Hospitality; Foresee and plan for the future challenges and opportunities

By Giovanni Angelini       Updated Mar. 2017

All indications are that for the coming years, the growth in global tourism will outpace the growth in the global economy. How the hotel industry can maximize on this? No one has a crystal ball and at times predictions can be a dangerous game……but responsible executives/leaders must foresee and plan for the future. 

“Time for the hotel industry to get off its posterior and have a go at something totally new? Nothing ventured nothing gained…..”

Anticipating changes and identifying new opportunities has become an essential part of the business. An efficient “rolling” 5-10 years strategic plan (that drives actions/executions) can be a very useful guide for dynamic and passionate leaders/executives determined to grow the organization and prosper.

Do we let our imagination loose? Or try to look at the future based on our experiences, on new trends, on new technology, on innovations and on what are the travelers’/customers’ expectations?  Changing customers’ demands and new competitive threats are pushing hotels to plan and respond.

Very few professionals anticipated the speed of changes that took place during the past 10 years (2006-2016) and in all probability, during the next 10 years we will see much faster and dramatic changes.

First things first; The industry is in a period of significant evolution and of new opportunities. Leaders/executives are faced with a long list of important questions that have to be answered in order to plan and respond to demanding market needs;

• Where will future profits reside? And how to create value for shareholders?

• Will investments in new hotels generate acceptable NOI and ROI? And where does the capital come from?

• If new investments are not financially viable, what needs to be done to achieve economy of scale for a brand? 

• What are the company’s and leaders’ values and purpose? Where the organization is going?

• What will be the next big thing in hospitality?

• Who are the game-changers/next generation of brands? And how do those brands engage with their customers?

• What will shape the future of the hotel experience? Should brands invest in Customer Experience Management to identify and reduce friction in the whole customer journey in order to make it easier for customers to do business with the hotels?

• What’s needs to be done to increase direct online engagement with guests that will result in direct bookings? This is and will remain a priority for hotels.

• What innovations and technology to look/invest in?

• People will remain the most valuable asset of hospitality business and community but an efficient internal data/loyalty system has become a most valuable asset as well.

• Who will be the new disrupters and how to plan/answer the challenges that they generate?

• What will it take to achieve/maintain market leadership and prevent a brand to deteriorate over time into a commodity?

• What is the organization’s mindset on growth and on performance?

• Will the definition of getting a good night sleep change? Will neuro-technology change the way we sleep?

• What is the potential of the living space? And what the smart room of the future consists of?

And the list goes on……

One thing that we can take comfort in is that the “human touch” is part of the hospitality and it will remain as such. We are in the people business that by it’s very nature requires the personal touch. Technology cannot replace the human touch but in some cases it helps on providing for speedier response to customers and on maximising some of the business related revenue/profit centres in particular when it comes to handling of the 24 hour perishable inventory that hotels are facing every day. Right balance of Technology and Humanity is a must in order to respond to business cycles and trends.

Hotels are run by people, hospitality is delivered by people and a critical question for all of us is; “how much are we investing in our people in order for them to deliver quality hospitality?” Do we give our people the right tools and training to know how to respond to guests and to business, intuitively? (People-Process-Structure).

Innovation; much more will be needed in the future as compared with the past. There will be a new wave of innovations in all areas; marketing, sales, revenue, costs, profitability etc….Final objective of innovation is; become more efficient, generate more sales, avoid waste and unnecessary expenses and make that guest experience seamless and memorable. To be noted that innovation is not only new technology but processes as well. Innovation is what drives the organization mission and directions.

New Technology yes but what?; here the industry is faced with an enormous  challenge as there are so many new systems/products/solutions out-there, such as cloud computing, reservation platform hyper connectivity, own CRS?, high-tech amenities, virtual concierge, virtual reality entertainment, new ways to access to the Internet/communicate, personalised hotel rooms, confirmation and payment with DNA (finger printing), in-room entertainment, etc.  What will emerge in the future and how to plan/respond? It is critical in this area that technology is free to guests, it is user-friendly and it enhances the guest experience (Who would have believed 3 years ago of the existence of driverless cars/taxis and drone planes? The sky is the limit…..).  

While there are many aspects of new technology that the industry can look into investing in, perhaps the one aspect to focus on would be technology that creates a truly personalized stay experience for individual customers.  

Total hotel management revenue; this is an area where organizations must continue to be pro-active and investing in next generation hospitality revenue management is simply strategic/imperative and of course with proper training. A must to have an upgraded daily revenue optimization system addressing new measurements/metrics like who books what and when, making best use of supply & demand data, selling the ideal room to the ideal customer, revenue per available square foot/meter for the whole area (not only rooms), pricing, promotions, low/high demands, segmentation etc..

Mobile; engagement/platforms also at the forefront and huge growth in this area……mobile e-commerce, Chat-bot/s with artificial intelligence (AI) for customer service and reservations, DNA mobile check-in/payment, room selection/assignment, opening of room doors, mobile-friendly and video ads etc. And the impact of 5G mobile?………We simply cannot get away from investing in a wide range of solutions that creates service automation and immediate and personal engagement.

The rise of the Robots; for better or for worse, robots are on the way (no longer a gimmick) and all indications are that this trend is unstoppable, some countries will adopt more quickly than others. Most large hotel groups are experimenting with robots, with Japan leading the way as the first “humanoid robot” was introduced at a hotel in Japan in 2006. At present there are robots for concierge, front desk, porter, food server/room service, bartender, housekeeping, training etc. But will robots come at the cost of human interaction and human jobs? Are customers at ease with robots? Will robots improve the experience or should it be limited to non-guest contact roles? On planning for the future, robots have to be considered for some basic services.

