TRAVHOTECH reviews a year of dialogue and opinion through contributions to HospitalityNET’s World Panel topics in 2019. We’ve been pleased to able to offer our thoughts and experience on several important topics through our participation in the World Panel in 2019.
Personalisation in Travel
We have come to understand, that the guest is willing to provide a degree of personal information if they believe it will improve the overall customer experience. This can be process-related, information or experiences specific to their taste or simply making their life easier.
Best practice necessitates that as an industry we request permission, demonstrate responsibility with the information, keep the information secure, deliver a superior experience with the data, and commit to full removal of information on request – ensuring follow-through.
As an industry, we’ve traditionally held a volume of information concerning guest behavior when staying in hotels. The challenge has been to surface and consolidate the information across the business in a relevant manner, specific to an individual customer. The technology is almost here.
The emerging opportunity for the industry is to show value to the guest – an improved experience and an establishment of trust based on good governance. The incentive exists for the industry to make personalization a success. Critical to the model will be information security worthy of the confidence of the guest.
I believe we will continue to work in an environment where large volumes of information will be on hand to improve product and service.
For me, it’s alive.
Whether Hoteliers should develop in house technology or find qualified providers
It’s a broad question. Today’s technology has a much wider scope in application to our industry. I believe it depends on the scope of the project. For example, if the proposal was to develop from the ground up a property management system (or any core business application) then I fall on the side of core competencies. Most organizations would struggle to harness the global experience, input and resource to bring a functional product to play. The other aspect that is a major factor is time. It takes a considerable amount of time to build a robust set of functionality even in the most ideal circumstances.
Market leaders have invested decades in key operational verticals to deliver a depth of functionality. Time can be shortened but not drastically as only so much can be squeezed down the development pipe. The most popular business applications became so due to robust functionality and scale, benefiting from the input of a multitude of business environments and circumstances. And time.
If the proposal was to develop enterprise reporting capability and information for organizational analysis, then it may be better to do so in house, on the back of a core platform that supports heavy lifting such functionality. In this way, the specific focus, business objectives, measurements and approach to brand and operation can be factored into the information, sets and the manner in which they are analyzed, peculiar to the organization.
Each are significantly different in scale and undertaking. In my view, the latter being more specific or customized to the needs of the organization. Also more practical and achievable.
Rate Parity
In general I view Rate Parity as a level of equivalency to price fixing. Price fixing is not generally viewed as a good thing. Following the basic rules of markets the most attractive price of a product is from the producer of that product. In our case the producer of the room product is the hospitality industry.
All other parties further up/down the distribution channel depending upon how one views it, are some level of middleman player. It follows that the middleman will have costs of their own to bear on top of the cost price of the product from the product producer. This is where their opportunity to make a profit is available.
Why, in hospitality, is the producer of the product forced to find ways and means to differentiate their own core product they produce through loyalty, additional services, inclusions, incentives and other basic cost impacts, to make the product attractive for the end customer? The same customer who is ultimately their direct customer, consuming their product. All so that it is ‘fair’ to other parties who want to sell the product that they do not own or produce. In my view it’s a backward model.
Constant dialogue in industry discusses the balance of direct bookings vs. third party electronic or largely referred to OTA’s. If the lowest price of a product is from the producer and for the most part buyers generally seek the lowest price for the same product, it follows that the majority of bookings would be directly with the producer. In our case hospitality organisations. Third party distribution channels certainly don’t want that.
In the bricks and mortar world of the Travel Agent, the business model was to provide reach into far flung locations around the world through direct travel agent rate setting (10% commission on revenue booked) or through a wholesaler model where products were packaged inclusive of room products with volume rates and fixed hidden cost price based upon volume of production.
The electronic business model of today has done great things for travel and hospitality as industries in terms of exposure and custom. However I’m not convinced that the process of aggregating and consolidating other peoples products is worth significantly more than it was under a traditional model.
People will always need somewhere to stay. People do not always need someone in the middle to present it to them. Does the third party distribution industry need hospitality or does hospitality need third party distribution? The commercial relationship and pricing should reflect that reality. I believe we are seeing a shift in the model now.
What is constant is that the guest can’t sleep on an electronic transaction. Joseph and Mary were walk-ins.
The future of OYO
The overall scenario seems a good advertisement for brand power, although perhaps gone slightly awry following the current ‘rapid saturation’ approach to business growth. The first factor that is apparent to me is that OYO’s target market has been the based upon lower-tier accommodation products, which has been without genuine at scale brand representation across countries or continents and certainly in their home markets. The second factor is that the base of the business began in India in basic/lower tier accommodation that would be less sophisticated operationally and probably without existing technology platforms.
