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The Millennial Makeover Part 1

It's no longer OK to lump these groups together, now it’s important to understand their role as both business and leisure travelers.

Monday, January 20, 2014
Teresa Lee
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During the past year, a lot has been said and happened in regards to Millennials and the hospitality industry. For example, there was exciting news from Marriott and Commune Hotels with the announcement of new brands geared towards Millennials, Moxy and Tommie, respectively. But due to the intense interest in the next generation of travel, a lot of noise has been added to the conversation as well, with the same repetitive points being made. Millennials are technologically savvy. Obviously. They are social and want a lobby design to reflect that where they can interact with others, but also practice isolated togetherness. Got it. Be on social media and connect with them instead of just pushing promotions. Yes, is this 2009? These are all things that should have been realized and acted upon by now. I summarized all these and the other top ten travel trends for Millennials a year ago. The one thing that has not changed is the huge spending potential from this age group and the need for the industry to capture their business and fit their lifestyle.

These sweeping generalizations about millennials are not enough anymore. To truly gain their loyalty and thus, the money in their pockets, hoteliers and others in the travel industry must segment the millennial generation even further: Millennial business travelers versus millennial leisure travelers. This article will go through the top two trends and opportunities in each of these segments and give one millennial’s (read: my) viewpoint on each of these trends.

MILLENNIAL BUSINESS TRAVELERS

1. Millennials spend more per business trip than non-millennials.

OPPORTUNITY:
Companies should be offering more amenities to generate additional revenue that millennials are willing to spend money on.

Due to their younger age group and point of their career they are in, it would be expected that millennials account for a lower number of business trips annually. However, there seems to be a geographical divide. BCG reports that millennials currently account for approximately one-third of US business travelers, but is expected to increase to 50% by 2020, while Baby Boomers will drop to 11%. This strong demand from millennials is forecasted for the next fifteen years. Only 28% of American millennials report taking four or more business trip annually compared to 45% of non-millennials. It was also reported that Millennials take more trips related to training, recruiting, and conferences than client site visits or client relations; again, due to the stage of their career millennials are currently in. On the other hand, according to a global study conducted by Expedia and Egencia, millennials worldwide (considered 30 and under) travel 4.7 times annually for business versus 3.6 times for 31-45 year-olds, and 4.2 times for 46-65 year-olds. No matter the debate over the number of trips millennial business travelers are taking, it is clear the huge potential of business this generation currently and will continue to represent in the future.

Another large potential of millennial business travelers is that they spend more per trip compared to non-millennials due to more last-minute booking, refundable tickets, and itinerary changes. Millennials are 60% more likely to upgrade their seat to another with more leg room and spend more on in-flight entertainment, which results in Millennials paying 13% more for airfare than non-Millennials. Not only do they use more amenities on board, but they also use more amenities at the airport. This is in line with the finding that millennials are freer with company money than their own. 42% of millennials will spend company money on high-end meals compared to 26% of non-millennials. Millennials are also more likely to order room service , four times more likely to pay for wifi onboard, and two times more likely to download and watch in-flight entertainment. This all means more spending and more opportunities for the travel industry to earn revenue by offering amenities millennials are willing to pay for. This significant amount of spending highlights the largest potential in millennials: gaining their loyalty as business travelers. Not only does this capture the business demand that will only grow, but also will also carry their loyalty over to when they travel for leisure.

Millennial Viewpoint:
The finding from Expedia that millennials are freer with company money is not surprising. I have eaten steak on business trips simply because I cannot afford it in New York City. I live in one of the most expensive cities in the world and pay an exorbitant amount of rent on a typical post grad salary. One steak dinner on my own dime would blow my monthly food budget out of the water. On my first training assignment, my training manager explained it to me this way, “We are inconvenienced by travel, and thus we can expense overpriced food at the airport if we are hungry.” That has been my viewpoint ever since. Don’t get me wrong, my company has limits and I never order anything unreasonable, but I do believe it is in my right to budget my daily allowance as it pleases me. If I hardly eat breakfast and get fast food for lunch because I am rushing between meetings and site visits, I feel that I am entitled to a pricier steak dinner if it is within my daily allowance. Or as a female traveler, I sometimes go to a grocery store and stock my hotel mini fridge with yogurt and fruit for breakfast because I want to be healthy and this is honestly the most economical situation as well. I think that is absolutely fair. We millennials don’t mind playing an antiquated game, but we will play them using our rules.

