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Future Trends | Chapter 5

Service as the differentiator

With rising expectations, increased competition and knowledgeable customers looking for both value for money and good quality, there was a strong message from commentators that the service provided – and the people providing that service – were going to be the crucial differentiator in the future. These areas alone can make a business stand out and drive customer loyalty.

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they stayed… They might say yes, it was a lovely room, but they don’t say it was nice carpet, nice curtains – that’s a given. All they talk about is the experience, the service, and the memories. And that is really the thing that we have to remember; we are selling memories and experience. It’s not selling the bricks and the mortar.

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Sean Wheeler, Area Director of Human Resources, Dorchester Collection

Personalised, tailored service

Customers are increasingly diverse in their tastes and expect businesses to tailor their product and services to them as an individual. It implies a more proactive approach to anticipating customers’ needs. This is particularly evident in the increased engagement, profiling and segmentation of customers through research, which results in the delivery of a more personal customer service experience, especially at the luxury end of the market.

‘Last minute’

There has been a clear trend towards last minute booking in recent years and this is expected to increase as technology makes it easier to book hotels and restaurants, often while on the move. Being able to search and compare cheap deals online brings the necessary information to the consumers’ fingertips. Financial uncertainty also has a bearing; where in the past customers would have booked a summer holiday months in advance, this behaviour is changing. People are now waiting until nearer the time to book a holiday to ensure they have the funds available or that they are still working when they plan to take their holiday. This is then compounded by fears that travel operators may go out of business.

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experience. They don’t want to pay more for it, but their expectations of the level of service, the level of facilities that an average pub will offer, has escalated.

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Kate Nicholls, Strategic Affairs Director, Association of Licensed Multiple Retailers

Changing nature of loyalty

The nature of customer loyalty is changing. With so much choice and competition some commentators feel that there is increased ‘brand promiscuity’ or inter- changeability between certain types of products and services. This can be more evident at the lower end of the market where there is less product differentiation and where pricing is more often used to distinguish products and influence purchasing decisions. Today, loyalty means being on a list or catalogue of preferred products or services. In competitive markets this presents a challenge for businesses trying to build or maintain brand loyalty, and so other factors, such as quality, need to be considered.

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taking advantage of it, so we see massive brand promiscuity and many operators will say this is the most competitive market they’ve known in 30 years. Loyalty is incredibly important because you want people to come back, but now it is about being part of someone’s repertoire of places to go. It’s not necessarily the place you go to every week like going to the local pub used to be, but you’re on their list of places, so it looks different.

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Some employers fear that the culture is counter- productive as consumers are becoming conditioned to expect offers and discounts as the norm, with prices consequently being driven down. In the longer term this may mean less revenue, declining profit, and an inability to invest in the business and workforce. However, others have experienced success with discounts and vouchers and believe its appropriateness depends on the business model, and whether the business is able to upsell and create return business.

Market opportunities

Our consultations with employers and industry commentators highlighted a number of growth opportunities in specific markets:

• Young people – despite high levels of unemployment, young people continue to be important for the dining out and drinking markets, and continue to spend. This is expected to continue as this generation has grown up in a time where eating out has become the norm, not just something for special occasions.

• Female and family market – women are increasingly being recognised as the chief decision-makers and purchasers of hospitality and tourism related products, with children and families an important element in this. Some businesses are increasingly aiming their marketing at the female ‘opinion formers.’

• Corporate market – interviews suggest that the corporate customer is cutting back on events and conferences, and using cheaper products e.g. business travellers staying in budget accommodation, the standard of which is becoming more reliable due to increasing competition and the prominence of chains.

• Increase in niche products and markets – lots of niche product development and new markets are being established due to a more diverse ‘fluid identity’ among customers with a desire for novelty, innovation and new experiences,22 _{e.g. boutique hotels and ‘grand-}

travellers’ – grandparents who take the grandchildren on holiday.

• London market – London is seen as a

hypercompetitive market, very different from the rest of the UK and is at the forefront of new concepts and trends, as well as being a growth market for big brands.

2. Product and market trends

In addition to changing customer behaviours, wider product and market trends are emerging. Some have implications for the sector as a whole, such as rising costs, while others, like diversification, are drivers within particular industries.

Resilient sector but rising costs

There is concern that food costs will rise further, particularly in the coming year following a poor summer and harvests. This will challenge businesses to keep their costs low while still buying sustainably and meeting consumers’ expectations around value and quality. In the current climate rising costs are difficult to pass on to price conscious customers, at least in markets that are largely price driven and in which competition is fierce. For businesses operating in these markets, rising costs could potentially impact on already tight profit margins and have an impact elsewhere in the business. Our research has shown that employers most often responded to difficult trading conditions by either increasing (30 percent) or decreasing staff hours (26 percent).21

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upward pressure on input prices. And while selling prices can’t be pushed up because of consumer demand, profitability is going to suffer.

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Peter Backman, Managing Director, Horizons

Discounting and voucher culture

Employers highlighted the voucher and discounting culture as a key trend, although it is less prevalent in some parts of the sector, such as hotels and pubs. The product, business model and the market – typically the low or budget end where greater emphasis is placed on price – will also determine use. The economic climate and customers looking for added value and bargains is partly driving the trend, as is technology as customers can now easily search for deals online – all in the context of an increasingly competitive market.

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because they just encourage the customer to get the cheapest price. Operators are not building loyalty through these schemes. The businesses that are building loyalty are doing it through offering value for money and good service.

Future Trends | Chapter 5 Chapter 5 | Future Trends