As they recast themselves to cater to millennials, hotels are finding new ways to serve this tech-savvy, highly social generation.
Have you thought about how banks are going to respond?
The hotel business is grappling with the same demographically-driven problem facing bankers—differentiating to attract the generation of 75 million millennials amid a new wave of online competitors from Silicon Valley.
Reminiscent of fintech disruption, players such as Airbnb have circumvented the hotel industry, making it cheaper to find lodging in major cities across the globe. For traditional hoteliers, everything is on the table as they re-imagine their products and business models to attract and retain the Facebook set. Providing the “authentic, one-of-a kind” travel experiences millennials crave is a prime reason the lodging industry increased spending on construction and renovation an average of about 22% from 2015-2017 to more than $30 billion.
One hotel is taking a modern approach that could inspire new ideas for banks looking to reinvent their branches and business models.
The 367-room “Public” hotel opened recently in New York City, and is aimed squarely at millennial movers and shakers. It considers itself a full-service hotel. Yet, in the lobby there’s no front desk, no concierge, no luggage attendant. Guests check in through self-service screens, where they create their own room keys. There is no traditional room service. The hotel has no staff answering phones. The hotel has broken away from the traditional model, and automated its basic products and services, as many banks have started to do, in order to better serve this cyber generation on the go.
However, the hotel does sport five bars and a sprawling restaurant that are on track to generate profit margins 20% higher than the industry average. Public is straying from industry norms by placing food and beverage at the heart of its operations, providing a social environment instead of focusing on lodging. Public generates 35% to 45% of its revenue from food and beverage compared to a national average of about 24%.
For bankers, the parallel paths being blazed by hotels like Public serve as experiments worth not just watching, but considering how to implement.
To be sure, selling financial services is more complex than selling lodging, and one of the main challenges that banks face, which hotels don’t, is that customers expect their main account to be free.
However, just as hotels are focusing on different aspects of the customer relationship, bankers can also take a note on new strategies to increase foot traffic, and create an environment where customers want to linger and converse.
Consider the things that banks can’t automate, like personal relationships and face-to-face financial advice.
Survey data shows that millennials value trusted financial advice. The mix of a digitally-driven philosophy and a shift in the way bankers approach relationships can lead to increased value in person-to-person interactions. This increases the value of the time bank staff spends—and improves cross-selling of appropriate products, based on the customer’s background and stage of life.
- Capital One is conducting a similar experiment to Public Hotel, ditching the traditional industry layout and reinventing its core space—the local branch. In more than 20 Capital One Cafes across the U.S., counters full of pastries replace the transaction counter staffed with tellers. Tee-shirt clad employees, many of them millennials, walk around to start “interactions,” “make friends,” and ensure that Capital One is perceived as the trendiest, most modern bank on the block.
- Singapore’s DBS is hoping to attract the millennials with a new in-store ‘café and branch’ concept with monthly latte art and coffee appreciation classes, virtual reality technology for retirement planning, and video tellers.
- Umpqua has blended human and digital to create bionic banking. They proactively drive traffic to branches by setting up “meetups” and social events based around finance, such as “Finance 101 for single moms.”
And that’s what both industries need to embrace—creating a modern environment to sell traditional products.
The key is remaining customer-centric in a world where millennials and people of all ages are digital natives and expect vendors to meet them on their turf.
Public Hotel automated its front desk experience and put entertainment front-and-center to cater to millennial tastes, but at the end of the day the move allows it to sell more rooms, food and drinks. Amid the croissants and cappuccinos, Cap One is still focused on the bank business.
By maximizing automation, each industry can free up their people to provide the best products and experience possible.
If this level of digitization and automation sounds like a marketing strategy that would only work in large cities, think again. Demographic data suggests that bank marketers should find plenty of opportunities beyond the nation’s urban cores, since most millennials do not live in dense inner-city neighborhoods.
For retail and community banks especially, a clarion call-to-action accompanies this trend:
From the executive suite down, the industry needs to stop thinking of the branch as a location where transactions are completed and services offered. Instead, banks need to begin envisioning local branch offices as spaces designed primarily to begin and nurture relationships with customers who are challenging banks to think differently online and in the real world.
The day will come when staff grab a tablet and have a seat with a customer at a coffee table to go over their financial history and apply for new products, or when customers are riding around in driverless cars, looking at pre-approved offers scrolling across the window. Beyond just thinking about how to transform the branch now, banks should be preparing themselves with open and flexible technology. They need to be able to create new ideas and environments as new generations continue to drive change in the way that banks interact with their customers.
As bankers innovate to create new products and sales channels, the lesson from the hoteliers is, “Silicon Valley is a mindset, not a location.”
You don’t have to be a tech startup to take a new approach to an age-old institution. Bring that mindset to wherever your millennial consumers are, and the experience, and wallet share, will follow.
Originally seen on ABA Bank Marketing.com