Hospitality Industry Gets A Tech Makeover
Hotel room technology is changing the way you stay [Source: http://www.youtube.com/watch?v=-lzTFjzccBU]
When asked how his company would utilize the Web during the dot-com boom of the late 1990s, one of the worlds most respected CEOs answered that the conglomerate would not jump headfirst before thinking things through. A reasonable enough answer with 15 years of hindsight, right?
Well, think back to Web 1.0. There was speculation enough to make your head spin. Many CEOs slapped a ".com" on their businesses and expected a windfall. Some 99 percent of those businesses never went anywhere. That's why the guarded, skeptical approach of that conglomerate's CEO seemed so radical in the day.
What the Internet's boom and bust and boom again have taught us is that it's really good for certain things, and among these is harnessing the power of the crowd. Given that realization, certain industries - the hospitality sector chiefly among them - are learning to completely revamp their centuries-old business models. The result is that the world of hotels is getting downright radical.
The stuffy hotelier entering the world of rad, you say? Yes, indeed. Reverse bidding models and real-time offers that are powered by sophisticated software and powerful computing sounds like the hospitality industry has taken a page right out of the less-than-hospitable world of the financial brokerage houses. It's fascinating that both industries rely on getting the most efficient process and best price out of would-be customers using offers that are derived from algorithms. It's a good time to throw away the dusty reservation book.
Indeed, the world's largest hotel companies are re-thinking age-old models by using new technology solutions. For instance, the traditional method of gauging profitability by measuring room utilization as well as food and beverage revenues has been thrown out the window. Today, leading hotels are delving into and developing far more complex metrics to redesign their business models. A hotel's size (a scale metric) has less to with its profitability as does its ability to get consumers to pay for as many amenities and so-called luxury services as possible. What's needed, therefore, is wide-scale IT systems integration with hospitality industry domain expertise. Hotel companies want customized solutions to deal with the many challenges that are unique to their domain.
One of the very few elements that came out of the carnage of the dot-com bust in the late '90s was the knowledge that if used properly, the Web can be an amazingly effective tool to trace and then sell excess capacity. The worst thing in the hospitality business is an empty hotel room. If you can find customers willing to pay even a fraction of what the room typically is rented for, then you're one step ahead of the competition. What's made the industry radical by those standards is that private people have discovered that same power. That is, they're using innovative Web tools such as airbnb to rent out their apartments or even entire homes when they're not around. What the marketplace is doing is to create a boutique hotel system through completely digital means. Travelers can find rooms online that are often larger and furnished more like a regular house and pay less per night than staying in a regular hotel.
The traditional hotel industry is striking back (and very effectively, I might add) by leveraging IT. Global procurement systems, booking systems, customer care centers, and location-based guest databases are all part of an integrated IT ecosystem that tracks individual customers and delivers the amenities that they want even before they ask for them. There are obvious parallels to banking fees in the financial services industry. Consumers don't mind as much if the fees appear to be "bespoke" and therefore a part of the enterprise's high standards of service.
A superb example of just how radical the hospitality business has become is the Hyatt Hotels Corporation. Its customer service is unmatched and there's a Hyatt for every type of business or resort traveler. Jay Pritzker, the innovative businessman who bought the first Hyatt motel in 1957, is a favorite subject of business school cases - and for good reason. When he first bought the company, there were two accepted business models for the hospitality industry: one was a large (more than 1,750 rooms) hotel with convention hall amenities that was near an urban center. The other involved smaller, more upscale hotels that were often at pricey resort destinations.
The Pritzker family is so well regarded because they refused to accept either model. Over the decades, the Hyatt Hotels Corp. combined the luxury feel of a resort with all the big-city convention amenities into one of the most successful chains of the 20th century. The company did so by reckoning that customers would pay for the right kind of Hyatt when their travels took them to places for business, pleasure, or a combination of both. Today there are Grand Hyatts, Hyatt Residence Clubs, and even Hyatt Zilara, an all-inclusive resort chain, among other brands. In fact, there's a brand for every kind of discerning customer and they all operate across one, seamless IT system. That's the essence of today's digital consumer. The same philosophy that Hyatt has utilized all these years is what other savvy players in the hospitality industry are doing today because of their best-in-class IT solutions.
If a crowd-sourcing website can undercut any hotel by renting out private rooms, then hotel companies know that they either have to embrace new models or start bleeding cash. Digital consumers are fueling a hospitality renaissance because of offers and prices that come to them from pro-active hospitality enterprises with the right IT tools.