Mr. Kasavana

Mobile Technology

Optimizing Hospitality Industry Mobile Apps

By Michael Kasavana, NAMA Endowed Professor, School of Hospitality Business, Michigan State University

Forrester Research predicts by 2015 eighty-two million people will rely on mobile devices as a primary reference tool. Through the use of a mobile device, consumers are able to receive timely announcements, alerts, promotions, discounts, and location-relevant offerings along with access to reports of purchasing history, loyalty rewards status, and a host of concierge services. It is estimated that there are several hundred million active cellular network subscribers and with such a large number of users, it is critically important that hotels, restaurants, clubs, and casinos recognize the unparalleled competitive advantages that can be gained from location based applications (LBS), including guest check-ins, word of mouth broadcasting, and shared experiences. Gartner Research, which identified LBS as a top consumer application category for 2012, expects LBS application users to exceed 1.4 billion people by 2014. Jupiter Research estimates current market revenues attributable to LBS applications at around $486 million with 2014 revenue projections hitting $12.7 billion. Two key areas of mobile applications are location-based services and payment services.

Definition

A location-based service can be defined as an information and entertainment platform, accessible though a mobile network, based on the geographical positioning of the mobile device. In other words, LBS technology involves the use of device location coordinates to determine what directional or promotional information to transmit. Since 2002, LBS technology, primarily dependent on GPS triangulation, has been used to search proximity venues relative to a mobile device (e.g. "locate nearest hotel" or "find the closest Mexican restaurant", etc.). In 2010 LBS applications were expanded to include additional identifiable features and provide a basis for two-way data exchange.

Recently, push and pull technology capabilities were activated that enable the user to receive information, either via opt-in registration or proximity-based messaging, or seek desired information through access to mobile-compliant websites. Basically, LBS applications allow access to mobile messaging based on two factors: location and time. According to comscore.com, in January 2011 there were 74.6 million smartphones in the US. Given that LBS applications involve push and pull technologies only available over smartphones, industry researchers expect a significant increase in location-based services downloading.

Push/Pull

There are two broad categories of LBS applications: push and pull. Push applications deliver information requested by the user in response to the user opting-in or triggering transmission based on entry into a specific location. In most cases, push LBS applications rely on pre-set content developed for the user (guest) by the host (hotel, restaurant, club, or casino). A push service is activated by an event (guest arrives in a targeted area or a time-dependent setting expires). Dunkin' Donuts and Cold Stone Creamery, for example, are two firms credited with using push-based alerts, and/or promotions, to notify guests when they are in close proximity to a store location. A consumer who opted-in (i.e. registered) with either firm's LBS application would receive such notifications whenever a registered mobile device was detected within proximity of a business location.

The functionality of push technology is dependent on the concept of geo-fencing. Geo-fencing is defined as a push technology that enables an entity (i.e. hospitality business) to distribute text messages to a mobile device that is carried into an active signal area. Basically, geo-fencing creates a pre-defined, virtual space around a particular location or building. The application software allows hoteliers and restaurateurs to send text messages to consumers in a specific geographic area. A geo-fencing program requires potential users to opt-in through registration with an authorized website (online), text messaging (sending "includeme" to 3539211), or in-store enrollment. In other words, a potential guest must first agree to receive text messages from a business prior to the receipt of the notification. Push information is typically formatted to location, time, user preferences, and customer relationship management (CRM) data.

In a pull application, information is delivered as a result of a direct query by the user. In other words, the user requests specific information (e.g. hours of operation, nearest location, reservation information, etc.) and the application provides an reactive response. This is similar to typical web search functionality in that pull services send information in response to user query; unlike push services that deliver information without specific demand. Pull LBS requires that a user's position be acknowledged in order for location-dependent information to be retrieved, usually from a mobile website. As a result, hospitality management needs to develop promotions that can be both location and time dependent. Given the nature of LBS platforms, push technology applications have become much more popular than pull applications.

A popular item that can be used with both push and pull technologies is mobile couponing. Mobile coupons can be targeted to opt-in guests or proximity guests. Overall, mobile coupons have been found to have an average redemption rate of twenty-three percent; a rate that significantly out-paces traditional coupon redemption rates. Cellit.com, a major supplier of mobile coupons, claims its redemption rate for mobile coupons is eight times the rate for email coupons and eleven times greater than direct mail. Note: not all mobile coupons involve purchase discounts; some revolve around challenging games, interactive engagement, or non-traditional offerings.

