Springhill Suite’s business model innovation
I stayed at a new outpost of the Marriott-owned Springhill Suites hotel chain whilst on business in San Diego last week. It struck me as a great example of business model innovation. The hotel had a fresh, contemporary feel, free breakfast, free high speed wifi, a pool and a spacious suite including living area (big enough for a family of 4). And all this for under $200 a night. But how can they do all this at such a reasonable price? What happened to the old Michael Porter model or choosing differentiation OR value pricing?
Below we look at how Springhill suites have used business model innovation to come up with an attractive value proposition that seems to be working well in the marketplace. The brand has grown from 34 properties in 1999, to 153 in 2006 and 350 by 2016. And SpringHill Suites was ranked #3 in Parents Magazine’s “10 Best Hotels for Families 2015″, according to this report.
1. More of what you want
Springhill Suites has lots of what you want from a city centre hotel. The design was modern, fresh and bright. The suites were spacious and had a living area including a sofa bed, great for families or groups of friends. I really loved the free high-speed wifi, with no hidden catches like having to pay for more than one device per room. The hotel also had a very generous and varied free breakfast, including various cold options and a hot breakfast. The design and quality of furnishings stuck me as being high, and on investigation I found these had been developed via a partnership with interiors retailer West Elm. The one missed opportunity for both brands in this collaboration for me is that the West Elm branding was not visible at all inside the hotel. And why not offer guests the chance to buy the furniture if they like it, to create an extra shared revenue stream?
2. Distinctive service signatures
What really struck me about Springhill Suites was the number of nice little extras that were on offer, delivering relevant customer benefits in a distinctive way; we call these ‘service signatures’. Importantly for a service business, these service signatures are scalable and replicable across multiple properties. Each Springhill Suites has a 24 hour little shop called ‘The Market’, where you can buy food and drink, including things to cook in your room using the microwave; a great way to save money by eating in. I also noted the chilled water dispensers with added fruit available in the lobby, a feature normally found only in more expensive hotels.
But there was a further service feature which was one of the most memorable and not even that expensive to deliver. It’s the one thing that a fellow guest told me triggered requests by his kids to stay at Springhill Suites when on vacation. What was it? A waffle making machine! I loved using this to make my own mini waffles, as did a lot of the guests I saw.
3. Less of what you don’t need
But how can Springhill Suites offer all the goodies detailed above, whilst charging a reasonable price and making a decent profit? The key is being smart at removing things from their business model, to cut cost without cutting too much into the customer experience. One big saving is having no restaurant on site. Yes, you get a nice breakfast, but this is all pre-prepared and self-serve; no need to hire, train and manage waiting staff. Drink cups are made of paper, and some of the cutlery is plastic, meaning less washing up. The breakfast is the same day after day, so everything (including the waffle mix!) can be bought in bulk, creating scale economies. Not having to manage lunch and dinner, each with a changing menu, means logistics are dramatically simplified and costs cut. There is also no room service on offer and the fridge in your room is empty (so there is no mini-bar for staff to re-fill); but you can buy food and drink from The Market.
In conclusion, Springhill Suites shows how to use business model innovation to create a distinctive value proposition that breaks the Porter-esque strategy model of value or differentiation.