Bots, Botlers, Blockchain and Beyond: Lessons from the hospitality sector
nThe new definition of insanity is to do same things and expect different results.
—Frits van Paaschen, former head of Starwood Hotels
What will travel and hospitality in 2030 be like?
If the Hyperloop—ultra-fast transportation that zips you to a city and back in next to no time— is a reality, will there be such a need to stay in hotels on business? Work on the Hyperloop is speeding up and the futuristic transport solution could be a reality sooner than we think. You could take a business trip and return the same day.
Will there be only leisure hotels then?
That’s clearly not a scenario that hoteliers want to think about, though they are thinking a lot about the future. The point one is trying to make is that disruption is coming from not just within the industry, but from seemingly unrelated innovations. Every new pathbreaking technology could impact hotels in some way or the other.
TECHNOLOGY IMPACT
As far back as 2014, Phil Mcaveety, chief brand officer of Starwood Hotels—this was before the merger with Marriott— had painted a scenario where a guest would send a 3D print scan of his shoes and the hotel would have gym shoes of the exact size ready and waiting in the room when he checks in.
The other trends he outlined included checking into a hotel through a smartwatch, sending voice-activated requests for car pick-up, and robots as valets are all a reality already. At the St Regis Hotel in New York, as you brush your teeth you could press a remote and the mirror in the bathroom turns into a television. At an Aloft hotel in Cupertino, you might be served tea by a robot butler quaintly named Botlr.
At the Starwood Experience Centre in Stamford, Connecticut, where the hotel chain creates mock-up rooms for all its brands, you get a sense of some of the changes happening inside hotels. At the Aloft mock-up room, for instance, there is no television but a projector on top of the bed and a smartphone dock at the bedside. The guest of the future will be bringing his own entertainment is what the chain anticipated, and this could change the room interiors.
Apps in the hands of travellers allow them to directly communicate with front desk, housekeeping and concierge staff. Nakul Anand, executive director, ITC, felt that travellers will increasingly want to be in control, and hotels have to hand this over. So typically, many of the services you would ring for will all migrate to within the room.
Technology is clearly one of the biggest drivers of change in the hotel experience today. ‘Companies that don’t embrace technology as an enabler will disappear,’ said Dilip Puri. Artificial Intelligence will allow guest experience to become so much better. Chatbots are already making the booking experience easier.
All trends point to the latest kid on the technology block, blockchain, disrupting the hotel industry. Blockchain is a growing list of linked digital records using cryptography that has already begun to change thinking about online distribution of hotel rooms.
Currently, all hotels depend a great deal on OTAS that use technology to connect consumers with hotel chains.
Every hotel has to invest in technology—booking engines, property management systems and channel managers—to connect to the OTA system. In a blockchain-based system, hotels can use any device to connect directly to a blockchain and there on to consumers eliminating expensive OTAS. It is a distribution landscape that is very creative. And it could especially benefit smaller hotels. Google and Amazon could get into this technology. Several blockchainbased platforms have come up and early movers like Citizenm Hotels have logged on to it.
Technology is also going to impact operations—the way hotels source their supplies, for instance. Currently, many hotels stock 30 per cent extra inventory of some supplies, keeping in mind damage and theft. What if there comes a time when there is a way to do everything in real time?
CONSUMER BEHAVIOUR
But there are other trends too shaping the future of hospitality. As Frits Van Paaschen, the former head of Starwood, author of the thought-provoking book The Disruptor’s Feast, pointed out, the Consumer could be a disruptor. Consumer profiles, tastes, needs, expectations are all changing. Every hotel chain from Marriott and Intercontinental to Taj and ITC is studying the changing consumer and new guest expectations, and beginning to redo their services accordingly. But the trick is in getting the trends right, and also time the changes to services correctly to catch it at the exact moment.
Bits and pieces of what these changes are going to be in consumer profile is already available. A study by the Intercontinental Group finds that the big travellers of tomorrow are going to be from different places. More travellers will originate from emerging economies like Brazil, Russia, China, India and parts of Asia. These new global explorers have very different needs from American and European travellers, and hotels will need to gear accordingly.
That’s why IHG has introduced HUALUXE Hotels & Resorts, a hotel brand designed by Chinese for the Chinese within its portfolio. Others like Accor are adapting their offerings too— Accor’s Grand Mercure Mei Jue brand focuses on the Chinese traveller’s expectations. According to Jean Michel Cassé, it is a matter of time before a hotel tailor-made for Indian guests comes up.
MICE (meetings incentives conferences and exhibitions) is another big trend impacting growth of hotels. Globally, MICE is an $808 billion industry. India currently has only 0.5 per cent share of this but a series of moves by the Indian government, including opening up discounted conference visas to the private sector, could lead to a surge in events being held here. According to the ICCA (International Congress and Convention Association), which did a study on where meetings were conducted, the biggest share of venues went to hotels. Despite the growth of video conferencing and virtual meetings, there has been no reduction in the volume of conferences—so that’s an opportunity area.