LBS Netware

There are three methods available for mobile device location identification: global positioning system, cellular triangulation, and WiFi networking. On the horizon is a fourth identification technique, based on inclusion of a certificate signing request chip that focuses entirely on indoor location determination.

Global Position System (GPS): primarily an outdoor navigation technology. According to cell phone data about eleven percent of cell phones manufactured have a GPS capability. As a result, this technology relies on an analysis of signals from GPS satellites to pinpoint a cell phone device. GPS tracking is considered relatively accurately, but not exacting.

Cellular Triangulation: an alternative method to GPS tracking that relies on cellular signal to/from tower detection. Although considered less accurate than GPS, cell phone triangulation incorporates the signal strength of multiple cellular towers to calculate a device's geo-physical location. Since the majority of cell phones do not possess a GPS chip, cell tower triangulation has become an important determinant in location determination. A cell phone's signal is often tracked by three or more cell towers, thereby enabling triangulation functionality. Given the probable distance from each tower in the set, as well as the lag time between when cell tower pings, the approximate location of a mobile device can be computed. The accuracy of a cell tower location algorithm is dependent on the density of towers in a specific location. When fewer than three cell towers are in a geometric area, the location identification is more complex and less reliable.

WiFi Networks: unlike GPS or cellular triangulation, WiFi networks are mainly used as a locator for indoor positioning. Basically, a venue's WiFi network is used to assist pinpoint the location of a connected device to within 1-3 meters of its indoor location. The mobile device user, however, must download a WiFi locator application in order to be detected. An LBS application typically only displays content for the location in which the device is positioned. Unlike pointer methodologies, an important advantage of a WiFi locator service is its ability to plot and analyze movement patterns within a proximate range over time (on-the-fly). This type of technology allows a restaurant located in a shopping mall, for example, to send a coupon to a consumer walking toward the mall's food court and determines if coupon redemption occurred. This method is popular given it can work indoors and outdoors (within effective range) but often tends to be the least accurate of the locator options.

Certificate Signing Request (CSR) -- considered an innovative application, on the verge of implementation, is a specialized indoor locator technology. A smartphone equipped with a newly crafted CSR chip, and containing special software, is able to determine indoor navigation tracking for in-store, in-mall, and in-shopping center LBS applications. CSR developers claim that the certificate signing request (CSR) chip works with the phone's GPS, WiFi, and cellular capabilities to determine mobile device positioning to within 10-15 meters. Expected in late 2012, indoor location based CSR chips are not expected to be retrofitable to earlier smartphones.

LBS Requirements

There are four required components involved in a location-based application: 1-mobile device (user), 2-mobile network (platform), 3-mobile locator (proximity), and 4-mobile messaging (content).

1. Mobile Device - a mobile phone with GPS, cellular, or WiFi connectivity is required to enable a mobile network to recognize the location of mobile devices.

2. Mobile Network - a channel providing wireless connectivity with a targeted audience. A mobile network has been shown to increase consumer brand awareness, improve customer loyalty and retention, while producing high response rates to marketing campaigns.

3. Mobile Locator - a user's outdoor location may be determined by GPS satellite coordination. An alternative locator is cell tower triangulation since an active mobile phone remains in constant contact with the nearest base station. By knowing the identity of in-range cell towers, it is possible to calculate the device's physical location. Unlike GPS technology, cell tower triangulation doesn't rely on orbiting satellites, and therefore can operate indoors. A third option involves the use of WiFi triangulation. When a mobile device is connected to a WiFi network the location of the service provider's location can be identified.

4. Mobile Messaging - text messaging as an engagement channel can include locator search results, new product announcements, informational alerts, advertisements and promotions, e-coupons, interactive text exchanges (e.g. polls, quizzes or feedback campaigns) as well as contests and giveaways, call-to-actions, and downloadable applications. The message should be considered the most important of the LBS requirements.

Gamification

Gamification has emerged as a highly preferred approach to location-based services. The term gamification refers to the use of game-like tactics or strategies to enhance customer engagement, loyalty, and repeat business in non-intuitive game situations. According to Bunchball, the self-proclaimed leader in gamification, client companies typically experience a 100 percent increase in webpage views, interactivity, and repeat visits. There are several software design firms focused on adding game methodology to hospitality industry products and services that are not naturally considered game related. Firms such as Foursquare, Gowalla and Checkpoints have developed contests, challenges, and rewards that are redeemable at hospitality venues given completion of a specified task or function. This could be thought of as a modern day "Where's Waldo?" or solution to a "Hide and Seek" game. Foursquare, for example, enables foodservice businesses to support user check-in functionality along with posted specials; the user is then subsequently rewarded when s/he returns to the venue and again checks-in with additional discounts, offers, and prizes. Gowalla and Checkpoints also support check-in processes and similarly reward frequent users with products, gift certificates or airline tickets. Developing customer relationships via interactive programming and gamification has been proven to drive consumer engagement while enhancing the user experience.