With industry press trumpeting the value of upscale big brands, owners’ interest in a brand on top of systems and performance commitments is understandable. Particularly where there is no prior affiliation. Low hanging fruit.
It’s no small matter to build a functional cross-border customer, distribution and hotel operation technology platform. Plenty of anecdotal evidence to support that challenge in our industry. Stepping across international borders would also be expected to bring about some learning curves for all involved. Meeting a more sophisticated operator/owner combination who is savvy with distribution and revenue management practices would expose limitations, particularly as OYO looks to ascend the accommodation scale/move to more developed countries or replace incumbent brands.
From an international perspective, I feel it is too early to pass judgment on OYO’s overall commercial success. From the brand footprint view despite some noise and detractors, owners continue to embrace and adopt the brand. This aspect of the business would appear wildly successful thus far…
The motels/hotels/guesthouse/BnB OYO manage were already there. If OYO should fail the bricks and mortar will remain after the brand is gone.
Single technology platforms for Hospitality
There are so many vendors in the industry for a number of reasons – Travel & Hospitality are ‘it’ Industries with high visibility at the moment; there is a wealth of speculative capital; technology development has become swifter through modern tools and platforms; the industry is perceived as ready for disruption; there remain many operational functions that are yet to be technology enabled; perhaps the industry wants something different……?
Now for the questions.
1. Yes, there are number of solutions that go well beyond the range in the question to encompass almost the entire hospitality operation.
2. Yes, it is. There will always be some parts of the operation/technology that will sit outside of this model. Revenue Management is a good example as it will receive input from so many other systems in the future. However, the rest of the operation has proven to be a good candidate. This is because when the hospitality operation is viewed in this context it is found that process and inputs are similar across the business. This is why a single platform is viable.
In my view the term ‘specialist hotel technology vendor’ is loose. Given the right resources and commitment it’s realistic to be strong at multiple disciplines. If through the acquisition of multiple disparate companies/products a vendor becomes ‘strong’ and celebrated why would it not be the case that through integrated technology you can also become strong? Is the cut and thrust of mergers and takeovers more interesting than big picture industry technology solutions? It appears to be the case in media dialogue and pundit world.
3. We’ve seen it and it is alive in the industry. Nothing new here.
Having direct experience on this topic as an operator and a vendor to industry, it is not as much about the technology as it is about the organisational drive and courage to make such a major shift in business process. When the commitment is made and the step is taken the rewards are huge. Not achievable through any other mix and match of multi vendor solutions. But you can only appreciate that if you’ve walked the road. Few have.
This will be the eventual way the industry runs as a standard because it is the only approach that addresses the real business pressures of industry. Perceived technology pressures that many like to cite are secondary concerns.
Attribute based shopping
I’m torn. In saying that I’m certain it will become mainstream because airlines have taught the customer this is a level of normal behavior. Although my personal position is that I feel it removes a level of hospitality and may bring about a race to the bottom. Hotels and resorts are not airlines.
What is an attribute? Is it an ancillary revenue item? Is it an item of inventory? Is it both? I’ve heard some speak about bed sizes, bathroom types, room locations. These have been part of the room matching experience technically since I began in the industry. We paid attention to the customer and kept the information on hand behind the scenes. We called it observing the guest and the art of anticipation – service. A cute term in today’s self service mode. The intelligence to assign rooms accordingly is also old. The hotel is built once and you cannot effectively change the bedding configuration – hence the concept of a room type. Is WiFi an attribute? No intelligent hospitality technologist is going to build a campus WiFi solution for part of their inventory. It’s there. It’s already factored in to the cost of sale for the room. To attribute such a thing is a revenue gouge as compared to a customer choice. Perhaps WiFi that works is an attribute! I digress.
Technology has existed above and on property to facilitate this type of functionality for quite some time in PMS, CRS in real time and more importantly customer information and loyalty platforms.
If an ‘attribute’ is truly ancillary products that are not being leveraged or sold effectively today then I approve as this is a major gap for the industry. If it is picking and choosing and monetizing nuances the customer already receives as part of the hospitality product then I see it for what it is.
In speaking to a good friend close to this he suggested to me that it’s about the inventorization of other products. It could be anything. Now we are talking! This, I am in favor of having a background of across operation sales platforms for all products. Everything in one location, inventorized and guaranteed. This means a consolidation and standardization of inventory, pricing and revenue structure and management throughout the distribution environment. Also a massive shift in pricing optimisation and the idea of what a hotel or resort product is. The entire offering. Not just rooms. Some significant technology shifts…..
