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July 11, 2019
Disruption
Jeffrey Parker - Jeff.Parker@rlhco.com

At industry events and conferences, there have been plenty of conversations about disruption, whether that meeting is focused on technology, operations or leadership. We’ve all heard how Uber was created on the back of a cocktail napkin because the founders couldn’t get a cab, and that Airbnb is the largest short term rental company in the world, even while they own only technology and no physical properties. 



Dry January Dries Up Business
My wife, Karen, and I are roughly 100 days from being empty-nesters. Our youngest, Seppi, is heading off to Northern Arizona University (go Lumberjacks!)
 
To celebrate we decided to go to London over spring break. Major League Baseball was leaving Phoenix early, and we decided we had to do something other than watch baseball. 
 
One of the great things we did was tour Fuller’s historic Griffin Brewery. It’s been in operation for more than 350 years. The Fuller family has owned it since 1828. As it turns out, we were one of the last tours to take place while the Griffin was a family brewery. The week after we left, the Fullers sold the brewery to Asahi. While articles noted the family wanted to focus on running its 900 hotels and pubs, staff at the brewery and adjacent pub had stories of disruption to tell. 
 
Our guide and wait staff pointed to England’s Dry January movement. The concept of not drinking alcoholic beverages during January was intended to help millions of people reset their relationship with alcohol and get healthier in general. As it happens, a great deal of people participated. January 2019 was a terrible month for Fullers. The impact to the brewery and, I’m sure, many other alcohol related businesses, was severe. 
 
In addition, Britain recognizes that craft breweries are big business. There’s a travel component for markets with a concentration of breweries. Britain taxes craft brewers at 50 percent of what their large commercial counterparts pay. This gives the upstarts a competitive advantage and lets them offer their product at prices comparable to the big boys – like Fullers. This means more taps at pubs are pumping out non-Fullers products. 
 
One dry month and a couple of taps lost to new competitors doesn’t force a company to sell. But an overall change in drinking habits and a shifting relationship with industrial brewing among core customers can pressure a family to reinterpret its profit centers and its core business model. In the end, the Fuller family is walking away from a profitable, beloved brewery. 
 
International Issues Impact Our Industry
Unlike Expedia reinventing how we sell rooms to our customers, or Lyft changing how guests get to and from our hotels, we need to look at external disrupters (not necessarily technology) that can impact our core business: selling hotel rooms. The latest competition might not be a new distribution model or Mary Jane renting out her downtown flat on the weekends for extra cash. It can be Holodecks and self-driving hotel rooms that nest into a larger structure when not moving. Yes, that’s a thing. 
 
And while those disruptors may be a little farther out on the horizon, immigration issues aren’t. Regardless of where you stand on issues like immigration and trade wars, recent changes and concerns regarding U.S. border security are disrupting our business. 
 
While many parts of the world are seeing a boom, U.S. tourism is in a slump that started in 2018 and will continue this year.

For places like Colorado, where the primary business is tourism, this impacts hotel rooms along with attractions, small business and, of course, restaurants. Even the marijuana stores in Denver are seeing an effect. Foreign travelers on holiday tend to spend more and be more high-price tolerant than domestic vacationers. They often represent growth opportunities local travelers can’t. 
 
While many parts of the world are seeing a boom in tourism, U.S. tourism is seeing a decline that started in 2018 and is expected to continue into this year.
 
One big market (and guest population that’s often seen as disruptive) is Chinese travelers. We’ve seen a dramatic decrease in their impact, including new regulations on how much money citizens can take with them when they leave the country. 
 
U.S. travelers are seeing airfares to Europe and Asia hit relative lows. Thanks to a strong dollar, travel to London and other places that were out of reach a couple of years ago is often less expensive than a trip to hot U.S. cities like Boston or San Francisco.
 
Call it a cycle, call it a phase, but to many of us this dramatic change in travel patterns is disruptive, particularly as we approach the typically lucrative summer tourism season. 
 
What is your business doing to get those dollars back? How will this shift impact your technology budget?
 
Closed borders and tariffs don’t just affect our guests. Many hotels rely on an immigrant workforce at every level of hotel operation. A drop in the number of Visas will leave many hotels scrambling to fill positions. Does your hotel rely on a foreign or immigrant workforce to bulk up the team during the busy months? Do your restaurants rely on produce harvested by this workforce? 
 
Green Efforts Require Greenbacks
Karen, my wife, is focused on moving our household waste from landfill to recycle. It seems each week we put out 2-3 blue recycle cans, and only one half-full trash can. It’s a visual representation of being green that makes us feel better about ourselves as we leave for work on pickup day. Hotels are also taking a cue from guests and providing recycling in rooms and throughout public areas. Many municipalities mandate recycling. Some build the fees for disposal in such a way that it costs more not to recycle. 
 
The disruption is this: Recycling almost always requires sorted and clean recyclables. Americans are rarely cleaning their potato salad containers and milk cartons prior to throwing them into comingled bins. (Be honest, do you rinse your soup cans before you toss them?) For decades the U.S. and Canada has shipped its recyclables to countries in Asia, including China. These places now say they can no longer take our water bottles and beer cans. 
 
Many markets are already seeing these additional costs for recycled goods make virgin aluminum, cardboard and glass more financially attractive. What will our curbs look like in the coming years when we not only have to sort our paper from our plastics and metals again, but pay to recycle? How will hotels handle the demand to be green when it requires a refuse area double the size of what we currently have, and a staff to make sure things are clean and all sorted into the appropriate containers?
 
 
Other Disruptions 
  • Amazon partnering with Kohls so you can return online purchases locally 
  • Contactless credit cards are shipping out to consumers 
  • CBRS, 5G and non-licensed LTE are things now 
  • Millennials are starting to get married, have kids, and worry about privacy 
  • The U.S. is starting to see more energy from renewable sources produced on a daily basis than from fossil sources 
  • Delivery companies are enabling restaurants and grocery stores to reach further than just brick and mortar 
  • Google Maps for hotel search (and flights for airfare search) is scary efficient, and scary good. 

©2019 Hospitality Upgrade 
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