Research: What's Driving Guest Satisfaction (and Dissatisfaction) Today - Forrest Morgeson

Josiah: What's driving guest satisfaction and dissatisfaction today? Joining us to answer that question is Forrest Morgeson, Associate Professor of Marketing at Michigan State University and Director of Research Emeritus at the American Customer Satisfaction Index. Stay tuned to hear the results of their latest research on travel and hospitality and its implications for you. T

Josiah: Just to set the stage for this for us, you know, in going through your research, going through the ACSI travel study, there's a lot of things that we can unpack, but I would love our listeners just to get some background, maybe first time they're coming across this. I wonder if you could tell us a little bit about the study, the origin of it, and then just how it was constructed, because it's very comprehensive. How did you think about teeing up this project and the study?

Forrest: Yeah. So this project, the American Customer Satisfaction Index, goes back 30 years now and essentially was designed by a professor at the University of Michigan Business School to measure customer satisfaction across the entirety of the U.S. economy. The underlying idea, which may seem basic to us but was unmeasured at the time, was that we need to look at not just the quantity of economic output but its quality as well. How well are companies providing consumers goods and services that they like, that meet their needs, that fulfill what they're trying to accomplish, or the job they're trying to get done with those products and services? And so for the last 30 years, we've been measuring across the economy and really for all of the major consumer-facing industries, we've been measuring customer satisfaction on an annual basis for now it's roughly 400 companies across the economy where we're measuring satisfaction directly from the perspective of the consumer. That is, we're interviewing consumers and asking them, hey, have you recently gone to a fast food restaurant, flown on an airline, stayed in a hotel? If so, what were your perceptions of that experience? And ultimately, most importantly, what was your customer satisfaction, and how was that driving your desire to remain loyal to those companies? That's the project. And what we're here to talk about today is mostly the travel related or the hospitality related components that we recently released data.

Josiah: I want people to read the report in its entirety because it's a fascinating study, and there's a lot there. So in this conversation, we won't go point by point, but I do want to give people a little bit of a glimpse into what's going on and then click that link in the show notes where you can download the whole study. But for us, as you conducted the research, as you started processing the data, and then you put this report together, high level for the lodging leaders that are listening to this, what are some of the takeaways that you had looking at the data?

Forrest: Well, when we're speaking specifically about the lodging, and again, there are multiple industries that we are measuring in here related to the travel experience, but focusing on the lodging industry, we have some interesting results. Just a couple of years ago, we had lodging at really a 15-year low in guest satisfaction. In the last two years, so 2023 and 2024, they've not only bounced back but sort of surged to near-all-time highs. That's great news, right? They're not quite at their all-time highs, but they're certainly far back from where they were before the pandemic and even a little bit better. And, you know, we've got a leader in the industry that most of us will recognize. In Hilton, they've moved up into first place with a big gain in 2024 or over the last year leading up to our recent release of this data. We've got Marriott coming in at second place at 79. So we've got some well-known and diversified brands that are doing really well and have really surged back into strong performance in terms of customer satisfaction following the pandemic.

Josiah: Interesting. What are some of the drivers that are causing this rise and this increase in guest satisfaction scores?

Forrest: Yeah, I mean, in this case, it's sort of wide and broad in terms of all of the underlying or the improvements in the underlying variables that we look at that have an impact on customer satisfaction. In this industry, they were one of the worst hit in terms of the pandemic. all of the changes they had to bring to the table to continue operations even at a meager level during the pandemic. And so we're seeing, you know, normal operations returning in general, staffing levels improving, and we're seeing improvements in things like the check-in, their ability to smooth the customer experience to some extent and make it a little bit more palatable to customers when they stay at a hotel.

Josiah: I feel like during the pandemic, there's a lot of conversation around if we can just get the right technology in place, we don't need to hire back to prior levels. And it seems, from my take in reading the data, there is something to be said by hiring better people back and training them. There is a very human component here where, at least not yet, technology is at this place where you can just use tech to replace a deficit of people serving in our hotels.

