By Cinn Tan and Shane O’Flaherty
On Sept. 17, we were pleased to join more than a dozen industry leaders from hotel ownership, management, investment and technology in the first meeting of HospitalityVIEW—a working group assembled by revenue management provider IDeaS to drive the future of the global hotel industry through the lens of innovation.
Given the pandemic’s human and economic impacts, the timing could not be better—or more urgent—for conversation and collaboration among this kind of group, which included:
- John Bortz, CEO, Pebblebrook Hotel Trust
- Tom Corcoran, president/CEO, TCOR Hotel Partners
- Sloan Dean, CEO, Remington Hotels
- Alex Dichter, senior partner, McKinsey and Company
- Chris Hemmeter, principal, Thayer Ventures
- Shyam Patil, internet equity analyst, Susquehanna Group International
- Kristen Richter, VP, sales, Sonder
- Dave Roberts, adjunct professor, Cornell School of Hotel Administration
- Michelle Russo, founder, CEO, HotelAVE
- Prakash Shukla, managing partner, Wayfare Ventures
- Rachel Spasser, managing director/CMO, Accel-AKKR
- Ravi Mehrotra, president/chief scientist, IDeaS
- Klaus Kohlmayr, chief evangelist. IDeaS
The group discussed some of the most pressing questions and concerns facing the hospitality industry today, including:
- In this unprecedented period of change, how can hoteliers continue to adapt and
manage their margins while preparing for the unexpected?
- In what “inning” of the downturn are hotels in? Is it even possible to talk about recovery, especially in the U.S. market, which drives so much of the global hotel business?
- What is the reasonable endgame of recovery? Is it right to talk about a return to normalcy—normal rates, normal patterns of leisure and business travel—or are we in a new game altogether, with new rules of engagement and the prospect of a completely changed landscape and metrics for success ahead?
Here are some of the key takeaways from the discussion.
A Consensus for Caution—and Innovation
Both technologists and asset owners/managers agreed innovation will be the driving force in determining future success. At the rate of growth currently forecast for the hotel industry, it’s possible hospitality will not experience any meaningful improvements in rate or occupancy for a number of years. Margins are compressed to previously unimaginable levels. One participant even remarked at her disbelief that so many hotels can continue operating at the revenue levels we are currently seeing.
The fact that so many hotels have survived—at least so far—speaks to the seriousness of the challenge but also to the resilience and creativity of hoteliers as a group. That said, it seems impossible to expect or measure recovery by any of the conventional standards, even those employed in the dark recessionary days of 2001 and 2008.
The reason is clear: The rules of the game have changed completely.
Prior to COVID, hotels were experiencing a renaissance of profitability in unforeseen areas, from F&B to events. But with physical contact off the table for the foreseeable future and all the changes that has wrought, it’s clear to everyone in the industry that we are now not planning for a typical recovery and simple recasting of metrics for business success—but for a complete redefinition of what profitability means.
Along with profitability, every guest touchpoint, service and offering needs redefinition. For example, the group agreed that new AI-driven tools are essential to replace antiquated systems such as the front desk. In part, this is a response to the availability of new technologies coming to the fore. At the same time, consumers themselves are driving the change—through and independent of the pandemic—insisting hotels provide the same level of personalization and contactless flexibility throughout their travel journey they experience in other environments.
One participant suggested this creates a virtuous circle of sorts. As consumers retrain hotels to provide new kinds of experiences, hotels will need to also retrain guests to accept the new kinds of offerings that will emerge from the pandemic era.
A major white space seen in the hotel journey is around the in-journey experience for the consumer. Hotels market to consumers before they arrive at the property, then maybe provide them a digital key, but beyond that they do not digitally engage the consumer with content in-journey to create a more emotional digital connection with them to personalize the experience. This is an area where innovation can lead.
