How Hotel Operators can Survive and Thrive in an Environment of Constant Change

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July 01, 2019
Feature
John Burns - john@burns-htc.com

On the business side, hotel brands are consolidating, while a nearly endless stream of new brands are appearing. Challengers – be they home sharing, vacation rentals, lifestyle accommodations, hostels that look like hotels (or hotels that look like hostels) both broaden and blur lodging choices. On the distribution side, while hotels were among the first merchants to offer online sales, the industry has subsequently experienced a succession of marketing and financial challenges. Adept third parties (OTAs) now compellingly offer hotel accommodation. New intermediaries (like metasearch engines) draw travelers from our websites while seeking advertising revenue from us, and search engines evolve into one-stop reservation options. 


On the business side, hotel brands are consolidating, while a nearly endless stream of new brands are appearing. Challengers – be they home sharing, vacation rentals, lifestyle accommodations, hostels that look like hotels (or hotels that look like hostels) both broaden and blur lodging choices. On the distribution side, while hotels were among the first merchants to offer online sales, the industry has subsequently experienced a succession of marketing and financial challenges. Adept third parties (OTAs) now compellingly offer hotel accommodation. New intermediaries (like metasearch engines) draw travelers from our websites while seeking advertising revenue from us, and search engines evolve into one-stop reservation options. 


Additionally, the systems relied on to operate hotels (and hotel brands) are undergoing fundamental changes. Cloud-based systems (and recurring monthly fees rather than occasional purchases) are replacing aging technologies, vendors are consolidating, new vendors and never before seen (or needed) technologies and services now vie for our selection and budgets. 


"I have been a hotel reservations and technology consultant for more than 27 years, and in the hotel industry for longer than that. I’ve never seen such pervasive, meaningful and urgent change in our business environment as I see today."


Managing Change


Change is all around us. It’s now a constant in our business lives. What’s the best strategy to deal effectively with this ever-changing business environment as we work to keep our own hotels successful? I suggest the following: 

  • Be aware of the relevant and significant changes that are taking place 
  • Relevant – directly impacts the hotel’s near- and long-term success 
  • Significant – can significantly enhance (or threaten) the hotel 
  • Analyze the changes you judge to be relevant and significant 
  • Be selectively responsive 
  • What is the positive (or negative) Return on Investment – ROI – of acting (or of not acting)?
  • Can my strategic business partners – my lodging brand, my major and most trusted vendors, etc. – help complete the change?

 

1. Be Aware 

Change is occurring everywhere. Some is deeply meaningful to us in hotel operations. Some is just distracting noise. Identifying and addressing the impact of the changes taking place in first lodging supply and second, systems and vendors, may help us break through that noise to judge significance and opportunity.

A Time of Change in Lodging Supply

Brand Consolidation
Lodging brands are either acquiring or merging at an unprecedented rate. Noteworthy transactions include:


Accor Hotels acquires Fairmont/Raffl es/ Swissotel, 25Hours Hotels, sbe Entertainment, 21c Museum Hotels, Mantra Group, Movenpick Hotels and Resorts, and Atton Hoteles

Auberge Resorts Collection merges with Grace Hotels

Choice Hotels International acquires WoodSpring Suites

Hyatt Hotels acquires Two Roads Hospitality (including Alila, Destination Hotels, Joie de Vivre, Thompson and tommie), and Miraval Wellness Spas

IHG acquires De Vere Hotels, Kimpton Hotels, Principal Hotels, Regent Hotels, and Six Senses Resorts

Jin Jiang acquires Radisson Hotel Group LVMH acquires Belmond

Marriott acquires AC Hotels, Delta Hotels, Gaylord Hotels, Protea Hotels, Moxie Hotels, and Starwood Hotels; Marriott Vacations acquires ILG/ Internal International

Minor acquires NH Hotels and Tivoli Hotels

Oyo Hotels & Homes acquires Islands and @Leisure Group

Wyndham acquires AmericInn and LaQuinta



Impact
The impact of this consolidation is profound and widespread. Acquiring organizations become larger, with increased marketing budgets, expanded loyalty programs and fuller arrays of lodging style options for prospective guests. Individual hotels (and guests) both benefi t from the brand’s organizational size but risk becoming smaller and smaller fi sh in increasingly larger ponds.

Emergence of Soft Brands
Soft brands are organizations with which independent hotels can affiliate in order to receive visibility and prominence while benefitting from the soft brand’s marketing/sales activities and reservation processing infrastructure. Until recently, soft brands were the exclusive domain of marketing-focused membership organizations such as Preferred Hotels and Resorts, Small Luxury Hotels of the World and The Leading Hotels of the World.