Forrest: Yeah, and that's not only the lodging industry in particular. That seems to be an economy-wide phenomenon where companies were so eager to move to SST, self-service technologies that allowed customers, again, in a variety of industries to make their purchases and consume the goods or services without the interaction of human beings. From the company's perspective, it's wonderful, right? That's a big Um, efficiency leading to ideally greater profitability. The problem is that consumers always like those changes and in industries where they want that personal touch, it's not going to resonate as well with them. And so we've seen companies across industries that are, are sort of scaling back a little bit on. What I think we all agree is an inevitable march towards more and more self-service technologies. We're seeing some companies scale back a little bit and say, we need to maintain that human element. We need human service delivery at some of these key touch points. And if we don't, it will impact us negatively in terms of the customer experience.

Josiah: Interesting. In the research, did you get a sense of guest expectations evolving at all over the past few years?

Forrest: Guest expectations are tricky to measure. We measure them in our model, and we have data on them; they're a really important part of our model. I say they're a tricky one because, of course, we're trying to measure a roughly representative sample of the population of the companies that we're looking at so we can do comparisons year to year. Of course, expectations are always, or at least to a large extent, relative. for that particular group at that particular point in time. So if we go back and, you know, we often talk now about the Amazon effect on the economy, right, where you should be able to buy something really inexpensively and have it delivered in 24 hours and everything should go perfectly. Consumers didn't have those same expectations that they were using as their benchmark 30 years ago or 20 years ago, even. So those kind of expectations are always evolving, or from that perspective, what consumers are using as a benchmark are kind of always evolving. Over the last couple of years, as satisfaction has rebounded, expectations have increased as well, and maybe even a little bit more. And what tells me is that that's a tricky spot for the economy to some extent. When you have consumers whose expectations increase more than their actual satisfaction, those can be tougher to fulfill in the future, right? Higher expectations are tougher to fulfill by definition. So, you know, you want to balance that hopefully within industries and across them. in a way that companies can fulfill their consumers' expectations reasonably. But we have been seeing them go up, which may be a warning sign that things will get tougher ahead in terms of keeping customers happy.

Josiah: It's definitely something to watch. I mean, I think that dynamic you illustrated is constantly changing environment, consumer expectations, the business landscape, what lodging companies can do. It seems that, as of the last few years, they have done a better job in anticipating some of those needs and serving their guests because of the increase in overall guest satisfaction that you've alluded to. I'm curious if there are specific innovations, either technological or otherwise, that you feel have helped lodging companies anticipate or serve guests or if anything comes to mind there? I don't know if this is a tech innovation or just a process innovation.

Forrest: Yeah, I mean, that's a tough one. And, you know, here now, I'm going to show that I'm not just a scientific researcher, but I'm also a pretty frequent traveler. Right. So for me as a consumer, you know, I look around and I can make a lot of comparisons between individual hotels that I've stayed at. Right. And I can say this hotel is excellent. Right. Reasonable rates. They gave me great service. Check-in was easy. My room was clean. Nobody bugged me in the middle of the night. Everything was perfect. For a lot of consumers, they can't, right? And so they're not making that same kind of, you know, they may only stay in a hotel once a year. Maybe they're not frequent business travelers and they don't spend a lot of time in hotels. So it's a very different experience depending on the type of business traveler. That's one of the things we talk about in our longer reports is the difference between those business and leisure travelers on how they're going to have a really different set of frames of reference. In terms of new technologies that are sort of coming on board, I mean, you're seeing it obviously across the economy as a whole, and certainly in this industry, and you are getting a lot more of the self-check-in. You're getting a lot, little innovations that I've noticed with the way that the rooms are keyed so that they're not, you know. I don't know about you, but I hate having to go back down to the front desk because my key magically stops working for no apparent reason. Every time, right? Getting some of those glitches out, you know, just as technology evolves and gets incrementally better over the years. But yeah, you know, it is one of those strange industries where I think consumers, on the whole, yes, they want that better self-service technology where it's necessary to have it, but they want somebody at the front desk. They want, you know, to be able to call down to the front desk and say, hey, you know, I got in late. Do you have one? Are you still serving food? If not, where can I go? You know, you want those kinds of personal touches that are better offered by human service deliverers in many ways.

Josiah: I appreciate you sharing that even on a personal level, because one of the study's findings was the lower guest satisfaction of business travelers by a considerable margin versus leisure travelers. And if you had to guess, is some of that driven by what you just alluded to? Business travelers are seeing more, so they're comparing more. And maybe a takeaway is hotel leaders need to be very aware of what the other options are. Is that a fair assumption?

