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HAPPY 2015 from LoungeUp!

Here are the 3 major changes facing the hotel industry in the New Year

2015 has arrived and Online Travel Agencies now boast a stronghold of around 20% of the room booking market compared to the meager 1% they held in 2000, their growth showing no sign of slowing as we enter the New Year. Consequently, independent hotels have become increasingly reliant on OTAs to bring in customers, some taking commission on nightly fees at a dizzyingly high 30%. Furthermore, largely influenced by the technological revolution, the wants and needs of the modern hotel guest are changing.

Evidently, hoteliers everywhere are facing several challenges as 2014 passes and we enter a new year. Here are the 3 major changes to the hotel industry that we predict for 2015:

GUEST BEHAVIOUR IS CHANGING

As the market becomes increasingly competitive and technology concurrently develops at an exceptional rate, the amount of online bookings has correspondingly shot up. Online purchases represented less than 5% of the market in 2000 whereas the figure now stands at 7 times that and is set to rise to 50% by 2017 with over 1 billion having been made in total (Oliver Wyman). The average hotel guest will consult 16 different websites before committing to a destination, hence why TripAdvisor is now so relevant for hoteliers. If studies show that a 30% drop in consumer satisfaction leads to a 10% fall in profits then it’s no surprise that hotels have been forced to concede commission. Nevertheless the significant 50% share in the market that independents still hold can be protected. Hotels need to find a way of better connecting with their guests, offering their services more efficiently and generally embracing the technological revolution before the commission rates creep even further.

Furthermore, the swift rise to prominence of Airbnb has significantly affected the market and independent hotels in particular. The company incidentally is now worth more than SnapChat, Dropbox and several other of the recent internet sensations, boasting over 600 000 rooms worldwide. Inevitably, it all comes down to price. If you can rent an Airbnb apartment just behind the Pantheon, Rome for half as much as it would cost in a nearby hotel, it’s no surprise that more and more tourists are turning towards the online revelation.

So booking behaviour has undoubtedly changed.

What hoteliers now need to discover, is an efficient means of convincing their guests that the in-destination services and relationship they can provide are worth paying the extra. By implementing a guest engagement app for example, this would be achieved, allowing the hotel to effectively present all of their available services, incidentally services that Airbnb simply cannot provide. With the monumental success of the latter’s app, guests are clearly open to a mobile solution and an app is the perfect means of showing off that which a hotel has to offer.

 

GUEST EXPECTATION IS CHANGING

It is clear that hotel customers are embracing technology with open arms: 80% now travel abroad with smartphones (MCD: Seeing Returns). So why not consider offering an in-destination app to better engage with guests? The means are already there, physically and literally in guests’ hands and that same 80% now actively want to be able to consult and book hotels’ offered services (breakfast menus, room service, book a table at the restaurant etc) from their mobile devices. Therefore the second major change facing the travel industry is that of guest expectation. The modern consumer now expects a technologically efficient service both pre-stay and in-destination.

Indeed, Marriott and Starwood amongst others have started to integrate mobile tech into the check-in process whilst iBeacons could allow for advanced target marketing, allowing hotels to push promotions to guests based upon geo-localization and previous behavior. The modern guest desires personalized travel experience and expects the same level of efficiency from their chosen destination as they do from the website or app upon which they booked the room. This is why the modern traveler currently prefers to solve problems, book trips and find out local info using mobile services, instead of contacting reception. Hotels must embrace the technological revolution to retain any sort of relationship with their clientele, focusing on a digital solution. Otherwise guests simply fall into the laps of the big online players such as Google, Priceline and TripAdvisor.

 

DESTINATIONS ARE CHANGING

The hotel market itself is unequivocally expanding with 30% growth expected by 2020. The main reason for this is rapid globalization. The emerging Asian, African and the Middle-Eastern markets in particular are all expected to double their current shares by the turn of the next decade.

Marriott as an example, decided to invest in more hotels in China alone, than in Europe throughout the last year. (Source: Wall Street Journal)

The idea of a luxury holiday in Europe or North America, is gradually being replaced by that of one in China or India as the diagram suggests. This inevitably affects independent hotels in Western markets as the aforementioned developing markets become more and more financially accessible. The modern, European or American hotel guest is beginning to consider these new experiences ahead of those closer to home.

 

So what can independents do to maintain any sense of relevance in the modernizing hospitality industry?

 

First and foremost there is an imperative to CONNECT with their current guests and strengthen a relationship that is rapidly being weakened by the convenience and informative capacity of technology as well as the global power of OTAs and chains. Why not profit from the fact that 80% of prospective guests now travel with a smartphone and offer an app that would allow for greater immediacy and proximity of contact between hotelier and guest? In doing so, the consumer becomes more likely to affiliate themselves with their destination and book a next stay, which of course, can be promoted and offered directly in-stay on the app. There’s no better way to combat OTA dominance.

Essentially, the modern hotel guest wants a technologically efficient and convenient service from their stay. It’s time for the hospitality industry to take back control of their in-destination services and reach the levels of guest loyalty that once defined the industry, converting guest expectation directly into guest loyalty.

Connecting with guests is key.

Happy New Year readers!

 

Sources:

http://mcdpartners.com/news/mcd-releases-hospitality-white-paper/

http://www.oliverwyman.com/insights/publications/2014/may/hotels_and_resorts.html#.VK5x9ivF-PM

http://appleinsider.com/articles/14/07/28/apples-ibeacon-continues-to-spread-with-new-rollouts-by-lord-taylor-others

http://www.wsj.com/articles/SB10001424052702303703004577475383271200696

http://skift.com/2014/08/04/uber-lyft-and-airbnb-are-winning-the-app-download-battle/

 

Written by Roy Manuell

 

Photo Credits: Kamboompics – Pexels