Recently soft brands have surged as traditional lodging brands have decided that this area offers an opportunity for growth by forging relationships with independent properties. Until recently the only “hard brand” participant was Starwood’s Luxury Collection.

Their proposition is appealing – maintain the independent hotel’s identity and style (with generally modest brand standard requirements) while enjoying the brand’s sales and digital marketing efforts, operations support, reservation and CRM infrastructure, and often its sizable loyalty program, all for about the brand’s standard franchise fees. Brand-operated soft brands, appealing to established (and increasingly, to new-build) independents, now include:

Accor Hotels – MGallery, and the House of Originals (in partnership with sbe Entertainment)
Choice Hotels International – Ascend Collection
Hilton – Curio Collection, Tapestry Collection
Hyatt Hotels – The Unbound Collection
Marriott – Luxury Collection, Design Hotels, Autograph Collection, and Tribute Portfolio
Wyndham Hotels – Trademark Collection

Impact

Brand-operated soft brands are a win-win-win. Independent hotels gain brand benefi ts through affi liation, loyalty program participation, and distribution quality and breadth, while presenting a unique identity and style. Brands expand their hotel inventory (and revenues) and offer qualitycontrolled, non-standard lodging. Travelers experience ease in booking, loyalty privileges, and confi dence in product quality while enjoying a non-brand lodging experience. Ironically, the most threatened by this soft brand expansion are, arguably, the traditional soft brands themselves as they struggle to match and exceed the benefi t of brand-operated soft brand programs.

Brand Product Diversification
The typical hotel built 30, 20 or even 10 years ago is not the hotel being built today. Lodging specialization has emerged and substantially evolved. For example, midscale business travelers were offered formats like Courtyard by Marriott and Hilton Garden Inn. Longer-than-average stays prompted development of extended stay hotels, exemplified by brands such as Marriott’s Residence Inn, Accor’s Adagio and Extended Stay America. 

The traditionally formal luxury segment added more relaxed lodging versions with entry into the marketplace of Alila Hotels, Aman Resorts, Auberge Resorts, Banyan Tree Hotels, Jumeirah, Montage Hotels, One&Only Resorts, and Six Senses, among others, each striving to define a distinctive style and personality

Before there was a category and a name for it, there was W Hotels. Conceived by Starwood, W Hotels broke the conservative full-service mold by creating properties with a character that was strong, vibrant, loud and most of all, fun. W brought different into the mainstream, repeatedly demonstrating the appeal of hotels that broke with tradition. The brand played a leading role in prompting a new generation of what were initially termed boutique brands and properties (and now widely referred to as lifestyle hotels), such as:

Accor: Jo&Joe, Mama Shelter, sbe, and Tribe
Best Western International: Aiden, Glo, Sadie, and Vib
Hilton: Canopy Hotels, Motto, Signia
Hyatt: Andaz, Exhale, and Hyatt Centric IHG: Avid Hotels, EVEN Hotels, Hotel Indigo, and Voco
Marriott: AC Hotels by Marriott, Aloft, Bvlgari, Element, Design Hotels, EDITION, and Moxy Hotels
Radisson: Radisson Blu Wyndham: Tryp


While major hotel companies were launching lifestyle brands, entrepreneurs – some seasoned hoteliers, some newcomers to lodging – were creating a breathtaking array of new concepts and brands such as:
Arlo Hotels, Bode Hotels, CitizenM Hotels, Dream Hotels, Fauchon Hotels, Leonardo Hotels, Life House Hotels, Montage Hotels, Nyx Hotels, Pod Hotels, Shinola Hotels, Soho House, The Origin Hotel Collection, and Yotel, to name just a few.

Impact
New style-forward properties, often with 100-250 rooms situated in a city’s central business district, have reinvigorated the lodging industry worldwide. They prove hotel guests are interested in, and willing to patronize, high-personality hotels.

What spurred this tide of lodging concept innovation and development was a combination of factors, including fatigue with traditional lodging options, internetdriven interest in product style and personality and the desire to share experiences online with friends. The need to respond positively and aggressively to growing competition from non-traditional accommodations like vacation rentals, shared economy style lodging vendors and Airbnb, also played a role.

These new competitors offered a better experience – nonstandard accommodation combined with the promise of a welcoming host and a facilitated connection with the surrounding neighborhood.

Worldwide, today’s lodging choices are more diverse, more specialized and more style-forward than at any time in the past. 


New Business
Configurations A quiet revolution has taken place in the last decade as traditional hotel companies have reimagined and restructured their properties to add style and micro-market focus. But lodging industry change extends far beyond the shape of the property and the style of service delivered. Accor, Hyatt and Best Western International provide interesting and thought-provoking examples.