Application Types

Basically non-payment mobile applications focus on three key parameters: "What is my current location?", "What is nearby?", and "How to get from here from there?" Recently, a fourth criteria was added, "Where are my friends located?" Location-based applications can be used with a variety of informational services including:

  • weather conditions anywhere on earth, both current and forecasted
  • navigational/directional mapping, including routing and landmark indexing
  • business directory or business finder, based on proximity or destination query
  • entertainment activities and venues, including show times and reservations
  • hospitality specific business indicators, with ratings and physical descriptors
  • local news, with alerts and warning information
  • notification of offers by event, promotion, price, discount, or reward
  • identification of friend's location based on opt-in, check-in functionality

Among a recently published 'Top 10 Hospitality Industry Trends for 2013' is an increase in mobile research and bookings. The article points out that an ever increasing number of travelers are expected to rely on a mobile device to research lodging and travel options as well as book and communicate room preferences directly with the destination property. Mobile channel bookings have increased four-fold between 2008 and 2010 according to Forrester Research and Google is projecting that mobile devices will overtake PCs as the most common web-access medium by 2013. With travelers adopting mobile equipment at a rapid pace, hoteliers are wise to optimize company websites for mobile usage, especially location-based applications. In addition, the trend article notes that currently just over twenty-two percent of hospitality businesses use social media as a revenue generating tool but expect this number to grow to exceed twenty-seven percent in the next five years.

Hospitality Mobile Apps

According to a recent survey conducted at the University of South Florida Sarasota- Manatee, during in the past year just over fifty percent of consumers reported finding a lodging property through GPS wayfinding, while approximately sixty-five percent claimed to have used a mobile device to suggest, locate, and dine at an unfamiliar restaurant. The study concludes that LBS technology enables hoteliers and restaurateurs to learn more about customer interest and how to incentivize and/or reward guests to encourage repeat visits through active engagement. Recently, both Ritz-Carlton and InterContinental hotels announced placement of global concierge teams on social media websites for location-based social networking. The access provided in these platforms is designed to provide travel advisories, weather forecasts, tours, landmarks, and site-seeing information to travelers; not to promote a destination property's amenities, facilities, or promotions. Industry observers consider this a way for each brand to leverage its customer engagement through a personal interaction with knowledgeable concierge staff at a local site.

DigitalCoCo (digitalcoco.com) is a social media analysis firm specializing in restaurant industry research. In late 2010, the firm tracked more than 80,000 guest check-ins each day for 29 days, at more than 100 restaurants. A significant finding of this study is that, when integrated with a loyalty program, restaurants are among the firms most likely to benefit from LBS. When checked-in guests have clout among their social base (i.e. influencers) then the notification messaging is much more powerful than predecessor word of mouth communication. In other words, a recommendation from an influential friend or family member tends to be the most effective persuasion technique. For the hospitality industry, leading recommendation sites related to lodging include Foursquare and Facebook Places and for foodservice UrbanSpoon and Yelp appear to be among the most popular applications. It is important to note that these four websites are not mutually exclusive and can work effectively with either hotel or restaurant searches, promotions, and reservations.

Hospitality Industry Specifics

Both Foursquare and Facebook Places encourage hospitality firms to create specials that reward users for checking in at business locations. One of Facebook's key advantages over Foursquare is its large, built-in network of users (more than 600 million subscribers). And because Facebook launched long before Foursquare, many of its users had time to build up their own networks of friends. In fact, the average Facebook user is connected to 130 friends. This means that on average, each Facebook Places check-in has the potential to be seen by 130 of a user's Facebook friends. The majority of Facebook users are connected to their intimate social networks-friends, family, co-workers, etc.-while many Foursquare users are connected to those they've never met (e.g., Twitter followers).

From a word-of-mouth standpoint, it can therefore be argued that Facebook check-ins are more valuable than those spread strictly through Foursquare. It's the difference between telling your best friend where you're hanging out versus telling a complete stranger. Your best friends are going to be far more likely to trust your recommendations. Foursquare users appear to be far more active than Facebook Places users.

