The hotel industry has already given away large segments of
its customers to online travel agencies like Booking.com and Expedia, and
sharing economy brands such as Airbnb.
And now it is at risk of losing even
more market share to technology giants with massive budgets and a deep understanding
of e-commerce strategy such as Amazon and Alibaba.
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That was the premise of “The Next Big Industry Threat,” a session
Monday morning at HITEC, the Hospitality Industry Technology Exposition and
Conference taking place in Minneapolis, Minnesota.
Presenters contend the hotel industry can fend off these
threats by adopting a retailing mindset and using technology that supports that
model, rather than relying on outdated property management systems.
“It’s quite clear we missed the boat on a lot of these past
threats, and it’s also quite clear we need to get ahead of this one,” says Lyle
Worthington, chief information officer of The Student Hotel.
Nick Price, CEO of NetSys Technology, uses what he describes
as the hotel industry’s past missteps with online travel agencies to illustrate
why it needs to act sooner rather than later.
When OTAs first came on the scene, he recalls, the hotel
industry doubted the ability of these new “internet intermediaries” to be
successful at selling rooms.
“I remember the conversations at the time – they’ll never be
able to do it, they’ll never be able to compete with our wonderful loyalty
programs, people come to our hotels because they want to talk to us... they
feel part of our brand. How many of those things are true today? Any of them?
No, not really,” Price says.
By 2010 industry executives were welcoming the opportunity
to partner with OTAs, he says, but instead companies such as Expedia and
Booking.com did a better job than hotels at using technology to meet the needs
of travelers, resulting in these and other OTAs now controlling a substantial
percentages of sales for some brands and independent properties.
“How many industries can say we’ve essentially given our
product away for somebody else to sell over the course of 20 years? That’s a
pretty embarrassing thing to say,” Price says.
And now the next wave of disruption is looming – driven by retailers
such as Amazon and Alibaba that are defining a successful e-commerce experience.
Retail revamp
The crux of the hotel industry’s problem, says the
presenters, is that it has failed to recognize it is a retailer and, as such,
needs to use technology to package its products and create an online shopping experience
that meets the needs of digitally-experienced customers.
Our biggest threat is lack of understanding technology and technical architecture
Lyle Worthington - The Student Hotel
“For some many years... I’ve heard CIOs say, ‘We’re not in
the IT business, we are in the heads-in-beds business. We’re in the face-to-face
guest service business. We’ll let someone else figure out the technology
problem. We’ll focus on the guest’,” Worthington says.
“That has failed. It has failed miserably. It was even
failing before this new digital consumer came into the market, before this
shopping cart thing was even part of our reality. Our biggest threat is lack of
understanding technology and technical architecture.”
Instead, Price says, hotels continue to rely on their PMS, even
though those systems lack the modern capabilities that consumers have come to
expect from companies like Amazon, such as the ability to purchase multiple
products in a single shopping cart with a one-click payment method at checkout.
“We have restaurants, we have golf courses, we have spas, we
have meeting rooms. Our industry has maybe 15, 20 products we could sell, but
you can’t arrange those products for sale digitally in one place without every
one of them having their own selling mechanism. And that’s just a lousy architecture,” Price says.
“We are at the end of PMS-centric architecture. That chapter
is closed. Close the book and move on to something better.”
A retail-style system would also enable hotels to create
meaningful packages for guests, as a way to engage loyalty program members and
to offer consumers something they can’t get through other distribution
channels.
“Maybe on our digital platforms we can sell that customer
our guest room, we can give you that four hours in a meeting room, we can allow
you to make a restaurant reservation and a limo transfer and then our product
becomes differentiated from the OTA model,” Price says.
Why can’t it be a room minute or a room second or a room hour? If we were thinking like modern retailers of course we would do that.
Nick Price - NetSys Technology
Price also says by eliminating reliance on the PMS, the industry
can move beyond the antiquated notion of a “room night.”
“Why can’t it be a room minute or a room second or a room
hour? If we were thinking like modern retailers of course we would do that,” he
says.
“PMS companies are still creating this stuff and at the core
of it, it’s still a room night. Am I the only person ... who thinks this is
wrong?”
The solution, he says, lies in a system that uses a set of
APIs to manage the many products a hotel can sell combined with a unified
booking and payment system.
“The Alibabas and Amazons are the places I would look. This
is a retailing problem to solve and they have way better retail technology,”
Price says.
“And it starts with us, not the technology suppliers. It
starts with us, the buyers, to be more questioning, demanding and informed.”