CREATING GROWTH AND VALUE FOR HOTELS THROUGH INNOVATION AND TECHNOLOGY
Recap by G. Angelini, September 2015
Purpose of this paper is to highlight the importance and provide guidelines for a disciplined “culture driving innovation” within the hotel-organization and an indication on the latest technology changes/improvements for the hospitality industry.
Part 1: INNOVATION
(Suggested process & guidelines)
A changing World; we are seeing unprecedented changes in the way business has to be conducted in order to create growth and value. Behind those changes are two pretty much unstoppable forces: the rising wealth/middle class and greater global connectivity.
A staggering number of people are entering the global middle class every year and can afford to travel. Reported statistics tells us that if we go back 15 years, there were roughly a billion people in the global middle class. This number has more than doubled to-date and looking at next 15 years, we are going to go from 2+ billion people in the middle class to an estimate of 5 billion of which more than 3 billion from Asia Pacific (Source: Wolfensohn Center for Development at Brookings). It is hard to imagine the impact on the travel business and what's need to be done.
There is no company/hotel that can survive in this changing environment without being able to continuously innovate. What are the stakes and how should the hospitality industry respond? What actions to take now to plan/leading the business in the future? How to cater to those diverse, more sophisticated demanding customers? To what extend the hotel industry need to innovate/improve/change and deliver a competitive product-experience and value system-wide?
Demanding environments; when you are competing in a highly competitive service industry like the hospitality, customers’ preferences and competitor's response are unpredictable and the industry boundaries become confusing. In this environment, change is perpetual and endemic therefore innovations becomes critical in order to survive let alone thrive in such demanding situation.
Embrace evolution and avoid stagnancy. Ideally a successful hotel needs a sustainable advantage that creates emotion and enhance guests’ experience. Hotels need to innovate to meet the changing demands of the modern consumer. Look at innovation as a continual practice that improves the brand as cannot afford to relay on past success.
Hotel organizations have to continuously reinvent themselves and innovation becomes a "culture on doing business" in all the basic functions, systems, processes, efficiency, products, distribution, customer's acquisition & retention, training, productivity, motivation, controls, social media, etc.
Characteristics of an innovative ‘culture’;
- Innovation comes from anywhere. It can come top down as well as bottom up, and in the places you least expect.
- Focus on the user/customer. Worry about the economics later. When you focus on the user/customer, all else will follow.
- Aim to be ten times better. If you come into work thinking that you will improve things by 10% you will only see incremental change. If you want radical and revolutionary innovation, think 10 times improvement, and that will force you to think outside the box.
- Bet on technical insights. Every organization has unique insights, and if you bet on it, it leads to major innovation.
- Deliver what the business demands. Respond to trends and demands, do not wait for perfection/ideological quality standards as those will slow you down. Let users-customers help you to deliver what they wants/needs.
- Give employees 10% - 20% time to innovate. Let them pursue projects they are passionate about, even if it is outside the core job or core mission of the company. Normally they will delight you with their creative thinking.
- Default to open processes. Make your processes open to all users. Tap into the collective energy of the user base to obtain great ideas.
- Accept failures. There should be no stigma attached to failure. If you do not fail often, you are not trying hard enough. At some successful companies, once a product/service fails to reach its potential, it is axed, but the company pulls from the best of features. Failure are learning processes.
- Have a Mission that matters. This is the most important principle. Everyone at the organization needs to have strong sense of mission and purpose. All to believe that the work done has positive impact on all people that the organization comes in contact.
Positive Characteristics of the Innovator;
- Not afraid to fail
- Can see what is.....and imagine something better or more interesting.
- Promotes and stimulate creativity
- Challenges the status quo
- Passionate and dedicated
- There are no boundaries in her/his world
Negative Characteristics of the Innovator; (he/she can be seen as...)
- Politically unskilled
In general, the hospitality-hotel industry (which is a labor intensive one) has both the positive and the negative characteristics within its creative people/executives. The important part is to bring the very best out of both of them and to recognize talents-contributors.
Who creates Innovation/where it comes from?
1.0 - Innovation comes from the leader (CEO). There are leaders of some companies who have the ability to create a vision, exhibit passion, create alignment, shape the culture, motivate and inspire employees and stimulate innovation (unfortunately for the industry, not all leaders/CEO's possesses all the above).
1.A - Unique Characteristics of a ‘leader-innovator’;
- Challenges the status quo and pushes boundaries. Looks for ways to do things differently and to do different things.
