Horsing Around: Five Thoughts for the Hospitality Industry in the Year of the Horse

Time flies when you are having fun, so as the lunar New Year is almost upon us, I better add my two fifth to the canon of opinions and predictions that have so far poured out for the New Year of the Horse.

1. Integration, not Innovation    

As I said many times before, technology should be the conduit for a smoother guest experience, not the raison d'etre. The "hotel room of the future" has reared its head again with a follow up of what was launched last year at the FITUR hotel conference in Spain. Now, a full one year later (a lifetime in technology these days), apparently people can finally try it out. Judge for yourself here, but I very much doubt that this will "take the hotel experience to the next level" as the people behind it want us the believe. Given the fact that the hospitality industry in general has to bridge a large generational gap at any given time, it cannot and will never be the hotbed of technology innovation. So rather than putting more technology into the room (like all those screens in the supposed hotel of the future...), hotels should focus on looking at how to better integrate what's already there to deliver a smoother experience - for guests AND hotels. This is where the ultimate expertise lies - not how many clever gadgets you can throw out there, but how you can intelligently integrate them into the overall ecosystem. As for the gadgets: to paraphrase Publicis chairman Maurice Levy at the Davos World Economic Forum last week, nowadays participants at Davos carry smartphones, tablets or both, whereas 10 years ago delegates were handed Palm Pilots (remember them?), and more recently it was Second Life that was predicted to dominate our lives, and is now of course almost never heard of. Enough said!

2. Bridging the Generational Gap

Having made the point about the challenges for hotels to serve multi-generational guests, hotels nonetheless are in danger of failing to adapt to a new breed of guests whose needs and demands are entirely different to those of previous generations. All too often we see hotels do nothing out of fear of alienating their not so tech savvy guests. This is a big mistake. A new study in the changing nature of hotel guests undertaken by global hotel consultancy HVS called  ‘A New Breed of Traveller’ says the impact of rising affluence, globalization and technology has led to modern hotel guests valuing experiences and the feeling of ‘being connected’ over traditional hotel luxuries. So what about the not so modern hotel guests you may ask? Well, offer both experiences. If you have interactive In-room Dining on your TV, make sure you also have a hard copy of your dining menu in each room to facilitate the transition from one generation's habits to another's.

3. Airbnb is NOT 'crushing' traditional hotel brands

Plenty of articles over the past year took aim at Airbnb and its imitators and how they are 'crushing traditional hotel brands'. I tend to think this is a tad overblown. Airbnb will definitely continue to grow and disrupt particularly the extended stay market, but 'crushing' the hotel market? I doubt it. The numbers may look intimidating, and there was much hoopla over the company's swanky new headquarters in San Francisco, but if you take a close look at what Airbnb is actually offering in terms of experience it puts those numbers in a different light. Let me share my Airbnb experience when I traveled to Tel Aviv last year. I booked a lovely looking penthouse in a funky part of the city. There were no elevators, so we had to lug our luggage up four flights of stairs - no porter in sight. The apartment didn't have a coffee machine as the owner apparently drinks tea. We were leaving during the Shabbat, so finding a taxi was a challenge as we couldn't ask the front desk to organise one. Don't get me wrong, these were not deal breakers and in terms of value for money it was absolutely alright for the holiday nature of this trip.

But would I book Airbnb for my business trips? Not a chance. And that's my prediction: Airbnb will grow within the extended stay and backpacking demographic. But I think the business and medium to high end leisure travelers will stay well clear of it.

4. ... but OTAs continue to disrupt the market

Rather than worring about Airbnb, hotels should focus on OTAs. OTAs are here to stay, and I think hotels have pretty much accepted this, but the challenge is how to wrestle some of the distribution channel control back from OTAs. So in the coming year we will see hotels ramp up their efforts to do just that, employing all channels available to them, including the in-room TV.

