Marketing

A hotel lobby and coffee for the people

Business travellers should have an easier time finding a decent cup of coffee and comfortable pubic work space, thanks to a resurging trend in the hotel industry. In fact, they may not even have to leave the hotel lobby.  Several large players in the hotel industry are ditching stale coffee and developing their own cafés as part of an effort to make more profitable use of their lobby and common areas. In the United States, hotels spent an estimated US$5.6 billion on capital improvements in 2013, which is more than double the $2.7 billion invested in 2010. A significant portion of that is being spent on injecting comfort, technology, and quality food and beverages in lobbies and public spaces to encourage guests to spend more time on site. With room costs for corporate travellers expected to go up from between 5 and 6 per cent in 2014, attractive new work and social spaces may be a key factor for guests when deciding where travel dollars are spent. Starwood Hotels & Resorts Worldwide recognised the potential to increase profit in its Sheraton brand in 2009, with an initial US$6 billion investment to revitalise the brand. The investment saw the renovation of 200 hotels internationally with the new Link@Sheraton experience. The Link was designed as a social destination in the lobby area that allows guests to interact with each other and stay connected with complementary computers, high-speed internet access and docking stations. It can now be found in nearly 450 Sheraton locations in 70 countries. Hoyt Harper, Global Brand Leader, Sheraton Hotels & Resorts, tells GCR Magazine the lobby efforts have made a significant impact on the consumer experience. “Sheraton’s signature programming is resonating with guests, driving guest satisfaction scores and generating incremental revenues,” he says. Its success with the new lobby spaces prompted the company to take the experience to the next level. Sheraton is in the midst of aggressively deploying the Link Café in these areas, where guests can get freshly brewed Starbucks coffee and other snacks. Sheraton isn’t the only large hotel chain revamping its lobbies for a younger, more connected audience.  Marriott Hotels & Resorts had similar goals when it tested its “greatroom lobby” concept in 2007. Geared towards a new generation of business travellers, the experience centres around greater access to food, beverage and technology in a modern setting where guests can work, hang out, and socialise. “Today’s generation of mobile travellers blends work and play, staying connected to family, friends and work nearly 24/7,” said Paul Cahill, Senior Vice President, Marriott Hotels & Resorts, in a statement. “By synthesising our customer research with the wealth of knowledge we have as hosts, we developed Marriott’s lobby experience. It represents a strategic and holistic approach to design, technology and service that is truly relevant to the new generation of travellers.” The lobby transformation is expected to be in 80 per cent of the 500-plus Marriott Hotels & Resorts properties worldwide by the end of 2014. Blast from the past
While several chains have caught onto the benefits of turning lobbies into more profitable public spaces in the past few years, the concept isn’t new. Stephani Robson, a Senior Lecturer at the School of Hotel Administration at Cornell University, explains to GCR Magazine that hotel lobbies in the late 1800s and early 1900s were largely public spaces woven into a community’s social scene. The concept seems to have fallen away in the 20th century. “The lobby has returned to being a public space where people who aren’t guests will come and spend time there,” says Robson. Robson, who specialises in how the design of environments affects consumer intentions, satisfaction and behaviour, says hotels are stepping up their lobby experiences to meet expectations of a younger, more connected target audience. “A lot of hotels have been offering free coffee in their lobbies for decades,” she says. “What I think has made this more prevalent is the advent of [wireless internet] and mobile working. Hotels have responded to that by making a better offering in their lobbies.” According to Bjorn Hanson, Dean of New York University’s School of Hospitality, the trend has been gaining traction in the last decade. “It really started in 2003-04,” he tells GCR Magazine. “The industry was in a period of recovery and differentiating capital. One of the areas that was receiving extra focus was lobbies.” Hanson, an industry expert whose research focuses on statistical and econometric analysis, says that while part of the effort was to improve brand image, another goal was to retarget lobbies towards a new generation of travellers who enjoy congregating in lobbies to work and hang out. “All of a sudden the lobby took on even greater importance,” he says. “It has been accelerating since.” Hanson says the recession in 2010 prompted a renewed focus on the hotel lobby as part of the brand. Boutique hotels may have also helped pave the way for industry’s refocus on the lobby by bringing a cool factor to their public spaces. The Ace Hotel chain, for