From Pyramid to Pillar: Opportunities Abound in the Baby Boomer Market

By Bonnie Knutson Professor, The School of Hospitality Business/MSU | February 10, 2019

I'm a nerd of sorts. Especially when it comes to numbers, statistics, data, and algorithms. I suppose part of it comes with just being a PhD. After all, a doctoral degree is, in essence, a research degree. And research essentially means a lot of numbers. But my interest in data probably stems more from growing up in a family business whose success depended on numbers. Customers. Sales. Inventory. Costs.

I can still hear my dad telling me that if you don't understand the numbers, you can't understand people. And if you can't understand people, you can't succeed in business. Dad only had an eighth-grade education, but he graduated with honors from the school of hard knocks. In other words, he had what we call street smarts. He got it.

Years later, management guru Peter Drucker told us the same thing in a different way when he supposedly said that "you can't manage what you can't measure." Actually, what he really said was that if you can't measure it, you can't improve it. Or as American statistician W. Edwards Deming quipped, "In God we trust, all others must bring data."

Given this background, then, you can see why I'm somewhat of a numbers nerd – especially when it comes to demographics. I still hear you, dad. I want to understand the numbers, so I can understand people. Consumers. Guests. So, it probably isn't surprising that one of my "go-to" websites is the U.S. Census Bureau, particularly the pages that look at projections of the population.

Not long ago, on one of those first chilly evenings when you know winter isn't far away, I was clicking away on my laptop when I came across of graphic on the U.S. Census website that put a lot of data into perspective. The title of the graphic was From Pyramid to Pillar: A Century of Change, showing the difference in demographics between 1960 and 2060. It was one of those Ahah! moments that brought into focus the dramatic transformation that is taking place in the U.S. population. And in some ways, in other developed countries across the globe too.

What really hit me, however, will happen in 11 short years from now when our population reaches a tipping point. For 2030 will mark the moment when all baby boomers will be at least 65 years of age – pushing that pyramid into a pillar. Think about this: 20 percent of our population will be of retirement age. That is one in every five. Jonathan Vespa, a U.S. demographer, puts it this way: "The aging of baby boomers means that within just a couple decades, older people are projected to outnumber children for the first time in U.S. history. By 2035, there will be 78 million people 65 years and older compared to 76.7 million under the age of 18." (And you wonder why social security is called the "third rail" in politics?)

So, what does this have to do with hotels? A lot.

With our apparent infatuation with all things Wall Street, many business leaders are more likely to be focused on the next quarter that the long-term future. But the future has a way of creeping up on us faster than we think. Eleven years ago, home entertainment was ruled by DVDs. Netflix, YouTube, Uber, Airbnb, and Twitter hadn't made it into our daily lexicon yet. And the 2007-2009 bear market has us all anxiously looking at our 401Ks.

But as we look ahead 11 years, we all know there are momentous forces that will shape the future of the hotel industry – globalization, automation, finding skilled employees to name a few. However, none of these are as "inevitable and invisible as the sheer march of time for today's adults." Because this shift is gradual, it can often go unnoticed when we think about opportunities and threats in the lodging sector. In short, the move from a demographic pyramid to a demographic pillar will affect everything and everyone. Including hotels.

It is projected that the Baby Boomer generation will control at least 70 percent of the U.S. disposable income and they will also stand to inherit 15 trillion dollars over the next 20 years. In addition, they will have more time to travel and to check off more items in their bucket list of "someday I'm going to experience…" We have all read articles or attended workshops on how to market to the aging population. The first rule, of course, is don't call them or even think of them as old. Similarly, eliminate the concept of seniors or elderly is any part of your marketing strategy.

This is particularly important in your messaging because growing older no longer means not being active. Look, for example, how Depends has positioned itself as underwear, not as adult diapers. Its The Great American Try On campaign was right on target. Then there is Walgreen's Keep Doing You television commercial featuring a spry, petite, active white-haired woman lacing up her athletic shoes and going on her daily speed walk. Sherwin Williams, without a lot of fanfare, simply enlarged the size of the fonts on their paint cans so no one must squint when they come in to buy paint. By just tweaking this one element, the label is easier for everyone to read; after all, most people start reaching for their glasses by age 40.

And even the venerable hallmark of retirement, the AARP, has figured out how to promote itself to more than just those in their so-called golden years. Its website is an impressive example of marketing to a new generation of an aging population. The term senior citizen has been replaced with phrases like "life re-imagined," and "you've still got it." As one of AAPR's publications states, "The Longevity Economy is…busting perceptions of what it means to age." These cases will serve as a model of how hotels can develop strategies to show consumers how "to use their products in a progressive yet user-friendly way, and by not using labels that limit them to a certain age group."

