In-Flight Entertainment vs In-Room Entertainment

While reading a recent report by Deloitte's on the future of In-Flight Entertainment systems (IFEs) and how they are changing the flying experience for both passengers and airlines, it struck me how the findings could just as well apply to hotel in-room entertainment systems (let's call them IREs, not that it's a recognised industry term yet, but if there's IFE, there should be IRE...).

Of course, there are some differences in operation and value proposition between planes and hotels. But the fundamentals on which both are rated on are essentially the same: price, destination served (airlines) or location (hotels) and quality of service. Yet, while these days even short haul and low cost airlines see IFEs as mandatory in order to compete, the notion that IREs are an unnecessary expense is still surprisingly widespread in the hospitality industry.  

This is in stark contrast to how airlines value their entertainment systems:  embedded IFEs are typically the single biggest expense after engines (yep...big gasp). Of course there is no point doing a like for like cost comparison between IFE and IRE, given the unique environmental and regulatory challenges of an aircraft that keeps the entry barrier for competition high. But are airline customers and hotel customers really that dissimilar an audience that it would warrant valuing entertainment systems so differently?

Let's take a look at some of Deloitte's findings.

Embedded IFEs are now able to improve the level of service, reduce costs and open up additional revenue streams for the airline.

Given that it is way more complex and expensive to upgrade an IFE system, it's understandable that hotels were somewhat quicker in realising the potential that IREs, combined with flat panel TVs and even smart TVs offer. Having said that though, viewing IREs as a revenue generator and cost reduction enabler has yet to be embraced by the industry as a whole. Way too often hotels still hold the view that now in the age of declining VOD revenues IRE is a cost centre and that's that. Maybe the big price tag forced airlines to find a better way to utilise - and thereby rationalise - their systems, but fact is that good IREs have long been ready to provide substantial tangible and intangible value to hotels.

Personal electronic devices (PEDs) will not replace IFSs, at least not in the immediate future. Airlines must choose IFE systems which allow and encourage the use of PEDs in conjunction with IFEs.

An important point that hotels should note: simply abandoning the TV and concede defeat to personal devices would be shortsighted. A TV is prime marketing real estate in a hotel room and even with an increase in the use of PEDs, television still reigns supreme when it comes to entertainment - even among the

much coveted Millennial demographic. Interaction is key here, so offering Miracast and/or Airplay integration with the in-room TV is a must for any IRE system to provide the type of sticky service that creates brand loyalty.

A cost effective and scalable Wifi internet solution will be an industry game changer.

Well ok, this is where the airline industry has long been on the backburner because (we were told) it was not compatible with navigational instruments. Or something. But where there's a will there's a way, apparently, and just now I read that ANA has joined the fray of airlines that are enabling Wifi internet access on their flights. My guess is that the airline industry will go through a similar trajectory with Wifi as the hotel industry did: to start it will be a novelty that people are willing to pay big bucks for, then it will be an expected commodity with charges petering out towards a free or tiered model. I wished airlines took a leaf from their cousins in the hotel business and go straight for the freemium model. But somehow I think it's not going to happen... 

  

IFE is no longer a must-have offering for long haul full service carriers, but a tool for improving business of low cost and short haul carriers.

Just like IFEs, IREs were very much a five star proposition just a few years ago. But the relentless march of technology has made IREs now an affordable and viable option for budget hotels, just as it has done for budget airlines. Smart TVs are playing a major role here, but so does the ability to integrate with workflow systems that streamline backroom operations, such as housekeeping. For airlines it is now much easier to provide IFE, for example with tablet based systems, but it is also how they use it that matters. And similarly to budget hotels, low cost airlines see the system as a tool to provide upsell or streamlining operations, rather than "just" an entertainment tool, which has long been the main purpose of IFEs.

Passenger are placing increasing emphasis on IFE and connectivity, thus a quality offering is an easy way to market an airline as cutting edge and an effective way to fill seats.

Well, replace "airline" with "hotel" and "fill seats" with "generate bookings" and you have the purpose of an in-room entertainment system in a nutshell.

Thanks Deloitte!

The importance of a strong hotel brand in the age of OTA domination

Hotel owners and operators fought it out at the recent Asia-Pacific Hotel Investment forum in Bangkok during a panel discussion titled “Hotel owners bear all the risks and operators reap all the rewards”. True to its racy title, the panel drew lots of sharp breaths from the audience as two owners were pitted against two operators. The instant survey conducted immediately afterwards showed the audience was siding with the owners’ argument, albeit by a smaller margin (61% vs 39%) than expected.

Complaints about hidden management fees aside, the owners’ side quickly honed in on OTAs and loyalty programs as the culprits responsible for eroding their investment returns. It’s not surprising that owners don’t like either, but particularly the attack on OTAs sounded a bit like sour grapes. There can be no denying that the traditional hotel industry simply missed the boat and is now having a hard time getting in on the OTA action, if that is possible at all given that even Google has recently become an OTA.

The attempt by the big brands to counter the OTAs by launching their own – Roomkey.com – seems to have failed so far – there’s a great article on RoomKey.com’s misguided strategy by Vikram Singh here.

So how to counter OTAs? The response of the operator side was simple: build a brand. One of the panelists claimed that 75% of bookings at his hotel are made directly through their sales channels, rather than OTAs. His message to the owners: if you want to maximise revenues from the hotel brand occupying your property, choose an operator that is willing to build a brand that entices and thereby compels travelers to book directly through them.

I couldn’t agree more. OTAs have added another level of competitiveness to the travel sector and are fast commoditising hotel rooms. Recent research by comScore showed that online travel spending surpassed $100 billion for the first time in 2012, a 9% increase over the previous year, with OTAs such as Orbitz, Expedia, and Travelocity claiming a sizeable chunk of these revenues. Currently the OTAs dominate the market when non-branded keyword phrases are searched. For example, searching for “Hong Kong Hotels” on Google – which is what the average traveler without brand preference would do - churns out a list heavily dominated by OTAs.

While the OTA challenge seems formidable, hotels can certainly claim back some of these revenues through online strategies and paid search ads. A hotel I booked recently through Agoda offered me a promotional code at check-in that will give me 10% off my next stay if I book directly through their website. While these strategies may work, I would argue that a more effective solution would be to build a strong brand.

On Loyalty Programs

The other beef that owners had during the panel discussion was loyalty programs. Unanimously they condemned loyalty programs as “free night programs”. The argument was that if a hotel offered a unique and memorable guest experience – if they ‘got it right’ – then they did not have to offer loyalty programs in the first place as guests would flock back to them without any incentives.  

I think this is somewhat oversimplifying the loyalty concept, specifically if owners don’t believe in building a strong brand – how can you foster loyalty without it?

Courtesy Market Metrix, http://corp.marketmetrix.com/

For one, the ‘free night program’ argument no longer holds. A study by Deloitte found that travelers place more importance on factors such as value for money and past experience, rather than free room nights. This is echoed by many other surveys, including the one by Market Metrix on the right.

In other words, just like with airline programs, it’s the perks that count. The value of fast luggage delivery, waitlist preferences and increased upgrade potential to the airline high flier, is the equivalent of room upgrades, executive lounge access, internet access and late checkout to the hotel loyalty card holder.

And let’s not forget the other factor here: loyalty programs tickle the human ego by delivering something that hotels ‘getting it right’ cannot: status and the opportunity to feel valued and more important than the non member customer next to you that didn’t get an upgrade.

Unless you are a ‘one of kind’ hotel such as the Raffles in Singapore, loyalty programs in hotels across the world are ways to lock in frequent travelers by delivering a ‘rewarding’ experience which will help build a strong brand.