Exclusive: Hoteliers are going to need to be intuitive to counter cost-of-living pressures
Op-Ed: JLL’s Ross Beardsell says that effective loyalty schemes and offering distinctive experiences can help Australian hotels withstand the challenges presented by the current cost-of-living crisis
No hotelier or airline wants to hear the words COVID or lockdown ever again, so the headline on news.com.au would have come as an unpleasant reminder.
“’Like lockdown’: Aussies reveal how cost-of-living crisis is hitting household budgets”, the headline read.
It quoted a Melbourne software developer as saying, “It’s so grim. We all suffered through months of lockdown due to the pandemic, only to come out of it and be too poor to go out anyway. My girlfriend is baking her own bread and we’re staying in to watch telly on Saturday nights; we may as well be back in lockdown.”
A Pepper Money survey of 5000 respondents found that 33.1 percent said they’d cut back on dining out and takeaway to combat the cost-of-living crisis, while 18.2 percent had stopped going out for entertainment. However, it was better news for the hotel and travel industries, with only five per cent reporting they had cancelled holidays.
Southern Cross Travel Insurance’s research also reflected the resilience of the travel sector. 91 percent of their respondents said they planned to travel in 2024, but 83 per cent indicated they would look to reduce the cost of travel due to cost-of-living pressures.
Trading down in terms of accommodation was the biggest concession (41 percent) along with taking fewer trips overall (41 percent), taking a shorter trip (36 percent), and going to a cheaper destination (34 percent).
Of course, not all trends are uniform. Catch a Qantas or Emirates flight to Europe and there is an overwhelming skew towards older demographics, especially in the premium seats. Baby boomers are gold when it comes to international travel spend, with the number of Australians travelling overseas up 34 percent, year on year with spend at record levels, up 4 percent on 2019.
Adding to the challenge for local hoteliers, Australian cruising numbers have returned to pre-COVID levels and the average age of an Australian cruise passenger has fallen from 50.4 in 2019 to 48.4 in 2023, reflecting the increasing popularity of cruising among younger generations and the family market
But while cost-of-living pressures may be having a greater impact on Gen X and Millennial cohorts, travel and hospitality are still high on the priority list for discretionary spending. Research by Frollo, the budgeting app, showed that hospitality spending by GenXers increased by more than 46 percent in 2023, and millennials increased their spending in this area by 38 percent.
So how does the hotel industry adapt to the new playing field?
With corporate travel still underperforming, hotels with dynamic loyalty programs have the potential to build market share by offering members access to far more than points and discounts.
The Mastercard SpendingPulse survey identified experiences as a key motivating factor for global travel, with Australians at the top of the list. In their recent global survey of travel trends, Australian travellers were identified as the biggest global spenders on nightlife and experiences, spending 19 percent on these activities in 2024 compared to the global average of 12 percent.
Hoteliers have recognised this and are increasingly entering into sponsorships and partnerships that provide exclusive access to events and experiences that they can share with their prime members. This can mean tickets to international artists, premier sporting events, hosted golf events, curated walking tours, chef’s table dinners and more.
The most successful loyalty programs treat each member as a unique individual and personalising rewards is far more likely to get members excited and feel valued than by offering a ubiquitous free breakfast.
The big chains have responded to the new trend with upgraded loyalty programs. IHG One Access is an experience platform for members with specially tailored packages, while Marriot Bonvoy Moments has offered experiences such as a private masterclass with Manu Feildel of My Kitchen Rules.
Accor has cleverly used its partnerships with the Australian Open and the Accor Stadium at Sydney Olympic Park to offer exclusive experiences for ALL members. The Limitless Experiences platform also provides auction-style opportunities to use points for experiences such as the Coldplay concert at Accor Stadium in November.
Accor’s loyalty program also targets the ‘bleisure’ trend by offering a Suite Upgrade option, which is ideal for travellers adding on a few days to a business trip and inviting a partner along for a special short-break that doesn’t break the bank.
While international travel is usually the first preference for most Australians, cost of living pressures mean that many can’t fly overseas, but still want to holiday. Hotels that provide more than just a room can build their attractiveness and a destination for staycations.
That’s what Darwin Airport’s Novotel and Mercure hotels did when they relaunched last year as Darwin Airport Resort, complete with tropical pool villas, a massive 61 metre lagoon pool and an Indigenous bush walk. As one journalist wrote after staying: “I spent a weekend at the airport and didn’t need a boarding pass!”
All the data suggests that Australians are willing to pay for something special, so hotels looking to maximise expenditure during stays may need to look beyond standard ‘happy hour’ specials to persuade guests to dine and drink in-house.
Offering a very distinctive menu featuring local produce, wines, or beers is essential to keep guests from wandering down the road, and it is also about what’s stocked in the mini-bar and featured on the in-room service menu.
Corporate travellers – especially those paying their own bills – are likely to be far more discerning in this cost-of-living crisis and will be looking for both quality and value to keep them spending time and money at the hotel.
Travellers who are feeling the pinch with costs will appreciate more options for breakfast than a boring $30 buffet, especially if that doesn’t include barista coffee.
They will also appreciate gestures rewarding their loyalty, such as a room upgrade or early check-in/late check-out if that is important to them.
The world may be collectively hurting from cost-of-living pressures, but for hotels, there has never been more prescient to focus on individually addressing guests and maintaining and growing their loyalty.
Ross Beardsell has over three decades of experience in the hotel industry in senior management roles in operations and development. Working initially with Southern Pacific Hotels, then IHG and the Carlson Group, Ross worked in GM positions across the Asia Pacific. In 2008, he joined JLL’s Hotels & Hospitality Group, providing asset management services on behalf of hotel owners to maximise profitability and to provide strategic guidance. He has provided hotel advisory services to the owners of luxury, upscale, mid-market, new hotels, limited-service accommodation, resorts, convention hotels, and pubs – both nationally and internationally.