In Newsletter #34: Strike a balance between human-driven hospitality and technology | The battle lines get redrawn in Airbnb vs. hotels | Is Google the monster of all OTAs?
It seems the hospitality and travel technology space is heating up. From what I am seeing, investors are starting to take a more interested look. It’s hardly surprising given an industry that for all its immense size is still so far behind in its technology prowess. According to CB Insights’ latest report, the next 5 years will impact the travel industry more than the previous 50. However, as Anand points out with a great image of 24 old war planes attacking King Kong, it is not the incumbent tech companies that are poised to disrupt, but rather a host of startups unbundling the space to serve a specific need (or as Innovation guru Clayton Christensen new theory on disruption calls it, a “job to be done”).
This reminds me of a speech Mr. Barry Diller, Expedia Chairman, gave at the company’s conference last year. Diller was talking about media at the time, but referencing how with technology everyone can pay for exactly what they want and no more. Big companies no longer control the consumer as they used to and gone are package pricing ultimatums (if you don’t want to watch sports, you don’t have to buy the sports package). As such, we are seeing a host of successful companies each specializing in their “job to be done,” from Zeel with their on-demand massages to HelloScout with their outsourced concierge services.
It is not only tech companies that are finding their niche groove though. Hotels are making incredibly innovative moves in their offerings. From West Elm hotels to Equinox we are seeing a whole new range of lifestyle hotels appealing to a certain demographic. Check out this new hotel concept, that combines Airbnb and WeWork - and i’m sure it’s not too long until someone takes us up on building a Shared Workspace Hotel (an idea given to me by another entrepreneur).
Either way, hotels are poised for some great technology coming their way and must choose where to keep the human touch and where service delivery can be automated, as covered below.
Heading to Vegas today for HFTP’s annual convention where I will be talking about maximising systems utilization, as no matter how good a technology is, its only as powerful as your users make it.
- Alex Shashou
HIGHLIGHTS FROM THE WEEK'S NEWS...
How necessary are humans to hospitality? (Pretty necessary.)
Hotel Management | Hotels Without Humans
Why it matters: “How necessary are humans to hospitality?” asks Arnie Weissman, editor in chief of Travel Weekly, after a frustrating customer service interaction at a hotel in Beijing. The incident began with impeccable human-served hospitality, but ended poorly, he says, and could easily have been avoided with technology.
The episode reminded Weissman of something Barry Sternlicht, founder and former CEO of Starwood Hotels and Resorts, said in a talk over ten years ago at a World Travel & Tourism Council Global Summit: if it weren’t for human employees, he could run a flawless hotel operation.
Weissman says Sternlicht’s observation provoked laughter at the time, but was remarkably farsighted. “The challenge of getting the just-right balance among human staff, technology, service, and guest autonomy is perhaps one of the more perplexing operational tasks a general manager faces,” he writes.
How do you balance a guest’s desire for both efficiency and personal service? Can you deliver service that makes a lasting impression via technology? Does the key benefit of technology - consistency - commoditize service standards and erode loyalty?
These are questions Weissman poses in the piece, but they are also the questions at the crux of most conversations about technology’s role in hospitality today.
Indeed few argue at this point that technology and automation don’t have a role to play in hospitality, the question is how much should be automated, and how to strike the right balance. Technology has a clear role in increasing staff efficiency, by assisting with mundane, repetitive tasks. (A McKinsey Quarterly article from earlier this year does a fascinating job dissecting the feasibility of automation to replace activities across occupations and across sectors - including the accommodation sector. How predictability figures into a task is the key measure of whether or not that task can be automated, they find.)
The reason why technology is such a question mark in hospitality is because of predictability, or rather, the unpredictability of the hospitality experience. As Weissman writes, “Hotels work hard to capture guest preference data, but the same guest can have different moods, whims, time pressures, levels of irritability and desires as well as variable needs for rest and refreshment. Having humans involved in service means service will be inconsistent, but the fact is that human guests are themselves consistent.”
Clearly there is room for automation in hotels, and there are many situations in which a guest would prefer to have the choice to use technology rather than interact with a staff member. However, it's important to remember there is a limit to the emotional connection your guests can feel without your staff creating one. Striking the balance between the “human element,” as Two Roads Hospitality’s Niki Leondakis puts it, and technology is where hotels can differentiate themselves and stake their competitive advantages. “The myriad ways and settings in which those...things can come together is what makes each hotel distinctive,” Weissman writes.
