Forrester Research predicts that by 2015 82 million people will rely on mobile devices as a primary reference tool. Through the use of a mobile device, consumers are able to receive timely announcements, alerts, promotions, discounts and location-relevant offerings along with access to reports of purchasing history, loyalty rewards status and a host of concierge services. It is estimated that there are several hundred million active cellular network subscribers, and with such a large number of users, it is critically important that hotels, restaurants, clubs and casinos recognize the unparalleled competitive advantages that can be gained from LBS apps, including consumer check-ins, word of mouth broadcasting and shared experiences.

Gartner Research, which identified LBS as a top consumer application category for 2012, expects LBS application users to exceed 1.4 billion by 2014. JupiterResearch estimates current market revenues attributable to LBS applications at around $486 million, with 2014 revenue projections hitting $12.7 billion.

Push/Pull
There are two broad categories of LBS applications: push and pull. Push applications deliver information requested by the user in response to the user opting in or triggering transmission based on entry into a specific location. In most cases, push LBS applications rely on preset content developed for the user (guest) by the host (hotel, restaurant, club or casino). A push service is activated by an event, such as the guest arrives in a targeted area or a time-dependent setting expires. Dunkin' Donuts and Cold Stone Creamery are two firms credited with using push-based alerts and promotions to notify guests when they are in close proximity to a store location. A consumer who registered with either firm’s LBS application would receive such notifications whenever a registered mobile device was detected within proximity of a business location.
Similarly, consider the LBS application at the Wynn Hotel & Casino in Las Vegas. When a hotel guest completes registration and checks in with his or her personal Foursquare account, the LBS application for the Wynn property acknowledges the guest’s location and delivers a special promotion to the guest’s mobile device. In this case, the reward may be a special offer for a complimentary glass of champagne at the hotel’s popular nightclubs.

The functionality of push technology is dependent on the concept of geo-fencing. Geo-fencing is defined as a push technology that enables an entity (a hospitality business) to distribute text messages to a mobile device that is carried into an active signal area. Basically, geo-fencing creates a predefined, virtual space around a particular location or building. The application software allows hoteliers and restaurateurs to send text messages to consumers in a specific geographic area. A geo-fencing program requires potential users to opt in through registration with an authorized website, text messaging (sending “includeme” to 3539211), by in-store enrollment.  In other words, a potential guest must first agree to receive text messages from a business prior to the receipt of the notification. Push information is typically formatted to location, time, user preferences and customer relationship management (CRM) data.

In a pull application, information is delivered as a result of a direct query by the user. The user requests specific information (e.g., hours of operation, nearest location, reservation information, etc.) and the application provides an reactive response. This is similar to typical Web search functionality in that pull services send information in response to user query, unlike push services that deliver information without specific demand. Pull LBS requires that a user’s position be acknowledged in order for location-dependent information to be retrieved, usually from a mobile website. As a result, hospitality management needs to develop promotions that can be both location and time dependent. Given the nature of LBS platforms, push technology applications have become much more popular than pull applications.

A popular item that can be used with both push and pull technologies is mobile couponing. Mobile coupons can be targeted to opt-in guests or proximity guests. Mobile coupons have an average redemption rate of 23 percent, a rate that significantly outpaces traditional coupon redemption rates. Cellit, a major supplier of mobile coupons, claims its redemption rate for mobile coupons is eight times the rate for email coupons and 11 times greater than direct mail. Not all mobile coupons involve purchase discounts; some revolve around challenging games, interactive engagement or nontraditional offerings.

LBS Netware
There are three methods available for mobile device location identification: global positioning system, cellular triangulation and Wi-Fi networking. On the horizon is a fourth identification technique, based on the inclusion of a certificate signing request chip that focuses entirely on indoor location determination.

Global position system (GPS) is primarily an outdoor navigation technology.  According to cellphone data about 11 percent of cellphones manufactured have GPS capability. As a result, this technology relies on an analysis of signals from GPS satellites to pinpoint a cellphone device. GPS tracking is considered relatively accurate, but not exact.