Expanding hotel (and non-hotel) services
Under the leadership of CEO Sebastien (add accent) Bazin, Accor Hotels has pushed every boundary, prompting far-reaching reconsideration of what it means to be a hotel company. It has:

Acquired Fairmont Raffl es Hotel Group, then appointed FRHI executives to manage much of Accor’s top tier lodging activity

  • Acquired Atton Hotels, Mantra Group, Mantis Group, Movenpick Hotels and Orbis Hotels
  • Invested in 25Hours Hotels, Banyan Tree Hotels and 21C Museum Hotels, brought these distinctive brands under the Accor umbrella, then launched Tribe Hotels
  • Launched the trend-setting Mama Shelter brand which blurs the line between limited service hotels and hostels
  • Created Jo&Joe, a house open to neighbors and travelers alike • Added short-term home rentals by aggregating several agencies into Onefi nestay.
  • Declared that a hotel could and should be an active vendor to and participant in, its neighborhood
  • Built its electronic distribution expertise by acquiring Availpro and Fastbooking, merging the two into D-Edge
  • Acquired 50 percent ownership of collaborative workspace operator Nextdoor
  • Bought ResDiary, a dining reservations and table management software operator
  • Acquired concierge, event management and experience delivery companies

Expanding Inventory Options
Two long-established hotel companies made unconventional moves in the past nine months to associate themselves with hotel membership organizations who bring strong incremental inventory to the relationship. Hyatt Hotels formed what it termed an exclusive relationship with Small Luxury Hotels of the World that allows Hyatt loyalty program members to earn and redeem points at more than 165 participating SLH properties. Soon after that, Best Western International acquired Frankfurt-based WorldHotels, forging a close relationship with more than 300 upscale hotels around the globe.

Impact
As a result of these efforts, patrons have increased options. Hotels within the brand get new guests. The brand has the opportunity to attract previously uninterested travelers and continue to serve them as their interests evolve. For hoteliers in other brands, these actions create license and pressure to consider unconventional, creative tactics.

New Competitors
Within the last 70 years, lodging options beyond traditional hotels have expanded (and improved) remarkably, evolving from roadside cabins and motels to include campgrounds, timeshares, vacation rentals, hostels and shared economy lodging.

Hostels Like You Never Imagined Them
The term hostel calls to mind low-cost, Spartan, shared sleeping facilities filled with youthful globe-trotting backpackers. While these still operate in large numbers, hostel operators have become much better organized. They’ve gone online and made their facilities appealing and easy to book. Now they’re adding private bedrooms and promoting hostel use as a lifestyle, rather than an economic choice.

This means hostel owners can extend the range and comfort of sleeping options, raise rates and place additional emphasis on forming and supporting the user community. Some are improving dining and beverage options, offering more comfortable common facilities and adding educational resources and innovative cultural programs.

Fast growing operators in this sector include Generator (which is expanding from Europe to North America with a hotel-like product in Miami), Pod Hostels, Selina, and arguably, facility operators such as The Student Hotel. Companies such as Cloudbeds offer these and more conventional hostel operators help with their electronic presentation and bookings. Some hotel companies have capitalized on this trend with their own flexible, hostel-like options, such as Accor’s Jo& Joe and Motto by Hilton.

Vacation Rental
The timeshare industry quietly developed a global presence as an adjunct to, rather than a competitor with, traditional hotel facilities. Points of differentiation included:
  • Positive: Larger facilities, convenience for families and larger groups, comfortable for longer stays, economical.
  • Negative: No always-open front desk or service staff, inconsistent quality standards, difficult to book, numerous additional fees.
This has changed. First, small, loosely affiliated timeshare operations consolidated and evolved into vacation rentals. Many of these were acquired and unified by organizations such as VRBO, itself now a division of HomeAway which is owned by Expedia Group. They’ve moved decisively to address shortcomings and promote the positive aspects of hotel-competitive vacation rental units.

This consolidation came as two vacation rental membership giants emerged – Interval International, (which later became Interval Leisure Group, now owned by Marriott Vacations Worldwide) and Wyndham Destinations, whose assets include RCI. And it came as online travel agencies, motivated to offer a wider breadth of lodging options, began to prominently feature vacation rental options in their accommodation displays.

“Sharing Economy” Accommodations
When Brian Chesky and Joe Gebbia decided to make some extra money by renting several air mattresses on the floor of their San Francisco apartment in 2007, no one could have guessed it would lead to Airbnb. Hotel operators generally minimize the impact of Airbnb and its competitors, but their competitive strengths could become considerably more apparent during the next economic recession. Right now, ironically, Airbnb is striving to itself source hotel accommodation for presentation and booking on airbnb.com. 