It’s in my view the only way forward to the next generation of hospitality operating platforms where operational processes and the guest experience become aligned. Rooms, Lifestyle elements, Transport, Retail items, Dining reservations, Transportation and third party products. From inventory. Real time. Guaranteed. This is what we always had in mind when dreamed of ‘Build Your Own Package’.
To me, this is what represents ‘attributes’ by comparison to what has been known as Room Features. It requires a fundamental change in what a property/hotel/CRS/customer information, loyalty and booking platform means. If it told you that it exists today what would you say..?
Perhaps this is the catalyst to bring us to that utopian operating model!
Will it do what it did for the airline industry – increase sales of products they could not effectively sell before? Yes. The remaining question is how our industry will approach the ‘products’ we choose to sell. For the most part I’m only seeing focus on Rooms. A limited view that misses the boat on the real opportunity to grow revenue and increase choice for genuinely valuable products.
The role of education in hospitality technology
The topic of education in hospitality is always an interesting one as it is so often the first casualty of financial performance. Technology education appears to lower the priority further. Buyers often complain about the volume of education recommended to successfully deploy a technology, seeking ways to whittle down education investment. Yet, quick to react when adoption into the business of a new technology is challenged. Ask any vendor company how often they can secure commitment from customers for ongoing education and updates to feature functionality. Even while the complaints roll in that the technology does not satisfy the needs of the operation, despite the required capability existing in the tool.
The end result is is that such a self destructive approach negatively impacts the two most important stakeholders – the staff and the guest. Over time, and sometimes not that long, a very good technology ends up being replaced because it ‘doesn’t work’.
There is no substitute for education. Education directly impacts adoption and influences retaining of the technology by the customer.
As our industry shifts from capital based models to SaaS based models all parties will do well to heed the necessity for continued education. As it is oft highlighted it’s much easier to remove a SaaS based deployment.
We can argue over the mediums and delivery mechanisms. At the end of the day the only way to avoid rapid wash-down of a knowledge base is to continually educate. There are no shortcuts. Fail to continually educate – fail to maximise the opportunities through technology assets – fail to be as effective and efficient in the operation. This is where industry falls behind.
Education institutions have a role to play in the introduction of technology to aspiring young hoteliers. However, it’s not possible to have every technology used in industry on hand. Tool introduction needs to extend well beyond the traditional PMS and POS to other across operational tools regularly found in industry today. More importantly young hoteliers need to learn about the strategic approach of technology and the role technology is intended to play in a business environment. Many students move into management over time and technology, while so fundamental to success in a modern hospitality industry, has been largely overlooked as an important management discipline for a well rounded hotelier. There is room for improvement and focus.
Finally, young hoteliers need to learn the skill of process engineering and optimization. The reality is that technology is the operational process and good management needs to be constantly scrutinizing operational excellence and the adoption of tools to run a better business. Teach them young to have an inquiring mind and a view toward constant improvement.
If there truly is demand for technology professionals in the industry, that is indeed good news and perhaps a telling statement for the industry. It wasn’t that long ago that many operators determined that technology could run quite nicely without industry technology resources – wholesale removal from industry. Perhaps some growing up has taken place and it is now appreciated that all aspects of a business require capable and knowledgeable custodians in scale with the breadth and business impact of technology deployed in industry.
Amazon’s opportunity in Travel
At the heart of it all, big tech has the funds to largely do whatever they would like to do when it comes to industry entry or disruption. Why not Amazon? They have as much funding as many of the others and they know how to sell products.
Although I still make the comparison between the capabilities of an Amazon vs. those company’s that have something bigger than a selling platform – a search engine and associated business platforms and operating systems. Not to mention an integrated environment by design.
Why? Because these are the tools that allow such an organisation to know far more about customer behaviour than the final sales transaction.
Eventually this greater customer knowledge will outplay those that can offer a transaction engine for inventory. Anyone selling a major search engine company?
Amazon could buy any of the existing OTA’s and distribution style businesses, but that would only replace the existing by name/brand. It will take longer to create an competing integrated environment.
Hospitality’s investment in technology
Technology represents one of the significant opportunities for competitive advantage in our industry. Market dependent, the physical aspects of a hospitality product are fairly static. The space where the opportunity lies to make the difference is in the ‘software’ as we often refer to it.
Software, being people, but also the technology that goes with them.
