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There is much being made of the im-portance of Millennials (people born between 1982 and 20041) to the ho-tel business. Certainly, as the vast majority of people born during that period are people, there is no doubt that in one way or another they are of great significance to the hospitality industry, and industry leaders must be applauded for their interest in this market segment. There were, after all, 80 million of them living in the US in 2012, and it’s likely that some of them, at least, will stay in hotels. Some already have.

However, the notion that under-standing this cohort is the magic bul-let that will propel hotel brands into stratospherical profitability is mis-

guided and possibly not helpful. I say possibly because, as we will see, the focus on this generation has had some very positive consequences for the industry for which we should all be grateful. On the other hand, the intense focus on these young people is having a dampening effect on the real growth potential in the industry, with the greatest opportunities being ignored in favor of what is, in real terms, a not very appealing market segment. The most simplistic précis of the ar-gument runs something like this:

Jimmy (not his real name) is given a choice of two market segments to go after. Which of the two should he choose?

The focus on

millennials is

having a

dampening

effect on real

growth

potential,

with the

greatest

opportunities

being

ignored in

favor of a not

very

appealing

market

segment

The Millennials: Leading to the damnation of hotel brands?

H otel brands have been focusing on catering to the mil-lennials – a segment of around 80 million Americans between 9 and 31, and many more in other parts of the world. However, all the work and development of brands

catering to this segment has pointed to one inconvenient truth: there are probably no real differences in hospitality needs be-tween millennials and boomers. The net result, however, has been an overall improvement in the design and quality of hotels across the brand spectrum; it has also highlighted the huge opportunity for independent hotels and small chains to grow their business through the boomer market segment.

Excerpted from the article by Protean Managing Partner Laurence Bernstein first published in Hotel-executive.com (http://hotelexecutive.com)

1. There is some discussion, obviously, about the beginning and end of the millennial generation. The dates 1982 to 2004 are those used by Neil Howe, William Strauss, and R.J. Matson who started the whole thing with their 2000 book Millennials Rising: The Next Great Generation.

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That the

branded hotel

industry has

chosen to ob-

sess with this

segment is an

enduring mys-

tery, which this

article makes

no attempt to

examine

The first segment consists of 80 million young people (between the ages of 9 and 31), a disproportion-ate number of whom live at home with their parents because they are too young to live alone (unsurprising and not unique to millennials) or because there are no jobs or only very menial low paying jobs for them, even if they have expensive college degrees. Some forecasters wonder whether there will ever be jobs for them (there will, but when depends on when the other segment retires or dies!). Other than a miniscule few, people in this segment have no assets, and those who do are highly in debt (mortgages and car loans). All in all prospects for this bunch don’t look very good for the next thirty or so years. The second segment consists of 76 million people ranging in age from 40 to 67. While unemployment is relatively high (7% in the US), there is no systemic reason why those who want to work won’t find jobs. While not necessarily well prepared for retirement, these peo-ple own houses and are paying down their mortgages – the older part are entering retirement. The generation currently owns 80% of personal financial assets and more than half of all consumer spending. They buy 77% of all prescription drugs, 61% of over-the-counter drugs, and 80% of all leisure trav-el1. They are about to inherit tril-lions of dollars from their parents and they are entering retirement: they’ll have nothing else do with their time than spend their money – in the initial stages of retirement heavily skewed toward travel.

Being the proud graduate of a certain nameless hotel school, Jimmy choos-es the second segment. Even though, as he points out, the busi-ness travel component in segment 2

is probably declining while that in segment 1 is growing (true, but there are probably around 50 million boom-ers in the business travel age catego-ry between 40 and retirement, and 45% of non-millennials take four or more business flights annually versus only 28% of millennials2). We could go on and on demonstrat-ing the important commercial point that millennials are (in the hospitality industry) by no means the low hang-ing fruit; every business strategy suggests going after the low hanging fruit first. That the branded hotel in-dustry has chosen to obsess with this segment is an enduring mystery, which this article makes no attempt to examine. What we are doing in this article is examining the impact of this obsession on the overall hospital-ity landscape.

In some ways the impact of this mis-guided obsession is very positive, pri-marily because millennials are not much different from non millennials – at least in terms of what they are looking for in hotel brands and how they relate to hotel brands at an emotional level. In fact, Protean-Hotspex study of brand engagement suggests that marital status has more impact on brand engagement than age cohort (which is clearly to be expected). Where there are differ-ences they tend to be around attrib-utes that might be attributed to physical age (for instance, the study suggests millennials are more driven to hotel choice by factors such as if they experience the hotel brand as exciting or entertaining; and millenni-als would be slightly more likely to engage with brands they consider ac-tive and modern) all of which are not intrinsic generational attitudinal dif-ferences, but may well change as the travelers get older3. They are also not de-motivators to the other cohorts.