This hotel inventory access is being accomplished through several initiatives, which include an arrangement with channel manager SiteMinder and direct relationships with hotel brands, such as Rotana. Other interesting developments include Airbnb’s acquisition of HotelTonight and its implementation of a partnership with WeWork.

A Whole New Category
At a time when new lodging concepts and fresh faces are constantly emerging, Ritesh Agarwal’s six-year-old company OYO Rooms (OYO stands for On Your Own) grew with breathtaking speed in his native India before establishing operations in countries in Asia/Pacific, the Middle East, Europe, and now in the United States. 

Recently rebranding itself as OYO Hotels & Homes and operating multiple divisions – Oyo Rooms, Oyo Flagship, Collection ‘O’, Townhouse, Silverkey, and Oyo Living, the company offers some 515,000 rooms worldwide. Primarily focused on small, budget-category independents, OYO offers connectivity, reservation technology and a basic operations platform, accompanied by operating standards and operator support.

Agarwal attracted small hotel operators and landlords in India, equipped their facilities with simple-to-use technology, processes and support, and then presented OYO online in an appealing and reassuring manner. OYO has captured the attention of travelers as well as private equity firms who have invested $1.7 billion, including some $800 million from Softbank. Airbnb recently committed $100-200 million and will include OYO accommodation on its availability displays.

Impact
These aren’t hotels in the traditional sense, but they are attracting travelers’ attention. The demarcation line between these products is blurring, driven in part by online travel agencies who strive to offer diverse, distinctive products. 

A generally strong global economy over the past decade, which led to steady growth in travel demand, has largely shielded the traditional hotel industry from the economic effects of substantial, well-organized alternatives. Economic impact aside, there’s no question these new competitors and sharing economy leaders have infl uenced the hotel industry. 

Travelers are rethinking their relationship with accommodations. The promise of a welcome, knowledgeable host, a home-like (rather than hotellike) lodging environment, ready and informed guidance on neighborhood amenities and assistance with travel planning, attraction visits and experience participation has recalibrated many travelers’ expectations. This is a signifi cant adjustment to the entire travel experience. To their credit, hotel operators have recognized, and in a growing number of cases responded, to these new interests and expectations. 

At the leading edge, hotels’ character has changed in response to challenges from the nontraditional lodging sector. Comfortable, inviting common areas have replaced austere lobbies, staff deliver a more relaxed welcome, furniture is suitable for both work and play, fast, easily accessed Wi-Fi is available, happy hours are offered, light meals and snacks are readily available, background music is more upbeat and you might catch an occasional music or cultural performance. Neighborhood activities information is available on the hotel brand’s app.

A Time of Change in Hotel Systems and Vendors
A remarkable amount of change – some possibly predictable, some utterly unexpected – has occurred among hotel technology vendors. The systems and services, and their vendors have experienced a similar substantial and unpredictable upheaval. The result for hotel operators is a mix of confusion, consternation and delight as these system-related challenges and opportunities appear for their consideration. The hotel of today is defi nitely not the hotel of 30, 20 or even 10 years ago. 

Technology Vendor Consolidation
Hotel operators typically work with long-installed systems. In this business we install a system, become proficient in its use and retain it until a compelling, unavoidable reason prompts its replacement. Along the way, we develop trust in and comfort with our systems’ vendors. Recent hotel systems history has seen an impressive number of acquisitions, consolidations and roll-ups in that vendor community:

Airbnb acquired HotelTonight, invested in OYO
  • Amadeus acquired Newmarket International Sales & Catering (including MTech HotSOS, iTesso PMS, TravelClick (who had itself acquired Blue Square Studio, EZYield, Rubicon, ZDirect, TVTrip and Digital Alchemy); establishes Amadeus Hospitality
  • Booking Holdings acquired Fareharbor, HotelsCombined, OpenTable, Buuteeq, HotelNinjas and PriceMatch
  • Cendyn acquired GuestFolio
  • Expedia Group acquired Trivago, Wotif, Travelocity, Orbitz, and HomeAway • HeBS Digital’s owner, Hotel360 Technologies, acquired Serenata IntraWare
  • Hotelbeds Group acquired Tourico Holidays and GTA
  • Infor acquired EasyRMS, Vivonet and ReServe International
  • Jonas Software acquired Springer-Miller PMS, Bookassist, Multi-Systems Inc. PMS and Leonardo; creates Jonas Hospitality; launched Jonas ARC integration platform
  • OBASA Hospitality acquired IBC Hospitality Technologies
  • Oracle acquired MICROS Solutions
  • Sabre Hospitality Solutions acquired InnLink, Genares and TRUST International
  • SAS Institute acquired IDeaS (which then acquired Smart Space Strategy)
  • Shiji Group acquired Hetras, ReviewPro, SnapShot, Touchpeak Software (to form Shiji Payment Solutions), Hi-sense, and ICE Portal • RateGain acquired DHISCO
  • TravelTripper acquired Pegasus Solutions 
Impact
Hotel operators rely on vendor partners to provide fully functional, highly reliable systems or system-based services. Regardless of the ultimate outcome, the short-term effect of all of this merger and acquisition activity on hotel operators is uncertainty – the worry that the new system/service/vendor will be less acceptable than the old one.