Cellular triangulation is an alternative method to GPS tracking that relies on cellular signal to/from tower detection. Although considered less accurate than GPS, cellphone triangulation incorporates the signal strength of multiple cellular towers to calculate a device’s geophysical location. Since the majority of cellphones do not possess a GPS chip, cell tower triangulation has become an important factor in location determination. A cellphone’s signal is often tracked by three or more cell towers, thereby enabling triangulation functionality. Given the probable distance from each tower in the set, as well as the lag time between when each cell tower pings, the approximate location of a mobile device can be computed. The accuracy of a cell tower location algorithm is dependent on the density of the towers in a specific location. When fewer than three cell towers are in a geometric area, the location identification is more complex and less reliable. 

Unlike GPS or cellular triangulation, Wi-Fi networks are mainly used as a locator for indoor positioning. Basically, a venue’s Wi-Fi network is used to pinpoint the location of a connected device to within one to three meters of its indoor location. The mobile device user, however, must download a Wi-Fi locator application in order to be detected. An LBS application typically only displays content for the location in which the device is positioned. Unlike pointer methodologies, an important advantage of a Wi-Fi locator service is its ability to plot and analyze movement patterns within a proximate range over time (on-the-fly). This type of technology allows a restaurant located in a shopping mall, for example, to send a coupon to a consumer walking toward the mall’s food court and determines if coupon redemption occurred. This method is popular given it can work indoors and outdoors (within effective range) but often tends to be the least accurate of the locator options.
On the verge of implementation certificate signing request (CSR) is considered an innovative application and is a specialized indoor locator technology. A smartphone equipped with a newly crafted CSR chip, and containing special software, is able to determine indoor navigation tracking for in-store, in-mall and in-shopping center LBS applications. CSR developers claim that the certificate signing request (CSR) chip works with the phone’s GPS, Wi-Fi and cellular capabilities to determine mobile device positioning within 10 meters to 15 meters. Expected in late 2012, indoor location-based CSR chips are not expected to be retrofitable to earlier smartphones.

Gamification
Gamification has emerged as a highly preferred approach to location-based services. The term gamification refers to the use of game-like tactics or strategies to enhance customer engagement, loyalty and repeat business in nonintuitive game situations. According to Bunchball, the self-proclaimed leader in gamification, client companies typically experience a 100 percent increase in Web page views, interactivity and repeat visits. There are several software design firms focused on adding game methodology to hospitality industry products and services that are not naturally considered game related. Firms such as Foursquare, Gowalla and CheckPoints have developed contests, challenges and rewards that are redeemable at hospitality venues given the completion of a specified task or function. This could be thought of as a modern day “Where’s Waldo?” or solution to a hide-and-seek game. Foursquare, for example, enables foodservice businesses to support user check-in functionality along with posted specials. The user is then subsequently rewarded when he or she returns to the venue and checks in with additional discounts, offers and prizes. Gowalla and CheckPoints also support check-in processes and similarly reward frequent users with products, gift certificates or airline tickets. Developing customer relationships via interactive programming and gamification has been proven to drive consumer engagement while enhancing the user experience.

Working Apps
The origin of LBS applications evolved from the realization that cellphones with GPS chips (or alternate location recognition capability) could be integrated with interactive social media to create participant reporting at select establishments. Through this check-in, or registration process, guests are able to advise others of current whereabouts and encourage others to join. Location-based services offer a priceless, complementary toolbox to engage consumers, distribute e-coupons and promote interactive programming among those who opt in and subsequently check in. Such location-based activities form the basis for unique marketing campaigns supported mainly by consumers, not media strategy.

