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Gel conference, April 2004, New York City

Customer Experience and Hotels

Friday, June 13, 2003
by Mark Hurst

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Forget websites for a minute. Hotels could make a lot more money if they made a small investment in improving their customer experience.

I know this because I travel a lot, and I constantly observe the ways in which hotels - even good or excellent hotels - often ignore their customers' most basic wants.

A good example is the luxury Palace Hotel in downtown San Francisco. I stayed there last week as I spoke at the DUX conference (it was good, btw), and it was a sight. Imagine the Palace's gleaming, soaring lobby. The meticulously dressed, unfailingly friendly bellmen and front desk attendants. The pool. The sushi restaurant. The valet parking. The Palace wants its visitors to know that this is a spectacular place.

One night, in my room at the Palace, I decided to dial up on my Mac to check my e-mail.

Then I saw the hotel's phone charges.

- Local calls were $1.50 per call, with extra charges if the call lasted over an hour.

- Toll-free calls were $2.00 per call, again with extra charges later.

My immediate reaction was irritation at the Palace: they're trying to take advantage of me! Trying to penalize me for making a toll-free call on their precious telephone, eh? Well!

Next morning, as I checked out, I voiced my disappointment to the front desk. The attendant apologetically told me that he hears that complaint all the time; that he has "told management" multiple times; and that they still leave the phone charges unchanged.

The end result is that I won't recommend the Palace to a friend or colleague. It's an excellent hotel otherwise, but telephone extortion is an obvious slap to the customer. The Palace might as well leave a dead fish to in every room, and charge $50 to remove it.

Here's the tally, after my Palace experience:

- $10,000: Approximate lifetime value of a loyal customer (1 night at $200 x 5 nights a year x 10 years)

- $30,000: Approx. lifetime value, counting a customer's referrals to other travelers (assuming just two referrals in 10 years)

- $400: My likely actual lifetime value

- $2: The amount that made the difference. That is, charging an extra $2 for a lousy toll-free phone call may have resulted in a nearly $30,000 loss in my lifetime value to the hotel. Counting the thousands of other Palace guests this phone charge affects, the Palace could be losing millions of dollars - maybe tens of millions - in unrealized lifetime value.

- $0: Approximate amount it would cost the Palace to change the experience. (Sure, re-printing the rate sheets and re-programming phones would take a couple of days, but amortized per visitor, it's next to nothing.)

And now, the final equation, which explains everything:

Investing ($0) in the customer experience (removing the $2 phone charge) generates huge ($5,000,000+) returns.

Invest next to nothing, return millions.


Customer experience is a long-term investment, and it needs to be applied consistently across the experience. It simply makes no sense to make lots of long-term investments (brass fixtures, downtown real estate, valet parking) and then throw in a short-term shaft (killing visitors on toll-free calls).

It's like opening a four-star restaurant, where everything is excellent - the service, the food, the decor, the live music, everything - and then putting moldy bread on the tables for customers. (Hey, it saves a few bucks not to buy fresh bread every day!)

Be consistent. If you're going to invest in customer experience, go all the way. You can't reduce the gross offenses against your customers to "just one." (More blue-green bread, sir?)

(P.S. Funny, the Palace hotel's Flash intro doesn't mention getting shafted on phone calls.)


One more quick example. I recently stayed at the Embassy Suites in Austin, Texas. I like Embassy Suites for business travel and have stayed there a lot, but never before in Austin.

I got to the pool around 7 a.m., so I could have a quick swim before breakfast, before I headed to my 9 a.m. meeting.

The pool was locked. Here's what I saw:

Pool Hours, 9 AM - 10 PM

Strangely, the exercise room next door was open from 5 a.m. to 11 p.m. Apparently I'm allowed to run on a treadmill in front of a blaring TV at 7 a.m., but swimming is right out.

It's patently absurd to lock a pool at a business traveler's hotel until 9 a.m. Why invest in an expensive pool, then use it only to taunt your customers, who are locked out?

And why would a pool close at 10 p.m.? Business travelers often go to dinner with the client after work, getting back to the hotel right around around, you guessed it, 10 p.m. Perfect time for a swim (if one is a good lock picker).

To compound the situation, the door to the Embassy Suites pool was combination-locked even when the pool was officially open. That's right: there's a five-button lock that visitors must negotiate even when they visit the pool at 11 a.m.

Since this may be irritating for visitors, the Embassy Suites helpfully posted a sign to show visitors how to open the lock:

To enter pool area, press 1-2-3, then turn knob to the right.

Imagine the functional requirements for the Embassy Suites' pool area:

- Business travelers must be locked out of the pool at all times.

- Non-business travelers must be irritated by a lock every time they enter the pool area.

- There must be no security to keep out unwanted visitors.

Once again, this hotel is not providing a consistently good customer experience. Embassy Suites excels in other areas - good breakfast buffet, large inner atrium, helpful and friendly staff - but this one "dead fish" in the customer experience will likely keep me away from that particular Embassy Suites forever.


Hotel shots below:

Lovely pool.

Pool, door, and sign.

Pool hours: 9AM - 10PM

Both insecure and irritating to the user: To enter pool area, press 1-2-3, then turn knob to right.

Exercise room: 5AM - 11PM

Unclear evacuation exit sign.

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