- Able to see complex connections between the external world and the company, which inspires new ideas.
- Has significant curiosity and desire to learn. Inspires and promotes similar desires in others.
- Open to new ideas, concepts, possibilities, critiques from sources inside and outside the company.
- Practical visionary who can create a compelling vision and provide a pathway for implementing it.
2.0 - Innovation comes from company's executives/individuals;
There are some executives and individuals who are "driven" to think innovatively. They are "bubbling fountains of creativity". Fundamentally, this is a personality trait which be sought and nurtured.
3.0 – Innovation comes from companies’ culture;
Organizational culture can be an engine of innovation or also.....it can also be a cancer that destroys innovation. What is the definition of organizational culture? It is the attitudes and expectations employees have regarding the organization. These attitudes and expectations are shaped by the company's values, norms, communication, processes, decision-making, procedures and policies and vision.
4.0 - Innovation can also come from process;
Many companies relay on processes to estimate and manage innovation. Those can be defined as; design driven, technology driven, customer driven.
5.0 - And innovation can also come from open sourcing;
Not the preferred way to go in the long term.... but some companies relay on the creative geniuses-on the outside to generate viable innovation and recommendation. Key benefits of this is; less expensive (short term savings) than increasing internal resources and development, easy to copy innovation-processes-systems successfully used by others-industry, focused on what it is needed at the moment and faster to implement.
In this fast changing industry and continuous changing of trends-customers-expectations, creating and implementing innovation at all levels has become a basic business requirement and companies cannot do without it. We also have come to realize that our next innovation may not be a physical thing, like a new bedding or a better energy-saving light bulb but instead it could be about service and personalization. Looking ahead, hotel brands, in fact all consumer brands that live in this age of changes, have to know what the user-consumer-customer wants-expects and they'll have to know when they want, how they want it and be able to deliver consistently.
- Innovation activities; focus on 3 areas; technological, organizational and human capital.
- Innovation should be transparent and recognized-welcomed by the customers.
- Innovation idea can easily be copied by competitor hotels (you also can copy).
Monthly sessions conducted by the CEO, should take place within the organization addressing the innovation and invite contribution plus compare with competition.
Part 2: TECHNOLOGY
(Trends, systems & guidelines)
The other force behind the changing times-changing world is hyper-connectivity through technology. And this is reshaping the global business environment, hotel-hospitality industry included.
Published surveys by the International Telecommunications Unions (ITU), tells us that there were 500 million active internet users in 2000. Now there are approximately three billion. In the next few years, three billion goes to five billion. And sometimes over the next year, there will be more mobile phones than there are people on the planet.
With technology changing so quickly and profoundly, we have no idea what's going to happen.....The best we can do is get a glimpse by seeing what's happened over last few years up until today and use some imagination-vision and experience to plan ahead. And..... avoid at all costs to fall behind the direct competition on technology. It is extremely important for hotel's leadership to embrace in full the power of innovation and of technology for customer communication acquisition and retention of talent.
Technology is changing the way we work and the way we live. Our offices are essentially wherever our devices are and... in most cases those are within our pockets. Technology has made a huge impact on the hospitality business and we will experience continuous changes and improvements in the future.
The so called "digital revolution" is upon us and represents major challenges for the hotel industry. The use of the latest devices is a trend that will continue and the consumer, in most cases, expects easy interaction with the provider and immediate response and confirmation of the required service.
Hotels have to respond and respond fast to technology otherwise they will be left behind in particular the individual non-branded properties and the small groups. Must look at technology with an open mind and focus on the revenue generating products-systems-software, on the efficiency and on costs savings as priority and less on items "nice to have".
To be noted that most of the new developed technology for hotels will most probably be implemented in the USA and gradually extended to other areas. Here a simplistic recap of present situation and an attempt to look at the foreseeable future;
- Connectivity; this sounds like a broken disc but it is absolutely necessary maintaining a high speed-efficient-free Wi-Fi in all areas of the property where customers and employees have access-use. This includes rooms, public areas, limousines, gardens-pools, elevators, corridors, rest rooms, etc. (stay connected everywhere)
- PMS mobility and Cloud based programs are becoming in demand and it is anticipated that those will become standards in the very near future. Important that data is properly secured and privacy respected.