The Location-Based Marketing Association (LBMA) projects 39 percent of smartphone users have downloaded a location-based application to their phones. The Facebook mobile app is recognized as the world’s most downloaded and powerful consumer application to date. In November 2010, Gap launched a Facebook application offering a free pair of jeans to the first 10,000 customers who registered with the company’s Facebook page and checked in at a Gap store. On the first day of the Facebook promotion, Gap staffers reported customers lining up in advance of the store’s opening. Within minutes, all of the available jeans were given away. Despite this, and numerous other examples of highly successful mobile marketing campaigns, LBS usage rates remain relatively low. According to a recent LBMA study, only about 19 percent of location-based application users check in at least once per day, as compared to 60 percent of online users who update their social networking profiles with a similar frequency.

Part of the problem with the surprisingly low number of consumer check-ins is often attributed to a lack of businesses participating in the LBS landscape. According to MerchantCircle, a leading social networking provider, about one-third of businesses report familiarity with mobile marketing techniques (including location-based services) while the remaining firms claim lack of knowledge or interest to engage in LBS campaigns.  If the old adage “an informed consumer is a valuable business asset” is true, then hospitality managers are wise to be active participants in effective LBS applications.

Application Types
Initially, LBS applications focused on three key parameters: what is my current location?, what is nearby?, and how to get from here from there? Recently, a fourth criteria was added: Where are my friends located?

Among Hotel Online’s recently published Top 10 Hospitality Industry Trends for 2012 is an increase in mobile research and bookings. The article points out that an ever-increasing number of travelers are expected to rely on a mobile device to research lodging and travel options as well as book and communicate room preferences directly with the destination property. Mobile channel bookings have increased fourfold between 2008 and 2010 according to Forrester Research, and Google is projecting that mobile devices will overtake PCs as the most common Web-access medium by 2013. With travelers adopting mobile equipment at a rapid pace, hoteliers are wise to optimize company websites for mobile usage, especially location-based applications. In addition, the trend article notes that currently just over 22 percent of hospitality businesses use social media as a revenue-generating tool but expect this number to grow to exceed 27 percent in the next five years.

Hospitality LBS
According to a recent survey conducted at the University of South Florida Sarasota-Manatee, during in the past year just over 50 percent of consumers reported finding a lodging property through GPS wayfinding, while approximately 65 percent claimed to have used a mobile device to suggest, locate and dine at an unfamiliar restaurant. The study concludes that LBS technology enables hoteliers and restaurateurs to learn more about customer interest and how to incentivize and/or reward guests to encourage repeat visits through active engagement. Recently, both Ritz-Carlton and InterContinental hotels announced placement of global concierge teams on social media websites for location-based social networking.  The access provided in these platforms is designed to provide travel advisories, weather forecasts, tours, landmarks and sightseeing information to travelers, not to promote a destination property’s amenities, facilities or promotions. Industry observers consider this a way for each brand to leverage its customer engagement through a personal interaction with knowledgeable concierge staff at a local site.  

DigitalCoCo is a social media analysis firm specializing in restaurant industry research. In late 2010, the firm tracked more than 80,000 guest check-ins each day for 29 days, at more than 100 restaurants. A significant finding of this study is that, when integrated with a loyalty program, restaurants are among the firms most likely to benefit from LBS. When checked-in guests have clout among their social base (i.e., influencers) then the notification messaging is much more powerful than predecessor word-of-mouth communication. In other words, a recommendation from an influential friend or family member tends to be the most effective persuasion technique. For the hospitality industry, leading recommendation sites related to lodging include Foursquare and Facebook Places, and for foodservice Urbanspoon and Yelp appear to be among the most popular applications. It is important to note that these four websites are not mutually exclusive and can work effectively with either hotel or restaurant searches, promotions and reservations.

Hospitality Apps
Both Foursquare and Facebook Places encourage hospitality firms to create specials that reward users for checking in at business locations. One of Facebook’s key advantages over Foursquare is its large, built-in network of users (more than 600 million subscribers). And because Facebook launched long before Foursquare, many of its users had time to build up their own networks of friends. In fact, the average Facebook user is connected to 130 friends. This means that on average, each Facebook Places check-in has the potential to be seen by 130 of a user’s Facebook friends. The majority of Facebook users are connected to their intimate social networks (friends, family, co-workers) while many Foursquare users are connected to those they’ve never met (e.g., Twitter followers).