A Growing Hotel Provider - Shiji
Oracle and Sabre are ‘household names’ for hotel operators. Shiji Group is not – that may be about to change.

The Beijing Shiji Information Technology Company – Shiji Group – was established in Beijing, China in 1998. Initially the company focused on the Chinese domestic market, offering IT products and services in four verticals – hospitality, retail, F&B and entertainment. Through a combination of acquisitions and new development, Shiji amassed and now offers five hotel central reservation systems and seven hotel property management systems domestically in China. While this number of product lines is unusual, the firm’s management believes that they receive better financial performance from their assets when they compete against each other.

In addition to selling its proprietary PMS and CRS technology, Shiji was at the same time the exclusive Micros Systems sales and service representative in China, an arrangement that ended shortly after Oracle’s 2014 acquisition of Micros. That was a signifi cant factor in Shiji deciding to enter the international hospitality technology marketplace. 

Through expanding the focus of several of its existing hospitality business units to a global scope and acquiring a still-growing number of international hospitality assets, Shiji Group currently offers:

StayNTouch – cloud-based PMS
Infrasys – cloud-based POS Shiji Distribution Solutions – channel management
Concept – activity management
Shiji Payment Solutions – payment facilitation
ICEPortal – online media contact management
SnapShot – hotel data aggregation/business intelligence
ReviewPro – hotel/restaurant reputation management
Shiji Professional Services – project management, implementation and consulting

A major obstacle for hotel technology vendors aspiring to move from regional to global operations scope is the provision of local sales and user support. Led by founder, Chairman and President Li Zhongchu and COO Kevin King, Shiji Group has taken the bold move of opening a global network of sales, service and support offi ces, now totaling 42 locations worldwide.

Shiji’s statistics are impressive – its 70 subsidiaries serve more than 60,000 hotels, more than 200,000 restaurants and more than 400,000 retail outlets. The company has received two sizable fi nancial investments from Alibaba, the fi rst of $460 million US for a 15 percent share of Shiji and recently a second of $468 million to acquire a 38 percent share of Shiji Retail.

What may ultimately prove to be Shiji’s biggest differentiator from other hotel system vendors is its intense focus on analyzing the data that its systems accumulate and applying lessons learned from that data. 


Emerging Technology Vendors
A steady stream of new vendors – and in some cases entirely new categories of vendors – offering hospitality software and services has entered the marketplace in the past several years. As this is occurring, several companies are developing substantial, significant portfolios of hospitality software/service options to rival those currently available from the largest hotel technology suppliers such as Agilysys, Infor and Oracle Hospitality. The following three companies are developing multicomponent platforms which potentially hold real appeal for hotel operators when the individual platform components are strong, when they are integrated with one another, when they steadily meet marketplace and customer needs, and when they are backed by an effective support program.

Amadeus Hospitality
Amadeus – still largely known in the hospitality industry for the operation of the Amadeus Global Distribution System (in competition with Sabre and Travelport) – is acquiring and aggregating assets into its Amadeus Hospitality division, which includes a latestgeneration CRS, cloud-based and on-premises PMSs, a top-tier sales and catering system, on-property service management system, plus other services including its recent major acquisition, TravelClick.

Jonas Hospitality
Jonas Hospitality was launched in 2018 by Jonas Software and its parent company, Constellation Software. While Jonas Software does not have a long background in the travel sector, it has offered an industry leading management software solution for the club industry since 1990. Through acquisition of Springer-Miller (including Atrio), Multi-Systems, Inc. (MSI), BookAccess and most recently, Leonardo, the company is equipped with strong assets and focused on becoming a major competitor in the hospitality marketplace.

Shiji Group
Shiji has been a leading presence for the past two decades in China’s hotel, food and beverage and retail point of sale technology sectors. The Shiji Group combines multiple PMSs, CRSs, point-of-sale systems, as well as other assets, into an impressive portfolio. Now equipped with available funding from Alibaba of nearly $1 billion, Shiji has moved rapidly to assemble a diversified array of international hospitality software and service options including the StayNTouch and Hetras PMSs, Shiji Distribution Solutions, Infrasys (PoS), Concept Software Systems (golf, spa and activity management system), SnapShot, ReviewPro, Shiji Payment Solutions, Shiji Professional Services, and most recently, IcePortal.

