Driving Business By Adding Value

June 30, 2008 | Uncategorized

Now that the price of gas has gone through the roof — and has caused a downturn in business for many industries — companies are providing gas cards as an enticement to draw customers back.

But there’s one industry — one you probably never would think of as being impacted by the price of oil — which is now using gas cards to lure customers back. Are you ready for this? It’s prostitution.

Yes, the ladies at the Shady Lady Ranch out near Beatty, Nevada, where prostitution is legal, have also seen a downturn in business due to the high cost of gas. It seems that the truckers who normally frequent their spread have stayed away since gas rocketed past $4.00+ a gallon, and diesel even more.

And the entrepreneurs they are, they now tout a “July Special” on their website (http://www.shadyladyranch.com/specials.html): spend $300 (for one hour) and you’ll receive a $50.00 gas card, a $100 card for spending $500 (two hours) and a $150 card for a $800 (three-hour) rendezvous. It’s an interesting twist on the value of providing added-value.

You have to congratulate the ladies of Shady Lady for this creative bit of marketing — just as you should the guys at Chrysler who launched the promotion that locked in the price of gas at $2.99 a gallon for three years for anyone who bought one of their cars during June. And there’s the ad I just saw from a recruiting company that offers a $500 gas card for any manager who started a position with a client company by July 11. And, of course, there are the scattering of restaurants across the U.S. which offer gas as an enticement to lure customers to their tables.

One of the first industries to use free gas as an enticement was the hospitality industry. In fact, I remember some hotels doing gas promotions years ago during slack travel periods. It would be interesting to know just how much these promotions impacted the profitability of their businesses.

It would also be interesting to know if all the industry surveys done over the years have had any impact on the hotel business. I would think most general managers read these surveys, although it’s anyone’s guess as to whether or not the sentiments on the written page make the jump to in-house practice.

One popular industry survey is the American Hotel & Lodging Association’s (AH&LA) Lodging Survey, one of the most comprehensive hospitality industry surveys of its kind. Undertaken every two years — the 2008 edition has just been released — it reveals some interesting trends in the U.S. hotel industry.

This year’s survey suggests an interesting correlation between the hospitality and airline industries: both, obviously impacted by the price of oil, are trying to cut costs in a variety of ways.

For example, of the more than 10,000 U.S. hotel properties replying to the survey only 59% now offer a complimentary breakfast. That’s down 9% from two years ago. More are also charging for a late cancellation. And the number of hotels that now offer a free morning newspaper has dropped 13%, to 70% today from 83% in 2006. It’s obvious there’s some penny-pinching going on.

On the other hand, hoteliers seem to be redirecting those pennies to services more in demand. In a society that is become more health-conscious the number of hotels now offering vegetarian menus has increased 16% (to 48%). Those providing “healthy menu” options rose to 66%, up 15 points.

The technology most demanded by clients — Wireless Internet access — can now be found in 91% of hotels, that’s an increase of 35% compared to four years ago.

But if you travel a fair amount, as I do, you’ve probably experienced the complete irony of Wi-Fi in today’s hotels — the higher the price of your room the less likely you are to get free Wi-Fi.

If you look closely, you’ll see that stats of the survey underscore this fact: AH&LA found that Internet access charges are most common at the more expensive properties with approximately 75% of luxury hotels and a whopping 91% of “upper upscale” hotels charging guests for Wi-Fi.

You don’t have to be a brain surgeon to understand the underlying rational. Many lower-priced hotels, especially those in the less-expensive categories, offer free internet to budget travelers as an added-value enticement. Like the free breakfast and morning newspaper of past years, some customers use it and some don’t, but it’s still value added and a good way of not having to compete on price alone.

Business travelers who frequent hotels at the luxury and upscale end of the spectrum almost always have a need for email and Wi-Fi, which they expense and pass on to their companies. Hoteliers know this, of course, which is why they maintain the access fees, even though you often hear upper-income travelers say they wish hotels would just provide free access and increase the cost of the room.

On the other hand, more and more hotels in the upper category are now offering iPod docking stations in their rooms. Hoteliers offer these for free, of course, since it’s an item most business travelers can’t expense but is a nice added-value enticement to lure execs for whom in-room entertainment systems are becoming more important.

Somewhat like the added-value of those gas cards out at the Shady Lady Ranch.

Jim Ferri