How Hotel Lobbies are Transforming: Reducing Costs and Elevating Guest Satisfaction through Lobby Markets

“An empty lobby is not an inviting place to be…“?

- Arne Sorenson

Arne Sorenson was a truly gracious leader and a personal inspiration, starting my first article with his words just felt right. The lobby centric hotel is nothing new and I give Ian Schrager immense? “Trailblazer Credit” for reinventing the lobby as a social space that demonstrates the soul of a hotel (See the Public Hotel in New York), I recognise that my contribution stands on the shoulders of giants.

In today's Hospitality landscape, hoteliers are seeking innovative ways to enhance guest experiences, while also optimising operational efficiency. One strategy that has gained traction in recent years is the incorporation of markets within hotel lobbies. By blending convenience and customisation, these lobby markets not only reduce operating costs but also elevate customer satisfaction. With younger generations shying away from staff interactions, hoteliers struggling to fill vacancies and raining interest rates putting more pressure on the hotels bottom line, this strategy couldn’t have come at a better time.

In this article, let’s look at a few insights and also how some global giants like Marriott, Hilton, and Accor have harnessed this trend.

Properties with lobby markets see a 12% increase in overall guest satisfaction, as observed by a study by J.D. Power.

• The principal “Why” for exploring this avenue. Guest satisfaction is the ultimate metric of whether a guest has enjoyed their experience, would return to your establishment and consequently, justifies and supports current and future ADR ambitions. The link between F&B quality, general hotel satisfaction and ADR has been proven multiple times, both academically (example: JPB)? and also on a tangible GM level(example: Hotel Business Review: Dusit International, 2015)

84% of hotel executives believe that incorporating lobby markets can significantly reduce operating costs, according to a survey conducted by Hotel Management (2022).

• Hotels are eager to please —the DNA of Hospitality— but allowing your cafe/restaurant/bar to stay open well past the point of profitability is not the answer. Allowing an automated solution to pick up the slack in shoulder periods is an elegant solution that generates revenue, caters to guests and requires no on the spot staffing.
• After speaking to a UK based hotel chain, stating that they were currently signed up to 16 recruiting agencies to fill vacancies and still not seeing the quality of associates needed to run a successful business, it becomes more evident that lobby markets are not only a way to reduce cost but also allocate human resources to functions that require more finesse & savoir-faire.

“The Minibar is dead”: PKF Hospitality found that the minibar accounts for a mere 1% of total hotel revenue.

• Different sources show anywhere between .23% and 2.5%. PKF is a respectable source and for the sake of this article, the variance is negligible

• The minibar is dead and no longer fulfils that impulse desire from guests. Major hotel chains offer empty minibars or remove them altogether..? A study conducted by Cvent found that hotel guests prefer to browse a shop or even leave the hotel for a nearby convenience store over? in-room or in-lobby treats.
• On a personal note, when I see guests with grocery bags walking through the lobby, my stomach sinks. Hotels have taken on industry giants like Expedia and Booking.com with campaigns to book direct; the cornershop should be a walk in the park.

73% of surveyed guests agree that they are more likely to stay at a hotel that offers self-service technology, minimising contact with staff and other guests - Oracle/Skift (2022)

• Whilst I usually internally sneer at people using corporate buzzwords, I stand corrected:? To use? self-serve technology is to future-proof your establishment. With millennials and younger generations making up 50% of hotel guests, adapting to their need for less confrontation and human interaction is extremely valuable. 39% of travellers desire? a fully contactless experience — this is the future to cater to.?

Offer additional convenience and value to guests: what to consider

According to Grab Scan Go: “Running a successful hotel lobby market or pantry can be a great way for hotels to offer additional convenience and value to their guests. However, creating and managing a well-stocked and well-organized lobby market requires attention to detail, strategic planning, and constant upkeep”

You are considering a Lobby Shop for your hotel? These are the points to consider to turn your idea into a success:

• Who operates the shop — and why does the answer matter??DIY: The Hotelier is in control of the shop and the P&L that accompany it. This solution grants the property the most control over the shop, but at the same requires it to do most of the lifting. To run a shop for a hotel requires stocking, cleaning, purchasing, behaviour analysis, inventory management, category management and accounting. Hotel chains that already have an integrated purchasing platform & PMS system can take advantage of this model.Store-as-a-Service: Advanced solution that lets the hotelier take on the operations of cleaning and filling whilst the technology provider takes on the administrative duties such as planogram optimisation, purchasing, delivery and payment processing. This scenario lends itself to hotel groups that would like to financially benefit from a solution but not take on the administrative duties of a full new POS.Outsourced: The Hotelier gives complete control of the shop to a third party operator in exchange for commission or fixed return. Hotels that want little or no involvement in their shop should consider this option.
• How are you going to finance your Lobby Shop?Purchase: Whilst needing capex investment, this option allows hotels to depreciate the asset according to their schedule and more honestly portray their FFE budgetLease/Rent: The asset light option that allows you to pay as you go
• How much return can I expect from a mini-market?Ask your supplier for a forecast; what is it based on and how are other hotels doing?What is the F&B intensity of my location? Are there shops, cafes, bars and restaurants in the area? Airport hotels, Resorts and Motels are prime examples of properties with F&B intensity approaching 0The hardware pay-off/breakeven should align with your renovation plan. Assets Amercia (2020) assessed that most hotels renovate every 3-6 years depending on star category. Don’t lock yourself into a commitment for 5 years if you are going to renovate in 2 years (Soft renovations excluded).

Lobby Markets: A conclusive positive asset for Guests

The combination of reduced operating costs and increased customer satisfaction is a testament to the power of the Lobby Market. It's clear that lobby markets are not just a passing trend but a strategic move that benefits both Hoteliers and their Guests, anticipating imminent changes to the Hospitality sector. Not only do you increase Guest Satisfaction — you render your hotel future proof.

Thank you for reading this far. I highly value your personal and professional insights — feel free to contact me and let me know what you think

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