Impact
These acquisitions and aggregations show many organizations’ bold strategic intentions to create contemporary portfolios of somewhat-to-extensively integrated systems/services for hotel operators worldwide. These new organizations stand to provide a healthy competition to established system, service and platform operators. In doing so, they will generate further technology development, uncertainty, competition and possibly superior solutions.

Emerging/Evolving Software Trends
A remarkable amount of change – some possibly predictable, some utterly unexpected – has occurred among hotel technology vendors. The systems and services, and their vendors have experienced a similar substantial and unpredictable upheaval. The result for hotel operators is a mix of confusion, consternation, and delight as these system-related challenges and opportunities appear for their consideration. The hotel of today is definitely not the hotel of 30, 20 or even 10 years ago. 

Mobile First/Mobile Only
The pervasiveness of mobile devices in day-to-day life has forced change in how hotel operators interact with both guests and staff. Increasingly, guests plan and buy travel using a mobile device. Usually it’s a cell phone, not a tablet. This forces us to rethink how we interact with guests, beginning with how we present the property online, continuing through every phase of contact, including interaction with on-property colleagues.

In addition to booking, these devices are now the delivery mechanism for pre-arrival communication with guests. This presents opportunities for upsell, add-ons, special requests, service reservations and much more. PMS vendors have generally fallen short in enabling this hotel-to-guest conversation. That’s ironic given that these systems are the repository of much of the information (including guest data) that populate this communication.

A new category of third-party service providers has emerged to address this opportunity. In doing so, they’ve required hotel operators to evaluate yet more software/service choices. 

I am referring to guest experience management (GEM) technology – software that enables sophisticated pre-arrival messaging, desk-free check-in (in some cases, key-free) guestroom access, in-stay messaging (“Don’t forget that Happy Hour starts in 30 minutes”) coupled with issue management software and postdeparture communication facilities.

A remarkable number of vendors, each addressing some (but not usually all) of these GEM services, has emerged, including Alice, Allin, b4checkin, Beekeeper, Cendyn, Crave, DigiValet, Fingi, FCS, Fuel, GuestDriven, GuestWare, Haptik, HotSOS, iLumio, Intelity, iRiS, Ivy, Knowcross, M-Hospitality, Monscierge, Nor1, Nuvola, Oaky, Precipia, Quore, Serenata, Zingle and Zoottle.

Mobile devices have also changed the way hotel operations personnel – from line staff to senior management – access data. From room status to financial performance, the preference is increasingly for instant access via mobile devices. Again, this requires examination and selection of complicated software services in an environment where similar decisions for other services compete for time and attention.

Direct Distribution
Direct booking is how hotel reservations were first created. In the 20 or so years since hotels first offered online booking, numerous additional entities – intermediaries – have evolved to persuade the potential guest to reserve hotel accommodation using their website. They deliver reservation data to the hotel later for processing and fulfillment.

Over the years, hotel operators realized that:
  • The delivered reservation data contained much less detail about the guest than the hotel would have collected through direct booking.
  • Some intermediaries believed that the guest was equally (or more) their customer than the hotel’s. The hotel’s net revenue was often and increasingly, substantially lower than when the guest booked with the hotel directly.
Those factors have prompted hotel operators to expand their efforts to capture reservations directly. In addition to protecting their revenues, their motivations included the desire to create an enduring relationship with the guest, gaining repeat stays at the property (and within the brand). Additionally was the wish to collect guest data that can be used to personalize the shopping, booking, pre-arrival, on-property and post-stay conversation.

With that in mind, hotels are striving to:
  • Strengthen presentation of the hotel on their website – to ensure it contains multiple attractive photos coupled with one or more video clips, and that descriptions of common areas, guestrooms, amenities and services are appealing and accurate.
  • Determine what online advertising, including metasearch engine participation/ advertising is worthwhile
  • Determine the visibility generation and reservation production potential of social media including Twitter, Instagram and Facebook, the latter now supporting direct hotel bookings via SiteMinder’s BookingButton technology
  • Manage room rates to ensure they’re appropriate for the competitive situation and the forecasted demand, and that rate parity is maintained so the hotel isn’t disadvantaged by intermediaries
  • Obtain, and fully apply personalization tools throughout contact with each guest, from initial booking to departure
  • Ensure that guest comments on the property are read and responded to appropriately

Online Travel Agencies

Both the services available from online travel agency services and the relationships between hotels, travelers and OTAs continue to evolve rapidly. OTAs have consolidated at the global operations level to form what’s often termed a duopoly, consisting of Booking Holdings and the Expedia Group.

