How Hotels can Replace Dwindling VoD Revenues

Using smart in-room technology to increase revPAR post VoD

I don’t think anyone would disagree with the statement that new technologies, when used creatively more often than not maximise revenue-generating opportunities for hotels. It’s a logical expectation and a simple premise, yet so seemingly hard to put into practice.

The first time hotels felt the pinch of diminished returns from technology investments was when the meteoric rise of mobile telephony dented IDD revenues in the 90’s. Fast forward to today and the new culprit – no surprises here – is the Internet and its wider ecosystem. Since the Internet started to morph from information to entertainment medium a few years ago, it has created a vortex that draws in and transforms almost anything associated with everyday life. Think about how consumer technology devices evolve and multiply with enormous speed while doubling processing power with each new release, making consumer preferences, such as interactivity, on demand and control, ever easier to fulfil. The content delivery world has responded to this pull by transforming itself towards an on demand, interactive and, most importantly, online delivery service.

How should hoteliers react to these developments? Some hotel managers I have spoken to have seen VoD returns falling so sharply that even switching off the entertainment system for a day or two to test its popularity resulted in zero complaints. That’s some hard evidence that cannot be ignored when it comes to deciding on future IT investments. However, these hoteliers have also been busy thinking about other services they could introduce in an effort to entice their guests to spend money while they are in their rooms to replace the VoD revenues of old.

There are a number of options hotels have to intelligently use technology to replace this erstwhile lucrative revenues stream. For hotels, competition drives the need to differentiate, so the key is to opt out of simply adding easily replicable technology gadgets that may add to guest experience but don’t actually contribute to revPAR. Technology is at the heart of a lot of value added, revPAR generating services but for them to succeed, aside from being relevant for a hotel’s specific clientele, they have to fulfil three essential conditions: they need to be convenient to access, easy to use and, from the hoteliers’ perspective, have to add to the bottom line.

Let me give you two examples. Firstly, room service. The usual in-room dining menu may be printed on high quality paper embossed with golden scripture, but what it doesn’t show, is a picture of what you will be served. Now you may argue that you don’t get a menu with images in a five star restaurant either but that misses the point entirely. When I go to a five star restaurant I have usually made up my mind that I want to eat there. I may have researched the menu online, and if I have any specific questions regarding the menu my waiter will hopefully be obliged to be of assistance. On the other hand, when I look at the food menu in my room I am far from having made up my mind of where to eat, particularly if I have a myriad of choices right outside my hotel. So in other words, giving guests a bland in-room dining menu is a missed opportunity.

I often tell the story of when I travelled to the Middle East for the first time and was confronted with an in-room dining menu that listed, among other items, Foul Medames. Now if you are new to the country and culture you probably neither know what it is nor would you be too enticed by the name of the dish. Even the printed English translation, “Stewed Broad Beans”, may not sway you. But if you have the chance to study an image, or even a video of the chef preparing it on your in-room entertainment system, you may get an idea of how delicious this specialty actually is and it may just convince you to place your order - even more so if you can order the dish directly via your TV screen without having to pick up the phone and deal with staff who may not speak your language very well.

The other revenue opportunity that is attracting the attention of hoteliers is using technology to provide a vehicle for in-room shopping. Shopping on the in-room entertainment system is an entertainment option that taps into travellers’ predisposition towards opportunity buying. Many hotels have a shopping annex or Duty Free emporium attached to their premises. This makes it comparatively easy to aggregate appropriate content for an in-room, on-screen shopping catalogue, combined with a simple fulfilment processes that would suit even the shortest of short stay travellers. The limitations of the remote control as a navigation tool can be overcome by turning either a hotel-provided, or the guest’s own tablet or smartphone into a touch-based selection tool. Having all transactions linked with the hotel’s PMS system enables timely delivery and convenient payment options upon check out.

There are many more examples of how this type of online interactivity adds to revPAR, from direct booking of hotel restaurants and facilities, to local maps where local businesses in the vicinity can advertise their trade. Provided hotels are using a capable IPTV system, the technology is certainly mature enough to so the key is for hoteliers to get creative and find the type of service that suits their hotel’s and their guests’ identity and requirements.