Friday, October 2, 2009

If hotels were like airlines - a cautionary tale

Relationship Marketing VP Sandra Gergen had just arrived in town for an executive meeting. Because her employer, Generic Airlines, had just initiated service to Bozeman, Montana, the meeting was held there. This was primarily a cost-cutting move, since it allowed the executives to show up in Bozeman for the grand opening of Generic Airlines service there, and then have their meeting after the mayor and everyone else had left.

And it was an important meeting, too. Generic Airlines had just completed its second quarter of its "Value Pricing" campaign, which talked endlessly about customer value but was in reality designed to provide Generic Airlines with new revenue streams. A la carte was the word of the day, and any item with a perceived value was reclassified as an optional additional-charge item. Generic's competitors were all doing this, and Generic was right there in the pack.

The next day's meeting was going to show the results of the new promotion, since the financial executives would by then have complete figures on the first six months of the program. Sandra, and the other executives, were looking forward to hearing how much additional revenue Generic Airlines was receiving from the new program.

But right then, Sandra Gergen was just interested in sleep. From Generic Airlines' headquarters in Tampa, she had flown to the carrier's eastern hub in Nashville, then to the western hub in Salt Lake City, and then up to Bozeman. (Only senior vice presidents and above were entitled to use private planes.) Because of weather and mechanical delays, she didn't arrive at her hotel room until after midnight, and all that she wanted was a good night's sleep.

"May I help you?"

"Yes. My name is Sandra Gergen, and I have a reservation for tonight."

"Ah, Ms. Gergen, we've been expecting you. Welcome to the Value Luxury Hotel. Let me pull up your reservation...yes, you booked the 99 dollar Value Luxury Palace."

"Hmm, 99 dollars. That's the same price that we're charging for our introductory flights to Bozeman."

"'re with Generic Airlines, then? Oh, I see that you are."

"So have you flown one of our 99 dollar flights?"

"Um...yes I have. (Pause) So since you're with Generic, you'll probably be very familiar with the pricing structure here at the Value Luxury Hotel. Would you like me to go over it with you?"

"Right now I just want to fix myself a stiff drink on ice, take a shower, and fall into bed."

"Well, that shouldn't be a problem, Ms. Gergen."

"I assume that you have alcohol in the room in one of those refrigerators, right?"

"We do have alcohol in the room, yes. But it's on a special table. Would you like me to add a refrigerator to your room?"

"Add? Um, no thank you."

"Now you also wanted to add ice to your drink, is that correct?"

"Yes. You DO have ice machines, don't you?"

"Yes, and all of our ice machines take all major credit cards."

"Excuse me?"

"Ms. Gergen, in an effort to provide greater value to our customers, a bucket of ice costs five dollars. The ice machine will accept your credit card, although we impose a two dollar surcharge on American Express card use."

"What? That's...oh well, I guess warm booze won't be that bad. Can I have my room now?"

"Just a minute, Ms. Gergen. You mentioned that you wanted to take a shower, correct?"

"Why? Are you going to charge me for the water?"

"Oh course not, Ms. Gergen. The health department wouldn't allow it. But did you bring your own towels?"

"What? You have to buy the towels?"

"Actually, the towels are rented. You can rent them for ten dollars per hour, two hour minimum. Be sure to specify whether you want a bath towel, a pool towel, or a washcloth."

"So I pay twenty bucks for a towel, and twenty bucks for a washcloth?"

"Only if you want to, Ms. Gergen. At Value Luxury Hotel, we put the customer in control of their value luxury experience."

"OK, just add it to my bill. I'll go wild and spring for the washcloth AND the towel."

"Done, Ms. Gergen. And one more thing -"


"You mentioned that you wanted to go to bed after your shower was done."

"Now wait just a minute. Perhaps Generic Airlines uses a value pricing method also, but at least the standard airfare includes a seat. Do you mean to say that the hotel doesn't include a bed as part of its standard package?"

"At Value Pricing Hotel, we do provide sleeping accommodations standard. If you would prefer the added luxury of a bed, we can provide a room with the bed of your choice. At Value Luxury Hotel, we put the customer in control of their..."

Pictures: Bozeman Airport (license), Lobby (license), Ice Machine (license), Sleeping Bags (license)

The original draft of this post can be found here
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