Another hotel CEO pointed out that hospitality is still “the people business,” and the people running the properties are crucial. So, in this newly disrupted era, how do we balance the need for technology with the “human touch”? Technology exists to help hotel workers operate more efficiently, from driving collaboration and increasing safety to improving property-wide communications, but as time passes these positions have to evolve along with the rest of the business. The current economy represents a golden opportunity to reinvent not just a property’s technology, but the way hotels are run—from the ground up. Once again, new technology-driven operating solutions are seen as key.
Operating Models, New and Old
One of the group’s key conclusions was that it’s not just the hotel-operating environment that is being remade—in a very sense, it’s the entire model of hotel management itself.
As multi-family owners and other new players take stakes in the game, they help shape new modes and orders for servicing, maintaining and even upgrading properties. New entrants are channeling the notion that hotel management should be anything more than a marshaling of technology solutions and automation to drive efficiency, labor savings and guest comfort. It’s clear we are just at the beginning of the trends toward automation and away from human labor to complete tasks that can be done by machines. The pandemic has accelerated both trends.
Outward-bound marketing and distribution have not been spared the torch of disruption. The hotel industry was experiencing record occupancy at the end of the previous cycle. Even so, it was beginning to buckle under the weight of growing cost headwinds, such as the increased presence of third-party distribution platforms. We also see new players in this area led by the big tech players themselves, such as Google and Facebook, which provide a more seamless customer online journey (search to book), facilitated by evolving direct payment gateway on their platforms.
The pandemic has exacerbated these trends and made their resolution not desirable, but urgent. Again, technology is the key to addressing the challenges, and it’s unclear, in the case of distribution, whether big players (e.g., Expedia, Booking) have the answers to help hotels survive, compete and lower acquisition costs in the current environment.
The property management system, long seen as a logjam of progress toward efficient hotel management, also continues to provide challenges. Even as API-first solutions come to the fore, it’s unclear the extent to which bigger owners are prepared to shift the model completely and write off long-held investments—even in obviously outdated technology—and especially in an era of overriding financial stress.
Tech departments at hotels are themselves a topic open for discussion and evaluation. Are they a spur to innovation or a blockage from getting there faster? The group seemed to agree they can be both. And they need to be jostled outside their comfort zones to look for the kinds of solutions that have pushed other industries forward in the digital age.
Meet Me There No Longer
On the consumer side, business travel and meetings seem unlikely to return to pre-pandemic norms. While it was unclear to the group whether the perpetual 10 to 15% reduction in business-travel spend offered by many pundits is accurate, it was agreed that the conditions in which business will take place on the road will change forever.
For example, group meetings are likely to adopt a hybrid model of in-person and remote, with an executive traveling to town for a conference, attending part of the show in person for meetings and choosing to experience the rest of it from his/her hotel room.
Technology that facilitates this kind of hybrid experience is likely to prove to be a winner, with a considerable amount of “reimagining” required around all aspects of the business travel experience. The leisure traveler, already more sophisticated and considerably more demanding than ten years ago, is likely to impose new requirements beyond just touchless service, as “high touch” is replaced by “no touch” in many areas of hotel interaction.
With all the talk of change, the HospitalityVIEW group concluded our meeting on a high note, reinforcing the universal belief that the hotel industry is far from dead—in fact it is adapting as rapidly as can be reasonably expected to the new realities.
At the end of the day, the industry will come together to survive. It’s not the first time we have been challenged, and likely won’t be the last.
Cinn Tan is chief sales and marketing officer for Pan Pacific Hotels Group, leading the organization’s global integrated branding, marketing, communications, sales, distribution and revenue management endeavors for a portfolio of properties spread across more than 25 cities. Shane O’Flaherty is global director, travel, transportation & hospitality at Microsoft, where he is focused on finding new ways to improve the customer journey through the convergence of travel and technology within Microsoft’s network of travel partnerships.
This is a contributed piece to Hotel Business, authored by industry professionals. The thoughts expressed are the perspective of the bylined individuals.