It is true that the same software is available to the entire industry. Where is the advantage? The timeline of adoption. Even if all company’s in a market were forced to use the same technology tools, the differentiator is at what point the investment is made vs. when the competitors make their investment. Time to enjoy capability before the pack catches up is the true advantage. If an organization continues to stay ahead of the pack, then they continue to enjoy capabilities the rest of the market does not have. It’s through time and capability that we empower the other software – people, with tools that make a difference to a business in general.
The early bird catches the worm.
I don’t believe it’s about R&D from a technology perspective as far as Hotel companies are concerned. Hoteliers need to concentrate on their core business in a congested marketplace. However, hoteliers do need to keep a close view on the adoption of tools that can provide the leap forward.
I also firmly believe that annual investment is not about set figures and arbitrary percentages. More so that constant improvement is imperative. Well constructed initiatives that an organization wants to achieve in the business are the key. The importance of these goals determine right-sized technology investment and when funds will be made available.
Apple, as an example, is a technology company. Their business motivations differ from that of a hospitality company. Many of the technology vendors providing tools to the Hospitality industry invest more than 5% per annum in moving their products forward.
Artificial Intelligence in hospitality
Artificial Intelligence is not new to the hospitality industry in the specifics of narrow intelligence. The industry has long had technology capable of providing decision support or executive information around specific and targeted sets of consolidated information. The main example is what we today know as revenue management systems.
The various company’s that have provided software solutions for this domain of expertise have combined information about the future, information about the past and then algorithms against this information to determine the future state of reservation and booking behavior to forecast lead time and make pricing recommendations.
Revenue Management technology has been in our market for more than 20 years. Curiously, for a part of the business so fundamental to operational success the adoption of revenue management technology for all its capability has been slow. Many questioning the application of the science, data and the outcome of the algorithms. Great resistance has been faced by industry technology providers. iDeaS recent study on adoption statistics support the phenomena.
I wonder if as a result of the buzz around ‘Artificial Intelligence’ across technology in general, the road will be smoothed for greater adoption of the tool.
As for the future, decision support can play a part in so many facets of the industry. My top 3 areas of opportunity are;
1. Revenue Management technology will continue their early work and with access to deeper information will apply forecast and pricing optimization across the business, having an impact on all perishable products and services. Eventually to the level of individual pricing for a single guest for a variety of specific or combined products.
2. The stand out opportunity is profile information. Capturing behavioral information about individual guests in relation to personal details and preferences as well as purchasing behavior is also old. The best operators have structured themselves to cater to the guest on an individual level through manual research of information on hand in various systems on and above property. 3 day and pre-arrival review and loyalty operations being manual examples of this effort. The next step will be the automatic analysis and presentation of this information as well as recommendations for personalization. As staffing decreases in operational positions, this capability will be the difference between blanket standard treatment and genuine individual recognition.
3. An area of large cost to industry is supply chain. Today’s smart operators adopt integrated supply chain solutions with a direct real-time link to consumption of goods, using transactions and par stock settings to automate the generation of orders. The next step will combine transactional information with buying behavior of mass and individual guests discussed in 2. above to shorten the supply chain, ensure fresher product, more quickly consumed and lower shelf and storage cost of supplies. Overall the guest experience will be improved and the cost of stock on hand will be drastically reduced, eliminating wastage in the supply process, further supporting pricing and profitability described in 1. above.
In general look to the large cost areas and potential for increased profitability as the immediate targets for AI.
The ‘death’ of yesterdays PMS
So we keep hearing and yet a new round of players are building new PMS products and a market is excited about buying them. I’m not sure that suggests the death of yesterday’s PMS. Just the next round of the same thing with current technology in the stack. Cloud and API based technology is not exclusive – it’s available to anyone. New and incumbent providers. The future holds promise, but there is still some way to go.
The role at the core of the PMS is the repository of pricing and inventory. At a minimum all hotels/motels etc. have room product. The need for the storage and management of that information is not going away. My view is that capability needs to become broader to cater for all product and service inventory. If ‘Property’ means anything then it is the entire property. A solution that encompasses the breadth of hotel operations is the next ‘PMS’. Some call it HMS – Hotel Management System. Semantics, but the same thing.
The industry cannot redevelop customer oriented operational models and job scopes and provide across business visibility of the guest journey with more of the same silo-based technical solutions. That is what is coming to market, with even more additional slivers of capability in each new app or system bolted on to this model from another provider.
A casual review of new to market products demonstrates the same. The jigsaw puzzle is not going away.