But that's not all of it. A recent article covered the challenges posed by the fact that despite the seeming ubiquity of credit cards and pay pal, a surprising number of countries still prefer different payment methods. In Brazil, paying in instalments is the norm and OTA Hotels.com has responded by allowing this form of payment since last year, as well as allowing guests to pay when checking out, rather than checking in, which is the preferred way to pay in southern Europe and Russia. According to the article in the FT, the online room retailer had to renegotiate 250,000 hotel contracts, but the potential upsides are evidently huge, given that, for example, Brazil's ecommerce market is set to grow from $18billion to $26billion in the next four years. So if hotels want to go head to head with OTAs they have little choice but to do the same.

5. The Labour Crunch will Increasingly Squeeze Operations

As the Asia-Pacific continues to plough ahead as the region with most growth potential, a dearth in qualified staff is starting to become an issue in some markets. Specifically in places like Singapore, where hotels suffer serious manpower shortages since strict new immigration laws have come into place. While there are no overnight solutions, a number of our hotel customers are seriously looking at how technology can assist with streamlining their backroom operations and ease the reliance on manpower.

But we are not talking about new technology, mind you. This is an issue of looking at existing technology in hotels and how it can serve to increase productivity, rather than jumping at new technology innovation. For example, a hotel's IPTV system can do much more than just infotain the guest. With the right programming and integration work it can easily become a crucial tool for streamlining backroom operations such as housekeeping. In the coming year we will see a much greater emphasis on this area, which proves again my first point: it's integration, not innovation that has the upper hand at this point in time.

And on that: Kung Hei Fat Choi - Happy Chinese New Year of the Horse!

South Korea’s Hotel Boom - a Boon for In-Room Entertainment?

South Korea seems to be on everyone’s lips these days. There’s a monumental ‘Korean Wave’ sweeping us towards its shores, fueled by the ongoing popularity of South Korean entertainment and culture, specifically in the form of K-Pop and television drama.

The Seoul Metropolitan Government has reported that there are only 29,000 hotel rooms in the country to accommodate the estimated 10.8 million visitors to flock to the country this year – a shortfall of nearly 15,000 rooms. Keen to get a slice of the action, local and international hotel chains are making a beeline to invest in the country in what the Korean Herald in a recent article described as a ‘Gold Digger’ mentality. 

Add to that the fact that South Korea will do the final switch from analogue to digital television at the end of this year and you have an industry at an inflection point. On the one hand there’s the massive influx of new hotel properties to alleviate the room shortfall and on the other there are the existing hotels that are faced with new competition and also have to address how to adapt to the post-analogue world come 4.00am on 31 December (unless they have already adapted to the ATSC digital standard of course). 

  

So no wonder plenty of suppliers -- including in-room entertainment specialists such as my company -- are eagerly putting plans in place to participate. The problem is that, unlike ‘mature’ hospitality markets in the region such as Hong Kong and Singapore, there seems to be a very different perception among South Korean hoteliers of the value of things such as in-room entertainment systems. The prevailing view is that in-room entertainment systems should be either provided free of charge to the hotel or provided through financing by the vendor. This stems largely from the market being ‘spoiled’ by legacy providers who more often than not threw in in-room entertainment for free because they subsidised it through HSIA revenues.

In the age of analogue entertainment and internet being a chargeable item in hotels this made perfect sense. However, with the onset of the age of HD, smart devices and ubiquity of internet access that is expected to be provided for free, the game for what guests expect by way of in-room entertainment has shifted quite dramatically.

Talking to our local partners during my recent trip to Seoul, most middle management in hotels seem understand the intrinsic value of sophisticated in-room entertainment systems; it’s the top management that, apparently, still needs to be convinced. This is not surprising: while the middle management is usually more heavily exposed to guest complaints about substandard entertainment options, the top management holds the purse strings and finds it harder to justify an investment whose returns are seemingly less tangible.

Next-gen in-room entertainment offers branding and revPar opps

But here is the crux: the next generation in-room entertainment systems are not only about superior picture quality, but offer a much wider opportunity for hotels to benefit from both tangible and intangible returns. As I have written about in another blog, in-room systems today offer hotels great opportunities on many levels, from creating  positive brand relationships and long lasting loyalty through hotel-specific features, to streamlining backroom operations through TV-based housekeeping, to increasing revPAR through interactive promotion of hotel services and eCommerce features. 