There is another way hotels can capitalize on this longevity economy that often escapes our radar screen. That is the exponential growth in what can loosely be called medical tourism. People travel for medical procedures that range from cosmetic surgery to dental work, to orthopedic therapies, to treatments for chronic and/or life-threatening conditions.

There are couple of opportunities for hotels in this growing segment than many hoteliers haven't thought much about. The first is actual medical tourism, which has traditionally been thought of as a segment sending Americans to other countries for lower cost treatments. But there is a growing market for overseas patients seeking treatment in U.S. Medical Centers, too. For instance, VoyagerMed is a "medical tourism marketplace for international patients seeking high quality medical care in the USA." It estimates that more than half of a million overseas patients want to come to the U.S. for treatment.

If your hotel is near an area that boasts a top notched medical facility or a prominent physician in a specific field, this market segment can offer a unique prospect for you. But that opportunity extends to the domestic traveler too. When my husband was battling cancer, I vividly remember periodically traveling to the Mayo Clinic in Rochester, Minnesota for his specialized care. Everything in our hotel was designed with the medical tourist in mind -- from the underground passageways taking you from the hotel to the medical centers without ever having to brave the outside weather to the nutritionally-designed menu offered on its complimentary breakfast buffet to its bright and cheerful room decor. The whole hotel experience made it a "no brainer" as to where we would stay the next time we had to travel there.

Another opportunity for hotels in this growing segment is what may be call wellness tourism. Perhaps the forerunner in this field is Canyon Ranch. Since it opened its doors in Tucson, Arizona nearly 40 years ago, it has focused its facilities, staff, and services on enhancing guests' health and fitness with a mission to "inspire people to make a commitment to healthy living, turning hopes and intentions into the highest enjoyment of life." Canyon Ranch has reimagined the concept of wellness tourism so successfully that it has a second "ranch" in Lenox, Massachusetts, and satellite facilities in the Venetian Resort Hotel Casino in Las Vegas, Nevada. It has even taken the brand to sea aboard Celebrity Cruises, the Cunard Fleet, Oceania Cruises, and Regent Seven Seas Cruises. They clearly saw the impact of the longevity trend before many of us.

I once read somewhere that in the realm of longevity, "grey is the new black." The numbers are showing us that the number of people reaching their golden years will skyrocket in the coming decades. They also show us that they will have the freedom of an open calendar, and projected income levels to fulfill their bucket lists. But statistics also tell us that medical and wellness tourism will grow as the U.S. demographic picture is transformed from a pyramid to a pillar.

Biologist Charles Darwin showed us that all species must adapt to changing environments in order to survive. The longevity revolution is the next frontier. Be sure your hotel is ready.

Your REVPAR will thank you!

Ms. Knutson Bonnie J. Knutson is a professor in The School of Hospitality Business in the Broad College of Business at Michigan State University. She is an authority on emerging lifestyle trends and innovative marketing. Her work has been featured in The Wall Street Journal, USA Today, and on PBS and CNN. She has had numerous articles in industry, business, and academic publications. Bonnie is a frequent speaker for executive education as well as business and industry meetings, workshops, and seminars. Dr. Knutson is also editor of the Journal of Hospitality & Leisure Marketing. Bonnie Knutson can be contacted at 517-353-9211 or drbonnie@msu.edu Extended Biography

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Coming up in March 2019...

Human Resources: An Era of Transition

Traditionally, the human resource department administers five key areas within a hotel operation - compliance, compensation and benefits, organizational dynamics, selection and retention, and training and development. However, HR professionals are also presently involved in culture-building activities, as well as implementing new employee on-boarding practices and engagement initiatives. As a result, HR professionals have been elevated to senior leadership status, creating value and profit within their organization. Still, they continue to face some intractable issues, including a shrinking talent pool and the need to recruit top-notch employees who are empowered to provide outstanding customer service. In order to attract top-tier talent, one option is to take advantage of recruitment opportunities offered through colleges and universities, especially if they have a hospitality major. This pool of prospective employees is likely to be better educated and more enthusiastic than walk-in hires. Also, once hired, there could be additional training and development opportunities that stem from an association with a college or university. Continuing education courses, business conferences, seminars and online instruction - all can be a valuable source of employee development opportunities. In addition to meeting recruitment demands in the present, HR professionals must also be forward-thinking, anticipating the skills that will be needed in the future to meet guest expectations. One such skill that is becoming increasingly valued is “resilience”, the ability to “go with the flow” and not become overwhelmed by the disruptive influences  of change and reinvention. In an era of transition—new technologies, expanding markets, consolidation of brands and businesses, and modifications in people's values and lifestyles - the capacity to remain flexible, nimble and resilient is a valuable skill to possess. The March Hotel Business Review will examine some of the strategies that HR professionals are employing to ensure that their hotel operations continue to thrive.