- MDM solutions; (IT and Mobile Device Management) support/assistance has to be put in place as with so much technology at the hotel, it becomes critical to maintain it in good working order at all times without interruptions to customers and to employees. Plus ensure that proper products-equipment are used i.e. type of fire-optic network, bandwidth, etc. This service can be done by dedicated hotel personnel (department?) or by a contractor.
- Big Data Connectivity and Marketing; Hotels in general, especially individual-non-branded hotels and small groups are not doing a good job on taking advantage of the wealth of information in the database-customers losing lot of sales opportunities like specific promotions, packages, etc. (also the importance of collecting the data, e-mail in particular, in the first place as this is the base for e-mail marketing campaigns).
Role of the in-house IT Division;
Technology has become a major channel/facilitator on originating business for hotels. Appropriate for this division to be evaluated on the increased revenue through technology? And to whom should this division report? To marketing or to the head of the hotel/company?
Strategies to motivate guests to book direct through own web-site/channels;
- To this date, the OTA's have maximized on technology and have gained a strong bargaining power over hotel's bookings. This trend will continue and hotels have to make OTA's as their partners and capitalize on their strengths, a Win-Win situation. All indications are that there will continue to be consolidation among the OTA's and will end-up with few very large and powerful organizations.
- Fast rising of new players (disruptors) like the "P2P Sharing Economy" AIRBnB etc… that are a direct threat-competition to hotel business in many locations. And also the raising of other new industry related services like Uber taxi & Uber food delivery service, etc.
- Hotels to be ready for the impact of next wave of emerging booking channels, metamediaries and retailers with large portals entering the hotel booking arena (Google, Amazon, TripAdvisors instant booking, Alitrip and others).
- Many of the B 2 B bookings moving-have moved to B 2 C.
- Visually driven and efficient web-sites facilitating bookings in various languages are of the outmost importance. Ideally, web-sites should be optimized for each property, efficient and mobile friendly. Web-sites are to be constantly up-dated and improved. Annual budgets need to be allocated for up-dates and for improvements.
- The digital marketing SEO (search engine optimization) will remain very important to both corporate offices and to individual hotels in order to direct business to the company web-site and technology will continue to evolve. Corporate offices and hotels to be hyper-linked; corporate to drive the main domain and individual property to have their own microsite to do their own SEO. Hotel’s GM and the top marketing executives to drive the process & activities. Business production from SEO should be measured. Adequate budget to be allocated to SEO strategies.
- Importance of properly managing social media, social networks and online reviews. Ideally, hotels should create a dedicated department handling this fundamental function. This will not go away and if poorly handled, the hotel business and image will suffer in a very short period of time.
- Voice CRS, gradually those are disappearing and the cost of maintain this "sunset" function can be transferred to social media and online bookings.
- Meta search marketing and search algorithms are to be properly promoted and managed in house or in most cases with online marketing specialists. Adequate budget to be allocated to Meta search. The industry will experience the emerging of mega search organizations (consolidation).
- SEM (Paid Search Marketing); increasingly complexity to manage and require time and commitment. Paid search is one of the highest drivers of direct online channel revenues and it needs attention. Budgets allocation is a must.
- DRM (Dynamic Rate Marketing); this allows real-time hotel inventory availability and pricing to be inserted in various marketing initiatives. This also has potential to increase direct on-line bookings. Hotels must be creative & proactive and plan well in advance. Budgets need to be allocated.
- External revenue solutions like IDeas, Duetto, Serenata and others will continue to offer their services and hotels have to choose based on their needs and markets as some of those solutions are better than the others.
- Long term sustainable competitive advantages (LTSCA's) to be properly defined, embraced by all and promoted.
It is a Mobile World;
- Continuous shift from desktop to mobile and tablet. Popularity of the smartphones and desire of mobile experience from a growing number of travelers in particular the younger generation.
- Popularity of the corporate app's & mobile optimization/devices with primary objective of providing information, bookings and also payments.
- Mobile search and bookings have seen a major increase and it will continue.
- Promotion via Instagram on the increase resulting in new bookings.
- Front of the house platform that will be able to include; reservation-booking, digital check-in/out & room selection, mobile key solution, mobile concierge, both ways communication and connectivity between the hotel and the customers for promotion hotel services-engaging with customers and for customer to make specific requests, etc.
- Back of the house platform (new but it is on the way....) and this may include; communication with staff on their duties, sales & basic training, staff activities, work orders, respond to customer requests, handling specific tasks, etc… (This may be a challenge with the different languages at the beginning but gradually it will improve).
