There’s a dichotomy that exists in a country that brought the world Einstein, Porsche, Siemens and Adidas, and also bred a culture inherent with a certain resistance to change and technological innovation.
It’s a nation that’s home to the European Central Bank and other leading banks, and also millions of residents who fear using credit cards.
In Germany, like in many other countries, we are seeing a hotel industry that no longer doubts digitisation is taking place – online hotel sales are expected to surpass €8.8 billion in Germany this year – and yet, for the most part, local hotels remain behind in welcoming the change.
It’s quite the irony for a nation that continues to rank among the World Economic Forum’s three most tourist-ready economies in the world.
While the Internet does present complexities, hotels can no longer deny it has become the main source of information for travellers and is the one place they therefore need to be in order to be found and booked.
Clemens Fisch
Indeed, for many local hoteliers, market-proven technologies such as the cloud are still new and often frightening concepts – as are everything that comes with them, including online payments.
While there are many hoteliers leading the way, the vast majority lack understanding of technology, its benefits and potential.
So, we continue to see many hotels – as in other corners of the world – disadvantaged by outdated technology and naive to how it is preventing them from becoming more competitive in securing and engaging guests.
Within Germany, there is a real nostalgia for the days of old and a natural scepticism about the change happening today, as, for many local hoteliers, there is a sense that what’s worked in the past will continue working in the future.
Change is often something that happens here only when every other alternative has been exhausted, which makes every decision involving technology a very considered one.
Strong though the economy may be, there is a general lack of willingness among local hoteliers to part with capital if that capital is being invested in technology.
After all, if they’ve survived this long without technology, why would they need it now?
A world of opportunity awaits
Hoteliers today have one of the most demanding jobs in the world. Not only are they expected to excel at hospitality, they are expected to be masters of marketing, distribution, revenue management, online reviews, social media and everything in between.
Technology is seen as the noise between them and their guests, rather than the enhancer of the guest experience and relationship.
This common misconception is no different in Germany, where, as technologists, we need not ask ourselves whether there is money to be spent. The more fitting question is: how do we convince hoteliers that technology is worth the investment?
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The nuances that exist within Germany make this a difficult question to answer. As a Software-as-a-Service organisation that allows hoteliers to renew their subscription with you every month, for example, how do you provide assurance to hotel business owners who find security in signing multi-year, multi-page contracts?
Where the subscription economy is disrupting the traditional business model around the world by offering hotels flexibility, in Germany it can be perceived as an unwillingness from technology providers to commit, and consequently we see many local hoteliers finding themselves unhappily locked in to lengthy contracts where customer loyalty is demanded rather than earned.
The widespread adoption of non-cloud-based hotel technology within the country further adds to the challenge.
With a number of the larger property management systems continuing to be managed on-premise, for hoteliers the process of migrating all their data to the cloud seems insurmountable and risky. How can easily-transferable data be good for my hotel business? What would it mean for privacy and security?
Within Germany, there is a real nostalgia for the days of old and a natural scepticism about the change happening today, as, for many local hoteliers, there is a sense that what’s worked in the past will continue working in the future.
Clemens Fisch
How will I ensure no one can access my guests’ information? The ongoing use of these legacy technologies makes it difficult for Germany’s hotels to integrate them with other systems and enable not only automation but a greater capacity to analyse every guest touchpoint.
A Phocuswright study found that as recently as 2015, integrated booking engines were employed by only 42% of Germany’s independent hotels, compared with 62% in France and 47% in Italy.
Similarly, integrated channel managers were employed by only 35% of Germany’s independent hotels, compared with 44% in the UK. However, alarmingly, both markets ranked higher than the 27% average across Europe.
Where most other European countries have one or two major tourism hubs, Germany offers many, from the Berlin capital to Munich and Frankfurt, to Cologne, Hamburg and Düsseldorf.
Understanding of technology and revenue management within these centres is naturally more advanced, while other areas suffer from disproportionate tourism levels which demand more time spent on bidding for more recreational attractions, such as spas and retreats, than time understanding how technology can bring the world to them – be it through third-party channels or direct.
In truth, this lack of understanding has created a dangerous dependency on OTAs among German hoteliers who aren’t recognising the need to take ownership of their supply.
For many, OTAs represent the single means to filling rooms, rendering the 12-25% commission rates trivial in return for a ‘free’ end-to-end sales process that doesn’t require their time or involvement.
According to Euromonitor International, third-party sites that include lastminute.com and Atrápalo are responsible for just over half of Spain’s online hotel sales, but the percentage is expected to drop to below 50% within the next five years.
Independent Lodging Market: Marketing, Distribution and Technology Strategies for Non-Branded Properties
By contrast, intermediaries currently contribute a startling 70.5% of all online hotel sales in Germany and, by 2022, this figure is expected to drop only marginally to 68.6%, proving an over-reliance on OTAs that local hoteliers are finding difficult to pull back from.
Rate parity has been a big contributor to the current state of online bookings. While German hotels can offer OTAs lower prices than those displayed on the country’s two dominant players, the ability does not extend to their own direct hotel websites.
It’s an issue no longer faced by a number of other European markets such as neighbouring Austria, France or Italy, where rate parity clauses have been completely outlawed.
Taking the lead
Positively, it seems we are in the midst of a radical change – although, the numbers likely are a case of the whole being greater than the sum of its parts.
Since 2012, Euromonitor International reports the value of online hotel booking sales in Germany has risen almost 58% from €5.58 billion to €8.80 billion this year.
In five years, this figure is expected to increase a further 28% to €11.29 billion, to represent the second-fastest growth in online hotel booking sales in a decade among Europe’s four most tourist-ready economies – behind Spain.
Where offline hotel booking sales are expected to remain fairly stagnant in Spain and the UK, and decrease only 8% in France, offline hotel booking sales in Germany are forecast to drop 24% in the next five years, to represent an overall decrease of 37% since 2012.
With wholesalers and tour operators continuing to thrive in many parts of Germany, these figures are perhaps indicative of an industry that is understanding the limitations of static room rates and learning how to cater to the new, dynamic ways through which consumers today make their reservations.
While the Internet does present complexities, hotels can no longer deny it has become the main source of information for travellers and is the one place they therefore need to be in order to be found and booked.
The value of embracing the digitisation of travel is clear, and I urge more of Germany’s hoteliers to be open to the change to reap the benefits – for themselves and for their guests.