How the hotel industry is shrewdly practicing ‘shrinkflation’

About a month ago, I stayed at the Paris Hotel in Las Vegas. When I arrived at the hotel at around 9 pm one weekday night, I was expecting the usual long line of people waiting to check in. And, no surprise, that’s what I found. But I also found something else, something surprising.

When it came time to check in, I noticed that where there was once a dozens or so “guest services” agents behind the desk, there were now only kiosks in front of the desks. Guests punched in their confirmation number, inserted their driver’s license and a room key was spat out after a few moments of verification.

A cost-cutting move? For sure. Those machines will pay a handsome return on investment to the hotel once guests get used to their presence and the hotel no longer has to pay salaries, health care and other employee benefits. But the machines represent something else: a pivot towards ‘shrinkflation’ that the entire hotel industry is shrewdly practicing.

By now you’ve heard of shrinkflation, right? It’s when you pay the same price for a bag of Doritos that once weighed 9.75 ounces but now weighs 9.25 ounces. Or when you pay the same price for a roll of paper towels, toilet paper or Hefty bags but are getting less product. Shrinkflation is nothing more than a price increase turned upside down. It’s keeping the price constant yet delivering fewer products and services for it.

And that’s exactly what the hotel industry is doing. I know this because I travel a lot, and I’ve seen it. It’s a quiet change, subtle, almost unnoticeable. But it’s a change nonetheless. And it’s helping the industry navigate its way through this time of higher costs. So, what’s it doing?

For starters, the lobbies and areas where the general public can see are still mostly spotless. No expense spared there. But I’ve been noticing more room service trays and other debris in the hallways that tend to linger longer than before. Not as many people see that stuff, so hotels have cut down the number of times they’re clearing it all away.

Rooms are being cleaned less often and, in many cases, only on request. There are fewer towels in the bathrooms. Oh, and I’m noticing that more and more hotels are replacing those individualized bottles of shampoo and body wash with industrial sized ones that other guests are sharing. If you forget your toothbrush, you may be able to get a free one at the lobby desk…or, depending on the hotel, you’ll have to pay for it at the shop.

I’ve noticed that hotel restaurants have pared down their food and drink offerings, curtailed their operating hours and have pretty much abandoned their menus in lieu of contactless systems and QR codes. Fitness center hours have been restricted and fewer employees can be found to assist.

Is this at all hotels? No, it’s mostly at the chains that I stay at that serve business travelers. I’m sure the five stars are still five stars. Is this just a temporary pandemic thing? No, it’s not. It’s an inflation thing. And even as the industry is predicted to recover this year, don’t expect things to change anytime soon while costs rise. We used to get this stuff for the price of the room. Now we’re getting less of it for the same price. As long as guests are willing to let this happen, there’s less motivation to change these practices.

The hotel industry – like so many other smart operators – is practicing shrinkflation. They’re charging the same for a room but delivering fewer products and services. Of course, this isn’t great for their employees, particularly the hourly workers who do the cleaning and serving. The hotels can cut back their hours and hire fewer people. But all of this is certainly good for their shareholders. And as long as they pull it off in such a way that doesn’t bother their guests, they can maintain their margins in this high-cost, inflationary period.

Small and mid-sized business owners should watch these big brands, and copy them. Do you really think Anthony Capuano, Christopher J. Nassetta and Mark Hoplamazian – the CEOs of Marriott, Hilton and Hyatt, respectively – are going to let a little thing like inflation cut into their profits and impact the market caps of their companies?

Of course not. They’re cutting costs and raising prices like everyone else, but they’re doing it in a more understated way. They’re implementing shrinkflation tactics. None of this is really unethical or immoral. It’s merely a smart management strategy, and smart business people see this and are doing the same. Good for them.

Gene Marks is founder of The Marks Group, a small business consulting firm. He frequently appears on CNBC, Fox Business and MSNBC.

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