Counting the Cost of Contactless
Hong Kong, Hong Kong SAR, September 30, 2024 / TRAVELINDEX / Today’s hotels are embracing the contact-free revolution, seeking to meet the expectations of health-conscious travellers by minimising physical contact and enhancing hygiene protocols. Today, with the tap of a smartphone or even a wave of a hand, hotel guests can access their rooms, make payments and request services. But how much are customers willing to pay to go contact-free in hotels? Thanks to Dean Kaye Chon, Dr Faye Hao and Dr Jinah Park of the School of Hotel and Tourism Management (SHTM) at The Hong Kong Polytechnic University, working with a co-author, we now know much more about the factors driving hotel customers’ willingness to pay for contactless services. Their novel empirical insights will guide hotel practitioners to invest more smartly and rationally in contactless solutions.
“Contactless service is being widely adopted by the hotel industry”, explain the researchers, “to provide the safest possible experience while maintaining good service quality”. By deploying contactless technologies at every stage of the customer journey, hotels can remove the need for physical contact from all major hospitality service encounters.
This may include “disinfection of public facilities and spaces, auto-detection of body temperature, keyless access, touchless smart rooms, and robotic services”, note the researchers. By meeting hotel guests’ need for more stringent safety and hygiene protocols, such contact-free provision can enhance customer satisfaction and trust and lead to more positive evaluations of hotels.
However, there is another side to the story. “Contactless hospitality service is expensive and has uncertain returns on investment”, the researchers warn. For example, some customers may be reluctant to pay a surcharge for contact-free amenities because they prefer “the human touch” or regard contactless technologies as unnecessarily complex. “Some customers believe that contactless technological implementation reduces the cost of hotel operation and management, thus expecting that they should be charged less”, add the authors.
Surprisingly, given the widespread implementation of contactless services in hotels to provide safe, seamless and efficient services, we still know little about how they are received by hotel guests. “Customers’ willingness to pay (WTP) for contactless service is still unclear in the hospitality industry”, say the authors.
This lack of understanding is putting hotels at a disadvantage. “There is a mismatch in the supply and demand of different contactless amenities”, observe the researchers. While most hotels are willing to invest in self-service check-in, keyless access, food ordering and concierge services, customers prefer contactless payments, digital room keys and digital messaging services. “Therefore, exploring customers’ WTP for various contactless amenities is critical to guide hotels’ investment”, the researchers point out.
WTP for hotel amenities – including contactless services – may vary with hotel type and customer-related factors. “Luxury and mid-priced hotel guests have higher WTP for green practices than economy hotel guests”, the researchers report. Guests’ age, education and income level, as well as their travel-related decisions, technology readiness and health concerns, may also affect how willing they are to pay for contactless services.
Integrating these diverse constructs, the researchers developed a novel series of discrete choice experiments to explore hotel guests’ preferences regarding various contactless services. The first step was to identify the relevant attributes of contactless service in a hotel setting, based on interviews with hotel managers and contactless service technology providers in China. “Six amenities of contactless service in the hotel industry were identified”, the researchers report. These were “contactless front desk”, “elevator”, “room entrance”, “payment”, “smart room devices” and “robotic services”.
Together with the price of a room for a night, these six types of contactless amenities were bundled into hypothetical hotel room packages for testing with real hotel guests. “We designed a series of discrete choice experiments to capture hotel guests’ WTP in various scenarios”, the researchers explain. “Each scenario included three hypothetical hotel room packages with different hotel contactless amenity combinations”.
These experiments were incorporated into a survey administered to 1,939 mainland Chinese respondents. The first section of the questionnaire elicited information on the respondents’ hotel stay profiles; the second presented the choice experiment; the third asked about the respondents’ attitudes towards technology, including contactless services; and the fourth collected demographic information. The researchers used a hybrid choice model to analyse the data obtained from the survey, as this approach well captures heterogeneity in individual preferences – here, hotel guests’ WTP for various contactless services.
The results of this analysis provide a holistic understanding of how and why hotel guests differ in their WTP for contactless services – with critical implications for hotels. “The empirical findings of this study provide three key takeaways for hotel organisations to develop more efficient contactless service design and delivery in the future”, the researchers say.
First, among the six categories of contactless hotel amenities, the respondents reported the highest WTP for contactless room entrance and payment services – the contactless amenities with which they were most familiar. “By contrast”, the authors report, “the WTP for contactless front desk services and smart room devices had the lowest values”. Crucially, these were the amenities with which the guests were least familiar. Given this connection between familiarity and WTP, investing in preferred contactless services will help hotels boost revenue in the short term. “However, in the long run, hotels need to pay more attention to improving customers’ awareness of less common and less preferred contactless services”, the researchers tell us.
Based on this finding, the researchers also suggest that user training can play a crucial role in increasing customer acceptance of new contactless services. “Accumulating positive experiences may address the current challenges of hotel contactless service (i.e., contactless front desk and smart room devices)”, they say. Hotels can also benefit in the long term from designing more “delightful” moments of contactless service delivery to encourage guests to accumulate positive experiences of going contact-free.
Second, the researchers found that certain characteristics of hotel guests influenced their WTP for contactless hotel services. For example, older guests reported a higher WTP, suggesting that hotels can benefit financially from tailoring contactless service marketing to seniors. In addition, customers who generally stayed in budget hotels were less willing to pay for contactless services, whereas luxury hotel guests were willing to pay more. “More efforts to balance budget hotel customers’ price sensitivity with technology engagement are thus required”, the researchers suggest.
Third, and perhaps surprisingly, customers’ WTP for contactless services was only marginally affected by concerns about virus transmission. Instead, they regarded going contact-free as primarily a technological advancement. Their readiness for contactless hotel services was closely related to their acceptance of or resistance to new technology in their everyday lives. “Connecting the technologies from customers’ everyday lives to hotel stays could make contactless service accessible to more people”, the researchers point out. “Customers’ needs and concerns regarding technology, such as discomfort, insecurity, performance expectancy, and trust issues, should be considered when delivering high-quality contactless service”.
However, the researchers also found that technology could not completely substitute for “the human touch” in service encounters. “Hotel organisations should establish a holistic strategy to satisfy customers’ desire for interpersonal linkage and technological efficiency by designing contactless technology as an augmenter of human contact in service delivery”, they explain.
“Although the hotel industry used to depend heavily on human touch”, the researchers note, “against the backdrop of the COVID-19 pandemic, customers’ change of preference from human service to robotic service is salient and has led to a significant increase in the WTP for contactless robotic hospitality services”. By shedding light on the factors responsible for heterogeneity in hotel guests’ WTP for contactless services, this innovative study offers guidance for hotel businesses on securing competitive advantages as the hospitality industry goes contact-free in the post-pandemic era.
Hao, Fei, Qiu, Richard T. R., Park, Jinah, and Chon, Kaye. (2023). The Myth of Contactless Hospitality Service: Customers’ Willingness to Pay. Journal of Hospitality & Tourism Research, Vol. 47, No. 8, 1478-1502.