2. Millennials are not loyal to travel brands…yet.

OPPORTUNITY:
Companies have a large potential at capturing and maintaining this loyalty as millennials enter their prime spending years and become the majority of business travelers.

As millennial business travelers are just becoming road warriors, their loyalty is up for grabs. Millennials are less loyal towards travel brands than non-millennials and more willing to switch to another airline or hotel brand if they believe that loyalty program has a better product or global alliance network or is willing to match their elite status. (Millennials are generally three times more brand loyal in other industries and are willing to take action on social media on behalf of brands. ) It is important to note that millennials want different benefits out of loyalty programs than non-millennials, which should indicate to airlines and the hospitality industry they need to use different tactics and strategies to gain their loyalty. For example, millennials report more dissatisfaction with airline mile programs, particularly with how fast miles expire since they do fewer trips. Additionally, millennials are more likely to use miles and points for free or discounted travel rather than upgrades as cashing in a large number of reward points at once is more prevalent among millennials. And due to their stage in life and spending, millennials are currently less likely to use a specific brand’s credit card, which is another big opportunity to capture their loyalty.

As millennials are testing out the different brands, they are slowly figuring out what they prefer and what brands fit their travel lifestyles. Companies should be communicating and marketing to millennials already using targeted campaigns and social media. Not only should brands offer a product millennials want, but their loyalty program and distribution systems should match their lifestyles and way of booking as well. The next several years are crucial as companies with more foresight and planning in their marketing departments capture the loyalty of millennials. Once they start accruing status and a large number of points on one program, they are less likely to switch to another unless their status is matched.

Millennial Viewpoint:
I have to confess that I am a miles and points junkie. I travel a lot for work, but due to the obscure locations I often fly to, I cannot choose just one airline to be loyal to as many do not fly to the smaller regional airports I am trying to reach. And as I get reimbursed for all expenses, I earn all the points and miles on my credit cards. Thus, I have become quite fluent in the world of credit card sign-on offers and capturing the large bonuses they use to entice you to apply for their cards. But I have to admit, I am currently not brand loyal. I do have an airline alliance that I prefer to earn miles on, but this was only after I finally earned status with them and I wanted to maintain and get to the next level.

Similarly to many other millennials, I report that I prefer Southwest and JetBlue for their superior product. And by superior product, I simply mean free snacks and in-flight entertainment. It truly is that simple. (Sometimes I like to fly Delta for the complimentary Biscoff biscuits and although many airlines serve Coca-Cola products, only Delta serves Fresca.) However, as was reported by BCG, millennials respond that they prefer Southwest and JetBlue much more often than they actually fly these two airlines. I believe that some of this is due to the limited routes these two airlines offer compared to the other major airlines. On the other hand, I often forget to check Southwest’s own website as their flights do not show up in any OTA aggregators when I do my research. Another major pet peeve of mine regarding the Southwest website is their search function. The most common route I book with them is New York City to the San Francisco Bay Area. Southwest operates at Newark and LaGuardia for NYC and out of San Francisco, San Jose, and Oakland for the Bay Area. That means I have to perform individual searches for each possible combination as they do not have an “All New York City Airports” or “All San Francisco Bay Area Airports” option. This is extremely frustrating when my dates are flexible as well.
Credit
Teresa Lee    Teresa Lee
Author
Hotel Interactive® Editorial Division

Bio: Teresa Y. Lee is a Consulting and Valuation Associate with HVS’s New York office. Teresa graduated from Cornell University with a B.S. in Hotel Administration and Minor in Real Estate Finance. Teresa has worked at various hotels and resorts both in the country as well as internationally. Since joining HVS in 2012, Teresa has appraised hotels in various states throughout the country. She will begin the MBA program at Columbia Business ...
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