Reinventing Hotels: citizenM

1. What are some of the challenges and opportunities of competing in the hotel industry? How do
you think the hotel industry (or travel industry more generally) has changed over time?
 The challenges of competing in the hotel industry is the low profitability, primarily due to
overhead costs and low margins, which means they’ll need to have a high occupancy rate to
increase their profit. Meeting the needs, understanding the culture and ethics of customers from
different regions is another challenge, to satisfy customer demands. Another issue is the low
switching costs to travelers, that makes maintaining customers hard. But this could be rectified by
using this as an opportunity to remove the high cost amenities and focus on providing customers
with only those core services and experience they value the most, eliminating the rest.

Overtime, the hotel industry has changed from a full-service facility concept to accommodation
utility. In mass-market sector, rental cars, airport check-in etc, has been disappearing due to rise
in technology, while high cost hotel model have been replaced with alternatives such as Air BnB,
capsule hotels, bed and breakfast at an affordable price. Two values that drive the industry now
are accommodation as customer experience and accommodation as simple utility. Customer
expectations have changed from in-room demand entertainment to needing broadband internet
or Wi-Fi.

2. Can you identify different customer groups in the hotel industry? What are some of the ways that
hotels attract these different groups?

 There are two big customer groups – short-term and long-term customers. Short-term customers
include business travelers. Short term customers often do not require sophisticated in-hotel
services, the main point would be location proximity. Long-term customers include those who
come for recreational visits, a tourist, vacation etc. the long-term customer would have more
expectation from the experience the hotel gives them.

Hotels can attract the short-term customers with amenities such as conference rooms, Wi-Fi,
airport shuttles etc. For long-term customers, they’re drawn in by proximity to vacation
destination and fun on-site entertainment. Standard amenities would include business centers,
gym, laundry center, restaurant and bar, pool, snack (vending machines), free Wi-Fi, free
breakfast, newspaper etc.

3. What are the advantages and disadvantages of targeting a narrower niche of customers rather than
trying to appeal to a wide range of hotel customers?

 It is easier to satisfy the needs of a niche rather than a wide range. Targeting a narrow niche
market would require less investment as they have to produce limited goods for the niche
market. There may be lesser risks, as the marketing is done to a very small segment of the
market. There can be brand loyalty. The customers may continue to repeatedly frequent the
hotel and may even recommend it. They also face less competition when targeting a niche
market.
 However, the niche market may not be big enough to provide high occupancy rates hence the
decline of the profit, making it difficult to enjoy a larger profit margin in the market. A firm’s
survival chances may decrease if it depends solely on niche.

4. What are some of the ways that citizenM has substituted technology for labor? What are some of
the benefits/risks of this approach?

 CitizenM uses many technological advances as a substitute for labor. Some include the self-
service check in machines that dispense keys, automated reservations, round-the-clock that
allows customers to help themselves to a quick meal whenever they wanted using their credit
card as well as in-room ‘mood pads’ to control room amenities.

The benefits are that there would be a decrease in the cost for construction and staffing, when
eliminating many of the costly features of a typical hotel and the savings would be passed on to
their guests which helps create a better stay for the customer.
The risks may include failure of technology, which can be a widespread failure compared to
human staff. Humans are generally better at handling ambiguity which is helpful since a
technology isn’t always welcomed instantly.

5. Can you think of other ways to dramatically re-envision how a hotel might operate and attract
guests? What are the advantages and disadvantages of your approach?

 One way could be, to try the micro hotel concept which focuses more on the style and substance
and not the size. This kind of concept for business travelers, even to those who would rarely stay
in their room. It’s also costs low to spend a day or more in a room of a micro hotel. It has a good
balance between comfort, amenities and affordability for anyone who just needs a clean and
comfy bed.
Disadvantage – some micro hotel rooms wouldn’t be a good fit for a person who is
claustrophobic, cheapest rooms could lack some amenities and because of its size, it cannot be
shared for a group of more than 3 at least.