Some argue that because systems are more ‘open’ and in the cloud, this is operationally a better solution. Technology operations certainly. However, If staff is forced to bounce around multiple applications to deliver product and service then the tools of today are not moving the operation forward any further than yesterdays.
Regardless of where the back end sits, the front end requires a unified operational experience. This is achieved in two ways. A single architecture product OR a skin or additional layer across a siloed line of business applications connected behind the scene with API’s.
How does the future look? Modern CRM and ERP platforms will play a much greater role in our industry. CRM – because the guest demands we understand them more deeply across the business and engage. ERP – because as the supply chain becomes more electronically enabled it will be necessary to gain visibility, efficiencies, and speed of process through full automation. The remaining pieces for hotel operations address traditional line of business systems – PMS, POS, Lifestyle, Sales & Event Management and Service optimization migrating upwards and consolidating into a single solution across property or portfolio – a CRS/PMS style solution above and across the enterprise, but for all pricing and inventory. Exposure of the necessary customer facing and mobile capability a given, unlocking the Digital Guest Journey.
Without such organizational capability, the multitude of third parties will own the customer relationship and the journey.
Is hotel technology lagging behind other industries?
There are a number of factors to consider;
1. Ultimately the hospitality industry is a real estate business. Most rental property owners like to avoid heavy continued investment into the asset, if at all possible. For that reason any decision to make further investments into the asset are heavily considered. That includes technology. As a result of the process progressive technology adoption is slowed through the natural investment cycles of real estate ownership. I’m not of the view that owners are anti-technology. It has more to do with asset management in general and technology becomes a victim of circumstance.
2. As an industry and particularly from a technology perspective, generally there is a pre-disposition to wanting to be somewhere between 2nd place and last place in relation to new technology. I’ve always found the desire to be anywhere but first a fascination. Not too many businesses in an industry would not strive to be No. 1. For the most part everyone is waiting around for someone else instead of taking a leadership position.
3. As a result of 2. above the industry in general does not reward innovation. Many large and small provider company’s commence with the right idea in mind for bringing large steps forward in capability to market. They are often crueled by a lack of courage in industry adoption and either disappear or fall back to the pack. There are many examples of early to market products that disappeared for something that eventually became main stream.
What to do about it?
A. Encourage a change in attitude by industry toward technology investment and an appetite for a reasonable level of risk that would encourage innovation. Today’s technology is far more reliable than that of the past. Many of the traditional risks don’t exist on the same level due to lead time to failure and survivability of technology platforms.
B. Applaud and recognize the early adopters as an industry. Nothing improves without change and if one organisation wont take the ‘risk’ then they can at least support those that do. A rising tide floats all boats.
C. View technology adoption as a competitive advantage. Today’s technology is the business process and the operational platform. Technology provides the opportunity for being faster, higher, stronger than your competitors. The window of opportunity to be able to do things in your business that other’s cannot through a lack of willingness to adopt can give years of business capability before the rest come in 2nd to last.
D. Have a go! People talk about ‘what if something goes wrong?’. Things go wrong now. In my view better for things to go wrong with additional operational power and capability than waiting for your competition to surpass your own business capability. At the end of the day our industry technology platforms are going ‘right’ more than 99% of the time. Why focus on less than 1%?
Despite statements to the contrary, there is and has been for many years a wealth of great technology available to the hospitality industry. More coming all the time, despite the challenges outlined above. Don’t lament what could have been. Get on board and move your business and the industry forward.
Rate Leakage
In general it’s a sad situation and does nothing to foster good relations between the distribution network that have no tangible product to sell other than a hotel product presented through someone else’s effort and expense.
The sign of a great business relationship is where both parties benefit and consider each other’s best interests. The nature of these relationships to date seems to be one sided where what is good for the revenue commission will just have to be satisfactory for the product provider who bears the real expense of producing a product.
The overall distribution network environment has in my view been a catalyst for the creation of mega brands, diluting the overall quality of the hospitality experience if for no other reason that trying to create a block at such scale and breadth that a level of direct competition or negotiating power exists to balance the relationship. The recent Marriott negotiations being an example.
Through the process everyone loses in this model. Brands become a product by name only. Product standards slide based upon whittling down of a fair rate. The idea of hospitality service begins to disappear from the product offering all together. It’s a race to the bottom where the new version of hospitality in some sectors will resemble not much more that a dormitory.
On the flip side I sense a change coming. A change that will shift the balance in favor of hoteliers in general on the back of a much broader distribution network where commission on room sales will not be the motivations for being in the market. I’m looking forward to this change and crossing my fingers that the new player will be much more interested in positive commercial relations with the hospitality industry.