From a word-of-mouth standpoint, it can be argued that Facebook check-ins are more valuable than those spread strictly through Foursquare. It’s the difference between telling your best friend where you’re hanging out versus telling a complete stranger. Your best friends are going to be far more likely to trust your recommendations. Foursquare users appear to be far more active than Facebook Places users.

Foursquare users appear to have much smaller networks, and thus a much smaller reach. The site doesn’t appear to disclose data about the size of its average user’s network. But anecdotally, it’s hard to find many users with more than 50 friends, meaning that each check-in may be seen by just a small group of users. Foursquare allows businesses to run what’s known as “mayor” specials. These deals reward the individual who has checked in the most to a location. Foursquare is also in the midst of expanding its check-in deal options for businesses to better compete with Facebook, so you’ll begin to see a lot of overlap between the two.

Facebook Places application allows user to share current location information by checking in from a mobile device. With Facebook Places, a user is able to store recent check-ins as well as see friends’ check-ins. Facebook promotes these three user activities: where you’ve been, where you are now, and where you’re going. In addition, the company claims the application allows a user to see where friends are as well as discover new places of business. For each business venue, detailed information (e.g., location, description, directions, comments and others who are checked in) is usually available. Locations available on Facebook Places are the result of prior check-ins, venues contained on Bing’s mapping engine, as well as locations added by the current user. Once a place is identified, the user can comment on what is happening there, add (i.e., tag) accompanying friends or invite others to join. You can immediately tell people about that favorite spot with Facebook Places. Users are able to share where they are and which friends they are with in real time from a mobile device. Facebook Places does not depend on a GPS device to find the user’s location. Gowalla, a highly popular and innovative LBS application, was recently purchased by Facebook. All the assets and resources of Gowalla have been integrated into Facebook, including application tools related to pins, stamps, badges and check-in functionality.

Foursquare Labs, Inc. is a premier a geo-location service and mobile application provider with more than 8 million active users that routinely check in to businesses, recreational facilities and other entities around the clock. Foursquare, launched in 2007, finds that its real power lies in the ability to provide a nearby consumer location to a participating business. Given the firm’s public focus on privacy, users have the power to determine when and what proprietary information may be shared or distributed among the Foursquare extended membership. Users opt in and actively check in to registered venues. Provides users check-in capabilities as well as badges (in virtual trophy cases) and mayoral status. Hospitality businesses tend to favor loyal clientele and the title of Foursquare mayor implies the person is a frequent guest. The designation of a Foursquare mayor usually indicates the recipient is an early adopter with online influence. Foursquare allows business partners to offer automated scheduled LBS campaigns and promotes brand loyalty incentives for chain operators by allowing users to accumulate check-ins at various venues; not solely the same unit, which at one time was the case. In 2010, Foursquare claimed that its users checked in to locations more than 380 million times.

Another application, the purpose of Urbanspoon is to enhance the process of finding a restaurant though entertaining categorization and fun facts. Urbanspoon’s new feature, called Scope, is similar to a periscope, point the camera in a direction, and nearby restaurants appear as colored bubbles and contain information about their distance and popularity. Tapping one of the dots delivers more details, like reviews, cuisine style and pricing information. This method of identification involves  augmented reality as it superimposes data, or other information, over a live feed from the phone’s picture capture feature. A major concern with augmented reality on Urbanspoon is the fact that it is GPS dependent. Knowing that GPS pinpointing tends to approximate a location and therefore may lack some degree of accuracy, augmentation may also involve a proximate location.