The big fat Indian wedding is a big opportunity area for hotels. Even a flower delivery start-up like Ferns n Petals has realized the potential in weddings and created two ‘wedding hotels’— Udman and The Opulent—in Delhi, designed and sold mainly for marriages. Additionally, according to figures from the US Inland Revenue Department, the trends are the growth in women travellers (30 per cent of Chinese millionaries are women, while in the US there are now more female millionaires aged 18–44 than male) so expect rooms specially designed with a feminine touch for women guests. As companies go for massive gender diversity programmes, with targets of having at least 30 per cent of their employees as women, more business travellers could be women.
The millennial cohort is a demographic that has already altered many a hotel’s offering. Shared spaces and community activities are all geared towards millennial guests. But Gen Z—those born in the mid-1990s to early-noughties—is rising and that’s another cohort with a very different personality. At the same time you can’t leave out older guests’ preferences so hotels will have to balance all their offerings to cater to many generations.
Another growing set of consumers is the woke brigade— guests who passionately care for environment, are worried about climate change, are activistic in nature and will stay only in places where everything is ethically sourced or made. Witness the way Marriott has already committed to reduce plastic usage in its hotels.
PERSONALIZATION
You can get the consumer grouped and bunched in cohorts— from a geography or a particular generation or gender—but within these groups, each consumer is still unique. Rising individuality is a big trend and hotels will have to cater to each guest differently.
The more agile hotels have already appointed heads of personalization. Marriott, for instance, has a VP personalization. At the Adobe Summit in Las Vegas, a session was devoted to personalization at hotels. Melissa Lemberg, global partner, IBM Interactive Experience, described here how IBM’S Watson understands different types of data and has the ability to draw a personality trait of a customer. IBM Watson coupled with the Adobe Experience Manager allows hotels to do extreme personalization. How it works is that by trawling through social feeds (Twitter, Instagram, Facebook and so on) as well as a host of available data on the web, the personality graph of a customer who is booked to stay is generated. This gives clues to likes and dislikes, taste in books, food and attitudes. So a proactive hotel could add shows and movies the guest likes to the TV in her room and delight her. Besides this, hotels will have to do away with rigid 2 p.m. check-in norms and do personalized 24-hour flexible checkins, get the bed and pillow preferences right, breakfast choices anticipated, temperature setting in rooms at the exact level the consumer wants, and so on. Many of these are already being done, but it will get to a really intense level. There are websites that allow you to book a room for just four hours—soon you could book rooms for just an hour. This could totally disrupt hotel operations for how do you manage housekeeping schedules, then?
OVERTOURISM
Frits Van Paaschen talks of overtourism as a big trend. Some destinations have got so much hotel supply and so many tourists spilling into it that the destination will completely go out of fashion. Hotel consultant Manav Thadani agreed.
‘As key markets near oversupply and saturation, lesser-known destinations will see interest from brands and consumers alike,’ he said. The trick is in getting the next big destination right.
Hainan in China is a big bet. Soon there will be more hotels in Hainan than in Hawaii, said the global head of development of a big hotel chain.
In India, taking this bet is very difficult going by the experience of several developers. When Bekal in Kerala opened up, pushed by the state government, the Lalit and a few others invested in the destination. For thirteen years nothing happened because the promised infrastructure never came up. Now, the Lalit is trying to open up Chitrakoot as a new destination in Madhya Pradesh. But the same infrastructure problem remains as nearby Khajuraho, a heritage site, suffers 40 per cent occupancy because flight, road and rail connectivity is very poor.
While there is no shortage of new destinations, in India there is additional problem of government red tape.
Jose Dominic’s problems of coping with the government interference at Bangaram Island is a case in point. If VIPS visited, access to the island would be cut off, and so on.
HOTEL FORMATS
Hotel formats are already being radically changed. There are pod hotels, innovations from spacestarved Japan that cater to travellers on a budget and limited needs. The first pod hotel in Mumbai has already got terrific reviews from travellers, who visit the business capital for just a day and need only a place to sleep in at night.
Both Jean Michel Cassé of Accor and Navjit Ahluwalia of Hilton feel that big box hotels are going to explode in India.
At Las Vegas, the Venetian run by the Intercontinental Group combined with the Palazzo has over 7000 rooms.
Genting Highlands in Malaysia has 7351 rooms. In India, by contrast, anything over 500 rooms is considered massive. ITC has taken the lead in setting up the biggest hotels in India, with the Grand Chola in Chennai, and the Royal Bengal Sonar combined property in Kolkata that together has 693 rooms. A 1000 room hotel was not yet a reality in India in 2018 but come 2023, we could have that. The advantage of a big box format is that it can tap into the huge opportunity for MICE. This is something that has just not been exploited well in India.