Foursquare users appear to have much smaller networks, and thus a much smaller reach. The site doesn't appear to disclose data about the size of its average user's network. But anecdotally, it's hard to find many users with more than 50 friends, meaning that each check-in may be seen by just a small group of users. Foursquare allows businesses to run what's known as "Mayor" specials. These deals reward the individual who has checked in the most to a location. Foursquare is also in the midst of expanding their check-in deal options for businesses to better compete with Facebook, so there appears to be overlap between the two firms. There are also Yelp and Urban Spoon applications.

Future Apps

For many mobile applications, the ability to fine tune or pinpoint exact location is becoming a focal point. In the past, approximate destination mapping has been acceptable but there is a trend toward incorporating more precise location data (often referred to as hyper-local or micro-local solutions). Historically, part of the problem with exact location pinpointing has to do with the fact the user is moving and is likely to experience a shift in cell tower while progressing toward a target. For example, cell phone triangulation is often not true triangulation. When the user is close to or on the edge of an overlapping signal area, there is likely to be a fluctuation in target destination. LBS developers are working to improve accuracy through cell tower optimization and minimization of signal footprint variation. Given that the number of smart phones equipped with GPS technology is steadily increasing, accuracy of location algorithms are expected to improve dramatically.

Given the explosive evolution of social media channels, mobile services appear to have unparalleled potential for the hospitality industry in that they provide a platform for marketing goods and services at the most relevant time. Location-based services include current position determination, points of interest in a given location, and authorized tracking of others factors. Central to an LBS application are location, time, orientation, and navigation. The hospitality industry is particularly well positioned to use mobile technology to gain a competitive advantage, enhance the guest experience, promote goods and services, incentivize visit frequency, and improve overall efficiency. During the past few years the hospitality industry has been reasonably active as a participant in LBS applications and given the projected near future explosion of mobile marketing, hoteliers and restaurateurs would be wise to become more engaged.

Sample Mobile Applications

  1. Weather (Current and Forecasted)
  2. Navigation/Directional Mapping (wayfinding)
  3. Business Directory/Business Finder
  4. Entertainment Venues/Show Times
  5. Hospitality Business/Ratings/Facilities
  6. Local News/Alerts/Warnings
  7. Marketing Events/Promotions/Offers/Rewards
  8. Locate Friends/Dating

Sample Mobile Platforms

  1. iPhone [Apple's iTunes App Store]
  2. Android [Android Apps Market]
  3. Blackberry [Blackberry App World]
  4. Symbian [Nokia SymbianOS]
  5. Windows Mobile [windowsphone.com]

Ten Hospitality Mobile Application Providers (sample - short list)

  1. Facebook Places/Gowalla
  2. Foursquare
  3. Google Latitude
  4. Yelp
  5. Mashable
  6. MyTown
  7. Urbanspoon
  8. Where Poynt
  9. Whrrl
  10. SCVNGR

Glossary of Terms

  • Gamification: use of game mechanics to increase user engagement, loyalty and monetization.

  • Geo-fencing: a push technology that enables an entity to distribute text messages to a mobile device carried into an active signal area

  • Geo-location: identification of geographic location of a mobile device using a recognized coordinate system.

  • Location-Based Services: an information or entertainment service, accessible through a mobile device over a mobile network, that relies on the geographical position of the mobile device.

  • Mobile alerts: text message notification of special events and/or happenings

  • Mobile feedback: post transaction customer insight surveying

  • Mobile locator: identification of proximity and directions to site

  • Mobile loyalty: effective CRM programming

  • Mobile Messaging: messaging, typically SMS, is used for advertising and promotional campaigns (e.g. coupons, discounts, rewards, etc.) hosted on mobile devices

  • Push/Pull Technologies: basis for content transmission resulting from user initiation or through an opt-in registration into a specific location.

Michael L. Kasavana is the NAMA Endowed Professor in the School of Hospitality Business at Michigan State University. His teaching and research efforts are sharply focused on information technology and transaction settlement systems for self-service and full-service applications in hotel, restaurant, club, and casino environments. Dr. Kasavana received his B.S. in Hotel, Restaurant and Travel Administration, his MBA in Finance, and his Ph.D. in Management Information Systems from the University of Massachusetts-Amherst. Mr. Kasavana can be contacted at 517-353-9211 or Kasavana@bus.msu.edu Extended Bio...

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