Millennials may be locked out of the housing market, but they’re not afraid to spend big dollars on another type of property.
This group are the biggest spenders on hotels in Australia, according to new research from CBRE’s latest ‘Check In’ report on the Australia hotel sector – forking out on average $234 per person per year on accommodation between 2014-2018, ahead of Generation X on $231 and Baby Boomers on $165.
CBRE’s Head of Hotels Research Chinmay Chitale said that the figures were a clear sign that Millennials were priotising travel over traditional life goals.
“[It] is likely linked to the fact that many have yet to purchase a house, get married or have children – meaning that they can prioritise travel more readily,” he said.
Almost half (49 per cent) of Millennials and Post-Millennials (or Generation Z) indicated that their reason for staying in a hotel was for ‘indulgence’, according to survey results included in the report, while 22 per cent indicated that they chose a hotel to get an ‘authentic local experience’.
One in four said they chose a hotel as ‘just a place to sleep’, and 4 per cent said that it was for ‘interacting with other guests’.
CBRE Hotels’ national director Wayne Bunz said that most existing luxury brands in the local market weren’t responding to these desires.
“There exists an opportunity for the ‘new age’ luxury brand to distinguish itself from Airbnb and typical luxury and upscale brands by providing not only a good product and service but also a shareable and transformative experience,” Mr Bunz said.
The survey found that for 26 per cent of Millennials WiFi was their biggest priority in a hotel, followed by restaurant and bar facilities (21 per cent).
Experience over amenity
Responding to Millennials’ desire for an ‘experience’ rather than a simple place to stay has been a key priority for boutique hotel group Ovolo Hotels, according to its Australian chief operating officer and chief financial officer Dave Baswal.
“We’re changing to suit the mindset where hotels are urban retreats where people are looking for experiences. Part of that is offering a really unique food-and-beverage offering, having mini bar and WiFi included and incorporating communal areas. We’re also ensuring that design is front and centre,” Mr Baswal said.
He said that “life and work is not two separate components,” and that hotels could no longer rely on the disinterest of corporate clients.
“Hotels have to try a bit harder, you have to design things differently, you have to offer a unique offering every time.”
Mr Baswal said that almost one in five of Ovolo’s guests in Australia were under 30, but the biggest group remained the 30 to 40 age bracket, which accounted for 39 per cent of customers.
“Around 60 per cent of our customer base is coming from the age group lower than 40 and we’re very mindful of that,” he said.
Part of the strategy to retaining this demographic was to focus on providing unique dining experiences.
“We obviously have the hotels which each have a different theme but a strong part of the strategy is having different restaurant offerings. For example, one of the restaurants in our Woolloomooloo property is 100 per cent vegan and the wine bar in our 1888 hotel in Darling Harbour has a Mediterranean theme…Your typical hotel restaurant with salt and pepper squid is no longer working.”
Gen Z the market to watch
Millennials, or Gen Y, might be the big spenders for now but a younger generation looks set to exert increasing influence over the hotel sector.
Post-Millennials, or Gen Z, recorded an increase in hotel spending of 6.1 per cent a year over the past five years, according to the report.
While they may have a way to go before matching the discretionary spending power of Millennials, the industry is not paying enough attention to this emerging demographic, according to Mr Baswal.
“There’s one thing that not many people are talking about, but the reality is that Gen-Z is actually making a lot of decisions in the house, in smaller families they control the wallets of their parents and so it’s interesting to see that the travel pattern is driven by the Gen-Z members of family,” he said.
“The reality is that very soon the trend is going to change…I think the travel decisions of Gen-X and Millennials will be very influenced by where their kids want to be.”
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