A recent announcement of hotels de-

1. Wikipedia (yes, we know, but it is the best available resource!) 2. Traveling with Millennials, bcg.Perspectives, March 2013 3. Protean Strategies-Hotspex Hospitality Brand Engagement Study, 2012

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It may come

as a shock, but

just about eve-

rybody travel-

ing these days

has a mobile

phone and/or

laptop and/or

tablet

signed or redesigned to meet the specific needs of millennials quotes Christine Barton, a partner at The Boston Consulting Group, and author of a recent study about the needs of millennial travelers. Ms. Barton high-lights a few of these needs which we have compared to the needs of non-millennials:

Clearly, all of these revolutionary ideas are in fact what hotels provide anyway, just updated. The important question is whether hotels would have updated their lobbies and rooms without this belief in an en-tirely new customer sensibility? In other words, is the whole millennial thing simply an excuse to bring ho-tels into the 21st century?

Given the complete lack of real in-sight into different millennial behav-iour as it applies to hotels, I have to conclude that this is the case. Take the following quote from the USA ar-ticle on Marriott’s new Moxy brand1:

“What we discovered is that they’re extremely comfortable with technol-ogy. They want and are willing to use technology to find good deals and good products. They love style and they’re very brand conscious, but they don’t necessarily want to pay an arm and a leg for some-thing.” (Moxy) 

One can only hope that they did not spend too much money on consumer insight research to come up with this deep understanding of the millennial

1. USA TODAY 8:43 a.m. EDT March 19, 2013

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Few, if any,

“innovations”

in millennial

focused

brands are at-

tributable to

typological dif-

ferences –

they are most-

ly updates of

traditional ho-

tel design and

amenities that

meet the cur-

rent design

and quality

standards

everybody is

looking for.

(and in this case Gen Y) soul. News-flash: in 2013 just about nobody is not comfortable with technology. Just about everybody is using technology to search for good deals and good products. Everybody loves style (although not necessarily the same style), the question of brand con-sciousness is proven to be related to a variety of socio-economic and envi-ronmental factors rather than age (so it is possible that all people who can afford to travel are more brand conscious), and nobody wants to pay an arm and a leg for anything. So what is Moxy actually saying? At the most fundamental attitudinal lev-el they had trouble finding any real differences between this group and boomers, so they hang their hats on functional design differences that sound suspiciously like a strategy to make the experience cost less, rather than be more appropriate. They have concluded, the article goes on to say, rightly or wrongly, that millennials are prepared to sacrifice more than boomers in the hotel experience pur-chase1. In the article Moxy is de-scribed as providing very small rooms, less furniture, no desk (millennials enjoy working on the bed or in the chair – actually, and appar-ently they miss the point, millennials and everybody else enjoy working in comfortable spaces and will go to the lobby or work-centre if the room is not large enough), limited service (no service), etc. Interestingly, other than the limited service aspect, this is exactly the thinking that Ian Schrager put into the design of the original Morton’s hotel in 1984, when the oldest mil-lennial was 2 years old. At the same time the idea of “lobby socializ-ing” (now renamed “lobby connectiv-ity”) was introduced; more to the point, lobby bars in hotel have been around since about always (except

they were less noisy and less dark!), and meeting in hotel lobbies is a long standing tradition al over the world. We can find many more examples that clearly demonstrate there is no real meat to the notion that millenni-als are different from boomers in their hotel needs in ways that have anything to do with their fundamental typologies. Few, if any, “innovations” (and I use the term loosely) in so-called millennial fo-cused brands are attributable to ty-pological differences – they all seem to be updates of traditional hotel de-sign and amenities that meet the cur-rent design and quality standards everybody is looking for. Millenni-als will stay at Moxy because it is af-fordable and comfortable – boomers would have stayed at an affordable and comfortable hotel when they were 25, if there had been a brand offering that product.

In the meantime this obsession has resulted in an overall rethink of hotel design for everybody and hotel brands have come to the conclusion that providing mediocrity is across the board a bad idea. This is good for all travelers, even if it was arrived at via a vapid segmentation strategy which has little chance of succeeding.

But it is a bad thing in that hotel brands are not focusing on where there is a real opportunity to create added value innovations for a market that is actually likely to pay for it. Bad and good – bad for the hotel brands, but good for independents and small chains that can capitalise on the huge potential of the boomer market. While that market may start to die (figuratively and literally) in about 15 years, it will be hugely lu-crative in the short and medium term, and appears to be a space in which the major chains are not inter-ested in playing.

1. Customer sacrifice is what James Gilmore suggests is the counterpoint of customer delight: it is the re-sponse people have to negative components of an experience that they otherwise find delightful or satis-factory. Typically customer sacrifices are described as “good enough” meaning they aren’t good at all, but given the need for the balance of the experience, they will suffice.

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Protean Hospitality is a boutique brand strategy advisory firm focused on helping our hospitality cli-ents drive growth. We combine our business/category expertise with tenacity, balancing rigor and creativity, to uncover new opportunities for hotels, resorts and hospitality brands.

For further information on this and other Protean Hospitality studies contact: Laurence Bernstein, Managing Partner,

416 967-3337 x 101; Bernstein@proteanstrategies.com Www.proteanhospitality.com

Protean Hospitality is a boutique brand strategy advisory firm focused on helping our hospitality cli-ents drive growth. We combine our business/category expertise with tenacity, balancing rigor and creativity, to uncover new opportunities for hotels, resorts and hospitality brands.

For further information on this and other Protean Hospitality studies contact: Laurence Bernstein, Managing Partner,

416 967-3337 x 101; Bernstein@proteanstrategies.com Www.proteanhospitality.com