These two organizations have become major forces in hotel accommodation sales. Recently PhocusWright estimated that direct bookings accounted for 49 percent of U.S. hotel and lodging online gross bookings in 2018 versus 51 percent for OTAs. They predict that hotels will rise to a 50 percent share by 2022.

The influence and advertising spend of the two leading OTAs is remarkable. On March 14, Kevin May reported in PhocusWire that online travel agency giants spent $10.6B on marketing in 2018. “The power of the platforms is huge: Expedia Group and Booking Holdings splashed out a record amount on customer acquisition during 2018. This marked an increase of 8 percent by the two organizations on their marketing activity in 2017, when they collectively spent some $9.8 billion,” May wrote.

Booking Holdings and Expedia Group have both aggressively diversified their accommodation offerings, addressing travelers’ interest in non-conventional lodging options. In doing so, they offer convenient access to competitive alternatives to hotels. The two leading OTAs have developed and deployed loyalty programs (sweetened by hotelprovided rewards) in an effort to become the primary party in hotel shopping and selection. Their promise of being the most convenient one-stop shop for most travel service has been further strengthened by their move into offering extensive activities booking.

UNDERSTANDING OYO HOTELS & HOMES

Airbnb is not a hotel brand. OYO may not be either, but like Airbnb, OYO is poised to be a significant disrupter in the global accommodation marketplace. With 515,000 guestrooms in more than 18,000 properties (an average of about 30 rooms per property), OYO Hotels & Homes is a significant lodging operation. 

The company focuses primarily on budget accommodation (with some economy and mid-market brands). Their model is to lease entire buildings that they then renovate under very specific OYO standards. Then they directly operate their properties, which are now located in 11 countries: India and China (its two primary markets, with a co-headquarters situated in each) plus Indonesia, Japan, Malaysia, Nepal, the Philippines, Saudi Arabia, UAE, UK and USA.

The OYO concept was formulated in 2011 by then 18-year old Ritesh Agarwal, the OYO founder and CEO, in Gurgaon, India. It launched in 2013 with one fully managed building and has grown with remarkable speed. From the outset the proposition was to offer very affordable lodging, delivered with specific and tightly monitored standards, in the process achieving occupancy levels and rates far above the facility’s previous performance and generating significantly greater profits for the property owner.

The OYO portfolio consists of several brands - OYO Rooms, OYO Flagship, OYO Home, OYO Townhouse (more upscale, targeted to millennials), Palette Resorts by OYO, OYO SilverKey (corporate apartments) and OYO Total Holidays.

The majority of these brands operate only in the Asia Pacific region although the company is promoting its Townhouse brand in the United Kingdom (where they now have over 30 properties in operation) and in the United States, where they have established a beachhead in Texas, with an administrative office in Dallas and several townhouses already open and operating in Austin and Dallas. 

The company’s most recent expansion announcement was the acquisition of Europe-based @Leisure Group for €360m. The move gives OYO access to an extensive and diverse inventory of rental properties across Europe.

OYO has used technology extensively since the company’s outset. Analytics are used to identify likely successful sites for OYO properties. Once open, property operations are facilitated by an OYO-provided cloud-based property management system (OYO OS) equipped with tightly integrated revenue management and guest profile management functionality. Regional revenue managers provide pricing guidance. OYO staff use a proprietary app dubbed Krypton for all aspects of on-property quality control. Extensive online training resources are supplemented by 26 OYO Skills Institute locations

OYO emphasizes its direct booking reservation path. The OYO app has been downloaded over 10 million times and includes access to OYO’s Wizard guest loyalty program. Although the direct booking proportion is not released, it reportedly contributed appreciably to the 75 million room nights OYO brands sold in 2018.

The proportion of direct bookings may or may not change with OYO’s newly announced relationship with Airbnb, which has committed between $100 million and $200 million in investment capital to OYO. That investment adds to substantial previously announced commitments, including one of $800 million in a September 2018 series E funding round which was led by the SoftBank Vision Fund and which included additional funding from several previous investors, investment funding that now exceeds $1.5 billion.

OYO Hotels & Homes executives say their goal is to become, “The mostloved hospitality brand in the world.” Clearly a lofty ambition, it is no less aggressive than its property implementation capacity which aims at converting 10,000 rooms per month to the OYO brand portfolio.