So new hotel or old, the current ‘gold digging’ environment combined with the upcoming switchover from analogue to digital presents a great opportunity for South Korean hoteliers to propel their properties to the forefront of guest room sophistication and reap the benefits with increased brand value as well as a boost to the bottom line.

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.     

The Problem with Predicting Future Technologies for Hotels

While science fiction movies routinely deliver the inspiration for technology innovation, it's what they don't predict that's really interesting

Being able to peek into what the future will bring has been at the forefront of human desire for as long as we have existed. It’s the basic foundation from religion (heaven and hell come to mind) through Nostradamus and right down to the more recent fascination with all things futuristic, that probably started when H.G. Wells published his novel “The Time Machine” in the dying days of the 19^th century. A few years back, the science fiction movie everyone loved to quote in our industry was Steven Spielberg’s Minority Report, released in 2002, which was a marketer’s dream for its depiction of a world in which advertising is so tailored, targeted and ubiquitous that it merges seamlessly into everyday life, to do its work of subtle (or not so subtle) persuasion. It seemed all so very plausible and within grasp then, not least because digital signage technology had just made an entrance into the advertising world in a major way.

Fast forward nearly 10 years and we haven’t really moved on that much. According to film lore, Spielberg consulted numerous scientists in the lead up to the film in an attempt to present a more plausible future world for the year 2054 than usually imagined in science fiction films and many articles have been written over the years about how many of the film’s imagined technologies have become reality. But let’s not get too carried away. Yes, companies have invented a lot of things that make an appearance in the movie, such as electronic paper, facial recognition advertising billboards and 3D televisions, and some were most probably even inspired by the movie to do so.

The thing is though, that precious few of these inventions have entered the main stream (3D TVs being the exception), not even facial recognition technology, which has been hailed as the holy grail by digital signage providers for years now. But then you can reasonably argue that with the movie set in 2054, we haven’t done so bad after all, given that we have another 40 odd years to make all the other technologies mainstream.

However, far more interesting than what science fiction movies from the Jetsons to Star Wars and yes, Minority Report, did predict, is what they did not predict: the Internet, for one. Or Facebook  Or Twitter, in fact the whole social networking phenomenon. These technology-driven trends have, and continue to shape our lives at almost every point like no other and yet every single look into the crystal ball has missed mentioning them.

So it was with some trepidation that I consumed the recent predictions of what the hotel room in the year 2030 will look like by Ian Paterson in the study “Travelodge Future of Sleep”.

There are a lot of technologies in there that sound great and believable, being connected in our own virtual reality through a visor or contact lenses and interactive video panels are two that instantly come to mind. This and other useful innovations I can actually imagine making my hotel stay more pleasant, but others seem more appropriate as home applications, rather than additions to the guest experience in a hotel. For example the “Dietary advice from night time monitoring”, which may be a great help when I’m at home and in my weekly routine, but the last thing I want when I wake up in a hotel room is a reminder of the banquet meal, pub crawl and karaoke marathon with my customer the night before. Not the least because it will probably require something a lot stronger than is on offer on the breakfast menu to get me back on my feet.

I am also slightly puzzled by the various home-upload features, particularly the 3D room re-skin home away from home upload, where lonely business travelers will be able to choose from a range of layouts including ‘virtual family’. The incredibly sad image this produces in my imagination aside, unless I suffer from pathological homesickness I think I’d rather not have that appearing on my hotel bill.

But then that’s just my preference and this is exactly the problem with trying to predict the future: technological ability and readiness does not equal ubiquity of adoption. The road to innovation is littered with plenty of brilliant ideas based on technological innovation that never got off the ground for one reason or another. What these failed innovations neglected to take into account is something that will be near impossible to quantify for generations to come, maybe forever: human behaviour, which is complex, irrational and variable.  As much as generations of marketers have tried to predict human behaviour through market research, the cold hard truth is that it cannot easily be squeezed into bell curve modeling.

Think about the phenomenal success of Groupon, which left the business world speechless for the simplicity of its premise, even though it is based on satisfying one of the most basic of human instincts: to get a good deal. So for my part, the next time someone asks me what I predict the next killer-app for a hotel to be, I think I opt for a good bed.