong to a hotel loyalty program. So hoteliers really need to know who their customers are and understand them on a deeper level. They have to earn their customers’ loyalty and fight for every booking.”
This confirms a study earlier in the year from Driftwood Hospitality Management that queried the general managers of its managed hotels. In that survey released in September, 43 percent of Driftwood general managers believe price is the number one concern of millennial travelers when choosing where to stay for leisure travel.

The study determined the average age of a leisure hotel guest is 42. The largest block of guests – 33 percent – is in Generation Y – people 24-36 years old. One in 10 is 18-23. Baby Boomers, ages 49-67, the traditional audience focus of so much of the industry’s marketing, are beginning to see their dominance diminish.

It also uncovered that just two of five travelers feel loyal to any travel brand and many are not even a part of hotel loyalty programs. Anecdotally, in conversations I find myself in, many former self-proclaimed loyalty program addicts seem to be suffering from points fatigue and are starting to feel their loyalty is being devalued as points and miles become worth less and less, which is further eroding brand allegiance. One comment I heard recently was I am a Platinum member of X Hotel Company and all I got was a small bottle of water. Why bother is that person’s opinion.

Even travelers who belong to loyalty programs and book on hotel websites shop around extensively before booking. Adara’s data show that elites average nine searches outside of the hotel chain they book. Other loyalty members average 11 searches.

The good news is that hotel loyalty program members are still two and half times as likely to take action if they see online ads about hotels that are relevant to their travel-related shopping and booking history.

“The hotel industry faces an uncertain business and consumer environment heading into 2014, but it does so equipped with more tools to help it succeed,” Harteveldt said. “Hoteliers can now access actionable knowledge about their customers and their shopping and booking behavior to reach them when they are making their booking decisions.”

Separately from this study another recent study released last month and conducted by
Harris Interactive and commissioned by Expedia.com and Egencia, said to book business travel, 32 percent of Millennials report using a smartphone, and 20 percent report booking on a tablet. Just 12 percent of those older than 45 used a smartphone, and even fewer used a tablet to book travel.

Millennials are also much more likely to use mobile devices to enhance their travel experience, the study concluded.

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