Similar to Urbanspoon, Yelp is an online city guide providing assistance to those looking for a place to eat, shop, drink, relax and play, based on the informed opinions of an active community of local participant members. Yelp advice simplifies finding, reviewing and discussing guest experiences at select venues. Similar to the other sites, Yelp is free to use and is available to anyone seeking an insider’s perspective on local businesses. Yelp’s search results are based on an algorithm that is designed to provide the best results based on a number of different factors including review text, ratings and number of reviews. The Yelp Elite Squad is made up of recognized Yelpers serving as active evaluators and promoters of local places, events and happenings. Elite status is based on achievement in a number of areas including well-written reviews, a comprehensive personal profile, an active contributing and voting record, and relationships with other users. Members of the Elite Squad are designated by a shiny Elite badge displayed on a personal account profile. Yelp uses a self-defined one star to five star rating scheme and invites consumers to rate places they have experienced. Users can vote to agree or disagree with posted ratings and review commentary. Over time, reviews that are found to be in the majority will be recognized and qualified for higher status consideration. Recently Yelp introduced an augmented reality feature called Monocle, that overlays restaurant listings and reviews on an iPhone® camera display for relative positioning. Users visualize a comparative location of nearby venues to help with destination selection.

Security Concerns
According to a recent study titled, “The Converged Lifestyle,” conducted by KPMG, security remains a major issue for consumers using mobile technology. Nearly half of the survey respondents expressed serious concerns related to security (48 percent) and privacy (48 percent). Based on these concerns, KPMG suggested companies across all business sectors employ transparent procedures as well as post certification of security capabilities so consumers are aware of application status.

Since location-based information often reveals the position of a user in realtime, there is concern relative to a potential intrusion of privacy. More than half of smartphone users have expressed concern about loss of privacy and personal safety. Hospitality companies are wise to receive permission to send location-based services as long as the user has received and agreed to a set of privacy policies. Not long ago, the Wall Street Journal tested 101 iPhone apps and found that more than half of those (56 of 101) transmitted unique device identifiers without the user‘s awareness or permission. Hence, it is imperative that hospitality businesses perform due diligence to protect the privacy of guest data.

Microsoft research found that just over half of all consumers are very concerned about protecting their identities when using LBS applications. For example, as guests share location data with others, concern that damage to one’s image may result should a venue be labeled with harsh criticism, scandal or immoral activity.

Future Apps
For many LBS applications, the ability to fine tune or pinpoint exact location is becoming a focal point. In the past, approximate destination mapping has been acceptable, but there is a trend toward incorporating more precise location data often referred to as hyper-local or micro-local solutions. Historically, part of the problem with exact location pinpointing was as the user moves he or she was likely to experience a shift in cell tower. Cellphone triangulation is often not true triangulation. When the user is close to or on the edge of an overlapping signal area, there is likely to be a fluctuation in target destination. LBS developers are working to improve accuracy through cell tower optimization and minimization of signal footprint variation. As the number of smartphones equipped with GPS technology steadily increases, the accuracy of location algorithms are expected to improve dramatically.

Given the explosive evolution of social media channels, location-based services appear to have unparalleled potential for the hospitality industry in that they provide a platform for marketing goods and services at the most relevant time. Location-based services include current position determination, points of interest in a given location and authorized tracking of other factors. Central to an LBS application are location, time, orientation and navigation. The hospitality industry is particularly well positioned to use mobile technology to gain a competitive advantage, enhance the guest experience, promote goods and services, incentivize visit frequency and improve overall efficiency. During the past few years the hospitality industry has been reasonably active as a participant in LBS applications, and given the projected near future explosion of mobile marketing, hoteliers and restaurateurs would be wise to become more engaged.

Michael Kasavana, PH.D., NCE, CHTP, is a NAMA professor in Hospitality Business for the School of Hospitality Business at the Michigan State University. He can be reached at kasavana@msu.edu.

©2012 Hospitality Upgrade
This work may not be reprinted, redistributed or repurposed without written consent.
For permission requests, call 678.802.5302 or email info@hospitalityupgrade.com.