All indications are that in future, travellers will have more choices than ever. More brands, more products, more destinations etc….. A survey done by Top Hotel shows that as of Dec. 2016 there are over 5,700 new hotels in the pipeline worldwide.

Future opportunities are clear; travel brands that will continue to innovate, that subscribe and embrace new and efficient/smart technology that makes best use of data, of distribution platforms, of loyalty programs, segmentations management, social media etc. will continue to provide positive customer’s experiences and generates new/additional business.

More than in the past, the industry in general has to do a better job in attracting, in training, in empowering and in retaining good talent. Compensation, incentives and flexibility/job satisfaction has to improve in most organisations. Labor costs will continue to increase in all areas/sectors.

Company Culture and Team Work; Retaining/increasing the competitive position in future requires a strong company culture that promotes/drives innovations and results. In order to prosper, hotel organisation’s needs to have an agile and unified team that has full understanding of the industry new trends and has in place an efficient process that continuously improves the products, the services, the designs, the comfort and most important are able to generate large volume of business via their own internal data/systems. In principle, “hotel organisations have to be/stay hungry”.

Large global brands, in effect they are distributions systems, will have an advantage over the smaller hotel groups/brands. Mergers, acquisitions, affiliations and combining of loyalty programs will continue in the future as it will be more difficult and expensive for the non-branded properties and for the small hotel groups to compete. Economy of scale will come into play. The rise of “super chains” with strong negotiating power will generate new and disruptive forces and change the way hoteliers think about their business. Small-medium size brands must clearly identify and maximize on their strengths and competitive factors in order to survive.

There is a need for continuous transformation in all areas in order to be competitive, evolve, innovate and respond to the latest and future business trends and expectations. The hotel industry has lagged behind in innovations and this has to change.

Will the branded travel networks such as TripAdvisor, Airbnb and others fill hotel rooms at much lower costs as compared to the hotel’s systems? And will they begin working directly with owners and developers of hotels? Will the traditional Management and Franchising agreements become too expensive for hotel owners? It is a fact that hotel owners are becoming far more savvy about HMA’s and Franchising agreements. Will hotels put their inventories on sharing economy networks? From When?

Importance of loyalty; an effective loyalty program is and will remain an essential part of hotel business (the backbone) allowing recognition, reward and communication with customers. The travel market will be defined by constantly rising customer expectations and the needs to exceed them. It is critical for hotel brands to continuously engage with both their existing clients and with new potential customers. Loyalty is always evolving and must respond accordingly. The key to loyalty is to get customers book the hotel directly, therefore it’s a must to keep the program and process simple and customer friendly. There’s some indication that in some cases the industry is moving away from points and more toward guest recognition, perks and experience.  Question: will convenience and value matter more than brand and loyalty?

Clear trends are that Franchising is on the increase at the expenses of HMA’s (note the present situation in the USA where 80% of all branded hotels are franchised versus 20% managed. It is anticipated that a similar trend will gradually expand to the rest of the world). Also note the potential of the “soft brands”. Hotel owners are becoming far more savvy about management/franchising agreements and best scenario here is transparency and when owners and operators are working in partnership toward their respective objectives.

Look good, Feel good and Longevity…….Travelers will put much more importance on the availability of wellness in hotels that they choose to stay in. Mental wellness-health and not only the old fashion SPA’s and outdated facilities. “Mental and emotional well-being” will become an expectation and a must to provide. Great opportunities for destination resorts to also look at the personalised prevention treatments and health enhancement programs.

Cheap and accessible flight tickets and a competitive airline industry, plus the low-cost carriers, means that more people than ever can afford to travel. Travel has become global and accessible. How hotel brands can maximise on this and respond to the cost-conscious traveler from present and from future source of business? What would be the perceived value of those travellers that want more for less?

Restaurant business within the hotels must also evolve and innovate as with the constant increase on operating costs and the ever increasing competition, profitability will continue to decrease. Can hotel restaurants survive and what it needs to be done? The present all-day dining concept is fading very fast and it has to be addressed. Specialty restaurants need economy of scale in order to survive and in most cases this is not happening.

Gradually hotels have to plan on putting in place the Gourmet Genomics where meals can be custom-designed with a unique diet and nutrition menu based on an individual’s DNA. Improving the health, the nutrition and fitness has become priority for most-, travellers in particular.

Success of hotel’s restaurants is normally based on the local community support and what are we doing to attract and retain this critical source of business?

Remote working opportunities and the global rising culture of virtual offices and co-working spaces  enable millions of workers around the world to tap into the global workforce from anywhere with internet connections.

Hotels will have to respond to the demand from the technological-minded, next generation travelers who are driven by a world immersed in technology and social media and who are determined to make the most of the world, live without fear to have deeper, more immersive and meaningful experiences.

The industry is more and more exposed to the evolving economical landscape and to the ever changing geopolitical situations around the world. Safety, security and violence issues are on the rise globally. However, despite perceived travel risks and uncertainty about the global state of affairs, travelers are growing savvier, and in many cases, more resilient than ever.

Also, the industry has to be prepared (covered) for cyber attacks and accept that travelers are wary on giving personal data.

There is an increasing shift towards responsible and sustainable tourism/travel and toward transparency. Sustainable tourism is a positive move that addresses both the environment/emissions and the local communities. The travel and tourism (hospitality) industry is expected to-do a much better and coordinated job in sustainability and meaningful engagement

The hospitality industry is in the midst of one of the most dramatic period of change in its history. Responding to the present consumer demand is a given but how to create products and services for future demands/opportunities? And is it a must to look beyond the hotel walls?