Other New Faces

As hotel operators endeavor to increase their direct bookings while maintaining productive relationships with online travel agencies, they must also be cognizant of a range of additional developments, such as the following:
  • Guest review management – This has become increasingly vital and time-consuming as the number of sites that host reviews grows. The pioneer in online travel reviews – TripAdvisor – has now become a hybrid, hosting reviews and serving as a booking site. The OTAs also host reviews, as do dozens of other websites. Hotel operators wrestle with questions such as What reviews should we read? How, and how effectively, are we responding? Are we learning from the reviews? Do we need assistance with review management, and from whom? Fortunately, hotels have seen the arrival of reputation management services – ReviewPro, Revinate and TrustYou are just three examples – who help organize review examination, response and analysis.
  • Metasearch sites – which display availability, rate and key-fact data from multiple websites – have become the most convenient way to identify and compare (especially on price) lodging options. Prominent-positioning the hotel (and a link to its own website) can result in more direct reservations. Major metasearch websites include Kayak (owned by Booking Holdings), Momondo (owned by Booking Holdings), SkyScanner, TripAdvisor, Trivago (owned by Expedia), and Wego. Prominent positioning in OTAs (which is mostly advertising-driven) usually results in good positioning in metasearch displays. Supplementary metasearch advertising participation is increasingly common, although the process is complex and adds further cost. The emergence of metasearch engines has forced hotels to again consider their level of participation in various OTAs and whether additional for-fee activity in one or more metasearch engines is essential and advantageous.
  • Google – The starting point for innumerable searches – including hotel accommodation – Google has recently taken a large step to being a key enabler of both searches and booking. The March 2019 Google Hotel Search functionality offers users informative data with which to assess and compare lodging options without the need to move to a metasearch engine or OTA website. The new Google capability may tip the balance between OTA-facilitated reservations and direct bookings, since users can launch a direct-to-hotel booking process from Google Hotel Search displays. Google’s increasingly prominent role in the lodging search and reservation process demands that hotel operators be aware of the function and the mechanics – including subscription to Google Hotel Ads – of prominent participation. 
  • Chatbots and voice appliances – Alexa, Google Assistant and Siri – are increasingly a person’s electronic assistant and their electronic concierge. But are they a facilitator of hotel reservations, a potentially important in-room guest communication/service asset for hotels, a nuisance, or worse? These questions remain very far from being answered. 


2. Analyze the Changes You Judge To Be Relevant and Significant
So far we have discussed the evolving hotel and lodging industry and the fastchanging hotel systems community that strives to provide the technology and services hotel operators require in order to survive and thrive.

But the changes that impact hotel and hotel brand operators aren’t confined to brand consolidation or innovation. They aren’t restricted to the systems and services in our traditional hotel operations toolkit. They extend far further, to also include changes that are reshaping society – smart mobile devices, the internet, social media, big data, and more.

Guests expect every phase of their contact with hotels – shopping, booking, arriving, staying, and departing – to be friendly, efficient and to happen in real time on a mobile device. Hotels operate in a more complex, competitive, environment than ever before. It’s one where both traditional and nontraditional competitors are deeply focused on meeting those expectations.

The daily challenge for hotel operators as they manage properties and brands is to be alert for changes. They may look like opportunities, threats or both. To stay on top of developments, I suggest the following:
  • Check one (or more) free-of-charge daily hotel industry electronic newsletters like HNN’s Daily Update, HN360-HospitalityNet, Hotel Marketing.com, Hotel Online, Hospitality Technology Resource, and Lodging Daily News.
  • Subscribe to Hospitality Upgrade to regularly receive the latest information from vendors and read their press releases.
  • Read newsletters, updates and bulletins created and distributed by the lodging brand, or if you’re an independent property, by the representation company that processes your reservations.
  • Participate in local industry events, like meetings organized by HFTP, HSMAI, MPI and the local hotel association. Report significant news your colleagues.
  • Ask other hotel operators about emerging system and service issues: how are they preparing for or dealing with them?
  • Talk to vendor representatives. Ask them what’s new, what you should know and how they can help you prepare for change.

3. Be Selectively Responsive.

Change, in all of the areas we have discussed, will impact you. The challenge and opportunity are to prepare to change when the need arises. Your challenge is to manage the change process – to expect it, plan for it, budget for it, and prepare colleagues for it. Your goal is also to minimize, if not altogether avoid, guest inconvenience.

The pace of change, and to an extent, its complexity may have increased, but some factors remain constant. Change is managed most effectively when the rationale for a chosen action is first, clear and second, shared with those who will be impacted.

There may or may not be a quantifiable return on investment. Easing competitive pressure or avoiding the downside of not taking action are also good reasons.

To prepare for change, research the issue and the possible actions thoroughly. Don’t rush. Ask if your strategic business partners – the lodging brand, major and most trusted vendors, industry colleagues – can help you successfully plan for and complete the change. We are deeply fortunate to be in a remarkably collaborative industry. We know we will evolve, and thrive when we work together.


©2019 Hospitality Upgrade 
This work may not be reprinted, redistributed or repurposed without written consent.
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