Is Airbnb eating the OTAs' lunch too?
The Information | Why Airbnb is a Threat to Hotel Chains
Skift | New Data Suggests Airbnb's Impact on Hotels is Less Than Perceived
Why it matters: Ever since the first inklings Airbnb was eating into hotels’ market share, the debate over if and how much of this is happening has become more contested and more nuanced.
STR published the preliminary findings of a report last week, using data supplied by Airbnb, to suggest Airbnb’s impact on hotels is less than perceived. Skift was quick to report, however, that the report was really “dealing more with apples and oranges...than apples and apples.” Skift points out that Airbnb data hasn’t always checked out, and also expresses doubt the data, even if accurate, is a “wholly accurate representation of what’s really happening.” It’s difficult, they say, to measure the specific impact Airbnb may be having on individual hotels in certain markets, primarily because that data just isn’t available.
As the Airbnb vs. hotels contest continues to rage, the battle lines seem to be shifting. As we reported in Newsletter 33, Airbnb might be proving just as disruptive to the OTAs as it is to hotels. And this week, tech industry publication The Information doubled down on this new battle frontier, reporting Airbnb faces in fact tough competition from the OTAs and is trying to add more of the services that OTAs offer, like instant booking, to keep up.
The Information looked at Airbnb v. hotels v. OTAs on the metric of repeat business, finding that while Airbnb beats individual hotel chains along this measure (Airbnb customers used the service roughly twice in the 12 months to August 2016 as compared to hotel leader Courtyard’s 1.69 times on average in the same period), the homeshare giant was bested by Expedia-owned Hotels.com, which U.S. consumers used an average of 2.07 times during the same reporting period. As The Information asserts, there’s typically a much larger number of hotel rooms overall in big cities than Airbnb listings, which gives OTAs more rooms to show to travelers.
“Yes, Airbnb is competing with hotels, but especially for leisure travel they’re competing with online travel agencies. Leisure travelers are going to all channels and tend to go to channels that aggregate prices,” says Douglas Quinby, VP of Research at Phocuswright, who is quoted in The Information’s piece.
The article goes on to discuss the ways both Airbnb and the OTAs are shifting their offerings to compete for one another’s customers.
As an STR VP concludes in the Skift piece about Airbnb vs. hotels, but which could just as much apply to this Airbnb vs. OTAs debate, “Airbnb is here, and it’s here to stay. This is the beginning of a larger discussion about the co-existence between Airbnb and hotels on terms that work for both parties. But this is just the beginning. We finally have data to add to the conversation.”
Why leave Google if I can do it all here?
Tnooz | Book on Google - Answers to Hoteliers' Questions
Why it matters: Google’s encroach on the travel booking space is not going unnoticed. As Google users in the U.S. and in the U.K. (and soon around the globe) have started to be able to book hotels on Google, many have started to wonder if this is good or bad for hoteliers long term.
From our perspective, it depends which way you look at it. In the battle over margins with the OTAs, increasing competition amongst the middlemen can only help in lowering commissions on booking. Hotels (and OTAs) can place their inventory directly on Google, to be booked without leaving the search giant.
However, another big gripe the hotel community has had with OTAs is that of the OTAs “owning” their customers. Specifically, this means hotels have long fought with OTAs over the email addresses guests use when booking. For now, guests booking on Google receive two confirmations, one from Google and the other from the hotel (i.e. Google is sending the guest information to the hotel). But, as Pablo Delgado, CEO at Mirai, astutely points out… although the customer’s original intent was to book on the hotel website, the truth of the matter is that she is booking on a Google screen and giving her details to Google...which if you think back a few years, is not too dissimilar to how an OTA booking would play out.
As these two graphics show, every big tech company is trying to own more of the customer journey (and by more, we mean the whole circle), and if history repeats itself, Google is setting itself up to be the monster of all OTAs.
So enjoy the commission competition for now, but don’t say we didn’t warn you ;)
- Airbnb Guests Tend to be Motivated by Low Cost, Use it as a Hotel Substitute HotelOnline
- CEOs Expect Technology to Drive Loyalty, Distribution Hotel News Now
- What's Going to Happen to the OTAs in 2017? eHotelier
- What Marriott Learned from its Faulty Facebook Messenger Chatbot Digiday
- Hotel Zephyr Uses the ALICE Platform to Improve Service Prevue Meetings