instance, is an edgy boutique-style brand known for being part of trendy social scenes with non-traditional lobby spaces. With its first location opening in Seattle, Washington, in 1999, it can now be found in other cultural hotspots including New York, Los Angeles, London and Panama. Its London location opened in 2013 in the Shoreditch arts district, a historic neighbourhood and dynamic hub for leading galleries, theatres and fashion. Its lobby café, Bulldog Edition, is operated in partnership with Square Mile Coffee Roasters, a local company known for sourcing high quality coffee. The café helps generate traffic from both hotel guests and local patrons. But while boutique hotels may have been among the first to make lobbies cool again, both Robson and Hanson agree it’s not so much a trend as a new industry standard.
“This is a permanent refocus and a new image for hotel lobbies,” says Hanson. Cost of doing business
According to Robson, the renewed focus on the lobby as a public space is part of a strategy to get more out of their guests.  “A lot of hotels realised there was an opportunity to keep people on their property so they didn’t go off and spend money at other businesses,” she says. “Part of that is to provide a pleasant lobby experience so people want to hang out.” Hanson believes the benefits of this strategy are two-fold. For the guest, it’s an added amenity, as having access to beverages in the lobby provides an alternative to room service and benefits those who spend more time working in the lobby.  For the hotel, it’s an added revenue source. He explained some lobbies are leased spaces operated by the hotel. The strategy also includes attractive benefits for the guest, convenience being at the top of the list. “I think it makes things easy,” says Robson. “You feel like you’re in a controlled environment. It takes some of the guess work out.” She explains that this is part of why people gravitate towards chain brands in general. “When you’re in a strange environment, some things you like to explore and do differently. But to get a coffee, get some work done… and feel like you’re in a safe place, I think has a lot of power.” Harper says Sheraton has already seen the return on investment and gotten positive feedback from its customers. “Since the initial investment, we have consistently seen guest satisfaction scores on the rise and a significant increase in lobby use, higher perception of value and increased likelihood to return,” he says. “Nearly half of our guests make use of the Link@Sheraton, more than the number of guests who use our fitness centres or order breakfast.”
The formula for success, he says, is simple: “It has also become clear that as people spend more time in the lobby, they are more willing to purchase food and beverages. Our space planning concept now integrates the “Link experience” throughout the lobby with the Link Cafe, with carefully considered adjacencies that offer easy access to food and beverage options, creating new revenue streams.” About the brand
Many traditional hotel brands are realising the potential of redesigning their lobbies to increase revenue. So why not just let a chain coffee shop brand set up shop? While it may seem like an easy solution, Robson believes there is more to it. “If you put a Starbucks in your lobby it may dilute your brand identity,” she says. Robson explains that select service brands typically wouldn’t take this route, part of the reason being that the franchise wouldn’t be on board. “For Starbucks, they also have to maintain their (own) brand identity,” she explains. “They have to have significant traffic to justify it. Unless you are right downtown, you probably won’t have the volume to be attractive to Starbucks.” Robson says the key for these hotels is to create their own experience that is comparable. Hanson says the question is specific to the situation: “In some cases the hotel brand can be a feature offering. If a brand can be associated with good coffee [or] customer service, it can be good for the experience.” On the other hand, he says in some cases having Starbucks’ associated reputation can add to the brand experience. Lobby for a new generation According to Hanson, the industry effort to bring lobbies into the 21st century is a direct target at millenials, the hyper-connected generation born after 1980. “This really is a service for millenials and does not respond to baby boomers,” he says. While it does not exclude the latter, Hanson says the baby boomer generation is much more likely to order food and beverage from the lobby and take it up to their room. Millenials, however,  prefer the “see and be seen” aspect of being in a coffee shop, the one that more hotel spaces are trying to emulate. For Sheraton, the recent technology-focused lobby enhancements were definitely designed with this audience in mind. “Our internal research shows that our guests, whom we define as the ‘social traveler’, want to get out of their room and into a social setting,” says Harper. Hanson agrees: “Humans are herd animals… We don’t necessarily want to interact, but we want to work around other people.” 

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