By Jim Mikula, President/CEO
Each week several e-newsletters from McKinsey & Company hit my inbox, and the weekly charts newsletter is a quick read. Their recent chart on consumers’ increasing spending on “experiences” caught my attention. Discretionary spending on Experiences (airfare, hotels, dining away from home, entertainment, club membership, etc.) grew 8.5% from 2004 to 2013 and 12.1% from 2014 to 2023. Discretionary spending on Things (defined as total spend on goods, less spend on essential goods such as medical, gasoline, groceries, etc.) dropped 8.3% from 2004 to 2013.
Note: there was an uptick on spending on Things due to the pandemic and from 2021 to 2022 spending went up 1.5%, which was the first growth of spending on Things since 1960.
Clearly, we do offer both Experiences and Things to our visitors here in Fredericksburg. You might be curious about the growth of Hotel Occupancy Tax (HOT) collected by the City of Fredericksburg and Gillespie County which reflects spending on Experiences. HOT funds grew 181% between 2013 and 2022. Sales tax collections went up 101% during the same time period, of which a significant percentage reflects spending on Things.
The chart is part of an article written by four McKinsey partners who specialize in tourism with a focus on hotels. The authors assert that “distinctive, superior service is more important now than ever.” This is also seen across the industries that rely on services to consumers. More and more customers place more importance on their “experiences” when determining if a service is valuable or not. The statistics in the previous paragraph demonstrate that consumers are more interested in Experiences than in non-essential goods.
In my opinion this is good news for Fredericksburg which offers Experiences that are not found elsewhere in Texas. We have the beautiful Hill Country scenery, agriculture literally minutes away, a historic Main Street, two great museums including a Smithsonian Affiliate, variety of restaurants and one of the fastest growing wine regions in the Unites States. These Experiences and the development of new ones will give us a competitive edge for attracting discretionary spending overall.
The article concluded that customer service is one key to great Experiences of all types. Several questions came to mind while writing this column:
• How can our community of small businesses marshal the resources needed to improve the overall customer service experience?
• How can we achieve consistently excellent customer service with high turnover and over 30% of our employees living outside of Gillespie County?
• What structure and processes are needed to help all our businesses achieve excellence in customer service experiences?
• What is the chamber’s role in answering these questions?
The Fredericksburg Chamber of Commerce’s Entrepreneur Initiative is a tool that can be used to answer some of the above questions. The participants will learn the science of innovation which includes CPS (creative problem solving) and Design Thinking. Maybe one of the participants will create a service company for our service businesses on how to create great customer service experiences. In addition, the chamber will start initiatives such as master classes for creating excellent service experiences.
In the science of innovation, the process always starts with questions. I wonder how…? What would happen if…? How can we create…? The more questions we ask the more innovation we create. If you can think of more questions, please send them to me at Jim@FBGTXChamber.org. Hmmm, maybe the Chamber should start a breakfast series where we create questions to challenge our creativity and flex our innovation muscles. I’m in, are you?
Sources: McKinsey Travel, Logistics & Infrastructure Practice, US Bureau of Economic Analysis, and Gillespie County Economic Development Commission