Forrest: Yeah, and we've seen this phenomenon for years with lodging and airlines. Business travelers tend to come in a little bit lower on average, not a great deal lower, but a little bit lower. So it's a longer term trend that we're seeing. I think part of it is exactly what you're alluding to, that they have that broader set of comparative references that they can think back to. Well, I stayed at this hotel two weeks ago, and it was much nicer than the other hotel that I'm staying at now. I think the other thing, and a little bit on a humorous sort of perspective, is we've wondered if it's not just the nature of the experience as a whole, in the sense that if you're a business traveler, by definition, you're working, and you're focused on work, it's efficiency, it's I'm here to do a job, the hotel has to meet my needs, I gotta be up at 6 a.m., I want the water to be hot, I'm out the door, and that's my whole experience. Whereas if you're on vacation, I would take a mediocre hotel on vacation over the nicest hotel in the world when I'm at work. It's just a very different mindset you're bringing to the experience, which may have sort of an effect on the way consumers process their experience overall.

Josiah: Interesting. And I guess just one more question along this line of innovation. Airbnb debuted in a pretty strong position in this study. What does that tell you in the sense of people's expectations or what's going on in the world of hospitality right now?

Forrest: Well, that's an interesting one, a newer measure that we've had here at the ACSI, and it is a very unique business model. It's had a massive impact on the industry, obviously. It's an easy technology to use. I'm a personal user myself. At times, I've used it. I'm not a frequent user, but I have used it. It's an easy technology to to integrate into your portfolio of consumer behaviors, if you will. And so, in that sense, seeing it do well isn't terribly surprising. And given its effect, it would be shocking if it had come in and been a really low-scoring kind of measure, given how big an impact it's already had on the industry. I think it's here to stay, obviously. I think it will continue to have a big impact on how people travel and how they look for accommodations when they're doing so.

Josiah: You spoke a little bit to how this is a constantly evolving market dynamic. If you had to look into the future a little bit, what are some of the trends or meta trends that are on your mind as you watch travel and hospitality unfold? What should lodging leaders be thinking about as they're doing more mid to long range planning?

Forrest: the pace of innovation. And this is a broader insight that I think is a relevant one here and to this particular set of industries but also applies to a lot of the consumer industries that we measure. Just innovation is the speed with which companies are innovating now is shocking. And so when we think about things that are being unveiled in new industries, new tech industries, that we would not generally think about as having a big impact on adjacent or unrelated industries, they are having a big impact on those industries. And so things are really, you know, the pace doesn't seem to be slowing down. So it's not going to look like it does today in five years, the lodging industry, it's simply not going to, and there are going to be innovations coming on board that one company adopts and everyone else imitates and become industry standard that we aren't even aware of today. That I think is, you know, it's sort of a general insight about the future, but companies really need to be competitive. Business intelligence is a word we use in the marketing discipline, right? Understanding what your competitors are doing and adopting those innovations as quickly as possible into your own portfolio of tools for your customers is really important.

Josiah: I think that needs to start with checking out your research, seeing what's going on in the market, what consumers are saying. I always love leaving our listeners with some practical takeaways. I think that's takeaway number one: check out this research and understand what's going on in the market. But we'd love to hear your take before we go. Any other pointers or suggestions you would have for lodging operators to focus on so that they can improve guest satisfaction and really build that long-term loyalty with their guests?

Forrest: Yeah, when, you know, thinking of our particular data, but the way that we try to position it in general and the applications to outside just interpreting our data, you know, we really try to think of the customer experience now as something that is multifaceted in a way that we didn't before. So when you think about, you know, your experience in the lodging industry as, as a consumer, there really are several stages to that customer journey. And each of those stages need to be something that is measured with hard data, with numbers that you collect, with data that you collect, like we have in the report you mentioned. thinking about each of those discrete stages of the customer journey and how you're performing as a company at each of those stages, rather than just an overall satisfaction number. But thinking about those individual moments, check-in, check-out, quality of the room, how's the Wi-Fi, how are the availability of food options in the in the hotel, those kinds of things. And customer satisfaction across all of those different stages and the discrete parts of those, of that customer journey is really important. And I would encourage, and I know a lot of hotels already do this, but, you know, I would encourage being able to have measurement systems in place where you can think about each of those stages of the journey independently and then take a holistic view, how are we doing overall based on those different stages.

Josiah: Amazing. Forrest, thank you so much for taking time to talk about this. I appreciate your work. I'll link in the show notes where people can access this and it's a lot of fun. Perfect. Thank you very much.