Experience Economy: The new Customization.
Atif Rafiq begins his tenure at MGM Resorts this month. A departure for a casino hotel operation that would typically hire from within the industry, Rafiq’s background isn’t in hotels at all. Instead, his most recent position as chief digital officer and global chief innovation officer at Volvo Cars signifies a shift in the way MGM is thinking about hospitality, moving away from traditional approaches and toward digital experiences. As Rafiq tells Skift, “Being a Silicon Valley native in tech companies, I want to think about how to bring the digital and physical together. I’m looking at it how a tech company would look at it.”
This is precisely where Airbnb has succeeded; at its core, Airbnb is a tech company offering a platform for hospitality and relying on its hosts to deliver the physical experience. The idea that Airbnb offers experiences is simply the way the company has chosen to market what they can do with their platform. On the other hand, hotels have owned the hospitality product and have focused their marketing on the product itself and the experience contained within all their walls. Two different models that serve the same purpose, but one, Airbnb, has successfully taken a bite out of the others’ profits because they have served up something appealing to modern guests — the notion of unique experiences, the idea that guests will get a stay that can’t be replicated. Very little of what a guest gets through Airbnb can’t be reproduced at a hotel in a similar fashion (except for the risks and rewards of being in someone’s home).
The experience economy has become a nebulous concept in the same way as terms like “personalization”. Whereas the term “experience economy” began with a few simple ideas in the late 90s — escapism, education, entertainment, esthetic — it has recently been expanded to include personalization, communitas, localness, hospitableness, serendipity, and ethical consumerism, according to the Boston Hospitality Review. No property or platform can deliver all of these things. In fact, the goal is to set up the guest to have these experiences — a serendipitous moment, for instance — rather than to hand the experiences to the guest. To become a conduit for experiences, hotels must look at the intersection of three key elements: hospitality, experience, and digital.
Hotels have always had a leg up on home sharing platforms when it comes to hospitality. No substitute exists for human touch — especially when provided with a precise combination of consistency and authenticity. Airbnb naturally can’t offer consistency; in fact, this may be the platform’s biggest challenge. Who knows whether a host will be responsive, fixing problems that arise quickly, or if a host will be overly responsive — an interrupter checking in too frequently.
Further, every single stay will be different. Guests never know if they will have everything they need, if the house will have a weird smell (or worse), if the neighbor house looks like a junkyard, or if the keyless entry will jam up. For some guests, the point is the risk and charm of the stay, but most guests are crossing their fingers, hoping that it all works out to their liking. This is all to say that bringing the physical and the digital together still proves to be a challenge in the experience economy, and there’s no substitute for human service and the effective problem-solving ability that hotels offer.
In an attempt to compete on experiences with one another, some hotels have found themselves going to elaborate lengths — workout equipment delivered on demand; celebrity golf, photography, and cooking classes; and luxury cars available for a select few. This “select few” is notable. Curating experiences for a few who will want them is different from setting the guest up to experience a community, culture, or location. What Airbnb does with “experiences” is what hotels have been doing perpetually via a concierge — local-led tours, adventures, and activities. Local experiences are not impossible for a hotel to deliver, far from it. The Standard Hotels, for instance, excel at suggesting experiences crafted around location (see The Standards Essential East Village To Do List), but where they hit home is delivering a precise voice tailored to a clearly defined audience. And guess what? They offer hotel rooms just like any other hotel. They provide consistency, and it works. Fundamentally, “experience” is about how a guest feels, and while the aesthetics can be crucial to this end, hotels can still compete, even if they have 200 rooms that all look alike.
Try as we might, it’s still hard to know what individual guests want when it comes to digital delivery of an experience. Some want the high-touch of a front desk (but without waiting in line), others not so much. Many want mobile check-in and keyless entry, but they also desire the security of knowing someone will jog up the stairs to help if need be, and that they can communicate this need by text if they wish. Here’s what we know: Mobile is anticipated to account for almost 80% of online use this year. When guests use a hotel’s mobile app, they report higher guest satisfaction and are more loyal, according to J.D. Power & Associates.
Further, 70% of a hotel’s rewards members have downloaded the hotel app. No matter which tools a hotel chooses to use at this junction, the end goal must be what TripAdvisor CEO Stephen Kaufer calls, “that full-trip experience.” Of course, for TripAdvisor this means getting guests to use TripAdvisor all along the travel pathway; for hotels, this means offering the same high levels of guest service in person and via digital. Creating the consistency for which guests depend on hotels with the advanced technology platforms that allow them the opportunity to choose at every touch point how they want to engage.
The experience economy isn’t new. In fact, the term is over two decades old. When Pine and Gilmore crafted the concept in the Harvard Business Review, they noted there are two dimensions to experience: customer participation and connection. Participation can be passive as in the symphony, or active as in skiing, but either way, they “contribute to the visual and aural event that others experience.” Connection points to the environmental relationship that “unites customers with the event or performance,” and connection falls on a spectrum of absorption to immersion. These same tenets hold as true now as they did then. We merely have more mechanisms for delivering experiences to guests. We have digital platforms like Airbnb and mobile apps that give guests more options for experiences than ever before, and we also have the digital means by which we can deliver opportunities throughout the stay. In some ways, hospitality and experiences have changed very little. What has changed are the digital platforms that give guests round-the-clock access to both participation and connection.