Hoteliers can really experiment with formats if they put some creative thought to it. Frits van Paaschen pointed to the world’s first ice hotel that came up in north Sweden and the reason it came up. He started with an ice sculpture show. Then an ice gallery. But nobody was turning up. In desperation he created an ice hotel and for some reason it was successful. Now there are many ice hotels. Closer home, in India, there is an art hotel in Mumbai, where every room is a canvas. Plenty of hotels have art in their lobbies and rooms, but boutique hotel Le Sutra located quite close to the seaface has made art its very raison d’etre. Over 120 painters, forty sculptors and fifteen designers have created this exotic little getaway in Mumbai’s posh Khar neighbourhood.
This quaint, charming place draws its inspiration from mythology and from the three gunas—tamas, Rajas and Sattva—and tells the story of Ravana, Krishna and several characters from Indian epics. ‘It is a big challenge for a large organization to do things unconventionally,’ said van Paaschen. ‘But it is an imperative to do so.’
Casino hotels could be the next big opportunity in India. The country’s rules prohibit casinos on land—so the first casino hotels have sprung up on ships on the Goa coast. At the Deltin Royale, the casino experience is quite memorable.
Spread over four levels and 40,000 square feet, the ship attracts over a thousand footfalls on many days. It has been conducting poker tournaments to drive traffic. Occupancy at the 106-room Deltin Suites remains high as guests check in there to be ferried to the floating casino.
At several hotel conventions in India, one has been running into representatives from MGM hotels who have been checking out the country in the belief that it will be only a matter of time before regulations change and casino hotels are allowed. Consolidation
Consolidation is a big trend globally and in India as hoteliers feel that adding scale could insulate them. Also, it is an easier way to get innovative if you acquire a hotel chain or a digital disruptor or a niche player that is doing interesting things.
Marriott Starwood was the biggest consolidation in the hotel industry. But all other international chains too have been on acquisition spree to cover all possible flanks. Just look at the list of acquisitions Accor made between 2016 and 2017 to get an idea of how various bases are being covered to counter disruption. In July 2016, it acquired John Paul, world leader in the concierge market. In February 2017, it acquired Travel Keys, a luxury-villa rental expert. In March 2017, it entered into an agreement with Brazil Hospitality Group, Brazil’s third-largest hotel company to manage its hotels.
Now, match this acquisition to the trend found by BCG that Brazil would contribute huge numbers to global travel. In March 2017 itself, Accor also got into bed with Rixos Hotels for a bigger foothold in the upper upscale market. The same month it bought Potel & Chatbot Keys, a luxury catering and reception planning company. In April 2017, it bought Availpro, which creates software suites for hotels. The same month it also bought Verychic, a digital platform for private sale of luxury hotel rooms, apartments, cruises and packages.
In May 2017, it bought Noctis, an events and entertainment company in France. In July 2017, it created global headlines with its acquisition of onefinestay, an Airbnb competitor and then grouped some of its previous buys Travel Keys, Squarebreak etc. into the Onefinestay brand. In October 2017, it bought Mantra and Orient Express, adding to its hospitality offerings. The same month it also acquired Gekko, a specialist in hotel distribution.
This is by no means an exhaustive list, mind you—but it shows how agile hotel chains are thinking. In India, Accor has been sniffing around budget hotel chain Treebo to buy a 40 per cent stake into it.
Indian chains have been slower to acquire but things are beginning to change now. Lemon Tree hotels acquired Keys. OYO has been a very agile acquirer, buying into a variety of companies, including Amsterdambased vacation rental firm Leisure Group.
Can being agile stop being acquired? If you look at Starwood, it’s really tough to say. As Frits van Paaschen pointed out, ‘At Starwood, we worked hard to avoid being devoured by digital disruptors. Disruptors were eating away at our business model from all directions. There were the online travel agencies— Booking, Expedia, Ctrip, and the like—as well as peer-to-peer lodging companies, most conspicuously Airbnb. Online reviews, such as Tripadvisor, were eroding the signalling value of brands.
At the same time, there were so many digital start-ups promising to solve travellers’ and hotel owners’ problems.
In the end Starwood’s sellout happened not because it could not keep pace with digital disruption—it was one of the few chains doingsoadmirably—butbecause the board and the leadership could not see eye to eye on many things.
So strong corporate governance and leadership are essential elements as well in taking a hotel chain’s story forward. Or even exiting at the correct time. As van Paaschen pointed out, ‘It may seem like a subtle distinction, but combining with Marriott is not the same as being made obsolete by a digital disruptor. Starwood’s brands are well-positioned to compete in the digital marketplace. My only regret is that we could have played our hand in consolidation earlier, when our relative position was far better. Our strengths became headwinds in 2015, when the US dollar had strengthened, and the emerging markets slowed. Watch out for trend lines.
Closing advice from van Paaschen to hoteliers is to keep a strong watch on trend lines. Automation, growing inequity, rising nationalism, protectionism and climate change all have a bearing on the hotel business. A sustainable hotel, for instance, will do far better in the future.
Excerpted with permission from From Oberoi to Oyo: Behind the scenes with the movers and shakers of India’s hotel industry written by Chitra Narayanan and published by Penguin Random House