Note: Mobile facilities-services will not solve every problem but it is highly in demand and it is very practical for the busy traveler.
It is anticipated that on developing new hotels, the size of rooms will decrease and with neater design as compared with the present products. New technology will make a big impact on all in-rooms facilities and services i.e.; (as of early 2015)
- Well insulated walls, entrance door and ceiling providing an efficient sound-proofing room. (based on budget/cost, look at 3D audio effect and digital room sound-proofing).
- A comfortable and memorable sleep experience is a must for the successful hotel. Smart ergonomically designed and adjustable beds-mattress and pillows that can provide sleep-inducing head-neck-body massage. Beddings should be customized to the brand.
- Latest in communication facilities. Wireless connection to all customer devices including an efficient plug panel accommodating all connectivity and charging requests.
- Multi-way conferencing with all-in-one dual phone station facilities that can also integrate with guest mobile devices.
- Latest in entertaining and top quality large flat-screen HDTV that also includes media panels. (For suites/double occupancy, consider dual stream TV system each with headphone).
- IP multimedia integrator, docking station with integrated Bluetooth receiver and device charger.
- Motion-detection lights that activate when guest enter the room.
- Efficient central controls; the traditional master switch/es plus a touch panel remote control that manages lighting levels and room climate, opens and closed drapes, control the TV, radio, DVD player and others.
- Glass doors-walls that can also frost over to create areas of privacy (bathroom, closet and others).
- Organic lighting-emitting diode (OLED).
- Programmable thermostat.
- A biometric room safe that uses a thumbprint as the lock and key.
- Space available, consider a virtual reality bike, or other not noisy equipment, to exercise.
- Smart mini bar using eco-friendly glass door (or top down) refrigerator. Capsule-efficient-easy to use coffee and tea makers that can be programmed with wake-up call and automatic start brewing coffee.
- Illuminated path to the bathroom with sensor (smart floor tiles).
- Water-efficient bathroom and luxury-feel invigorating shower with eco flow control.
- Heated bathroom floor, bacteria-static surfaces, chromo therapeutic lighting.
- Environmental friendly amenities and an efficient linen/towels reuse program.
- All services connectivity and communication facilities between guests and staff.
- Plus of course all other in-room basic items-facilities.
Technology has come long way and it will continue to advance providing new features for hotel rooms at all-time like;
- High efficient windows that minimize glare and heat-cold into the room and can also dim removing the need for curtains.
- Interactive video panels covering a full wall space.
- Cyber mirror systems with digital touch-screen-display-interactive (wireless screen-mirroring devices).
- Video call to family-friends-business.
- Interactive gaming and fitness.
- Optimum sleep-cycle alarm.
- and others as per new trends-expectations providing customer's comfort and experience.
Note: Principle of advanced technology in rooms is to create practicality/functionality, comfort and experiences. Not ‘irritations’ with complicated systems that customers have difficulties on operating-accessing.
“Of course, each hotel has to assess what the market and consumers needs and expects in order to compete. Don’t waste precious money on the nice-to-have.”
Food and Beverage;
Food-Glorious-Food….. not easy to define trends and where this huge industry is heading. But.... we all have to eat... and the magic word that we continue hearing is Balanced Diet.
- It is anticipated that demand for restaurants in hotels will gradually diminish and looking at the medium-long term, Asia will be facing similar situation as in the West where hotels will only have one food outlet and one lounge-bar.
- Hotels will have to find creative ways to attract in-house guests to the restaurant/s and bars. In most cases within Asia, the volume of business for restaurant within the hotels is supported by the local clientele.
- Asian food in general is becoming more in demand as compared with Western food.
- Profitability of hotels restaurants will continue to decline. Hotels without banquet facilities will have difficult time to show profitability in Food and Beverage. Banqueting is the saving face of making F&B departmental profit.
- Interesting to assess the popularity of social lobby within the hotels, is there an opportunity?
- Fine dining in hotels has been in decline for many years and there are no clear indications that it will get back in the near future.
- At present, focus is on the quality and on product innovation plus on value.
- Health and wellness in food has become a main stream trend as it is priority agenda.
- Nutrition-rich foods, vegetarian items, gluten free, plant protein, natural energy items, fish over meats etc... have become very much in demand by the health-conscious customers.
- Demand for organic products also on the increase but have to look at the Pros and Cons.
- Concerns for what is considered ‘un-healthy’ foods is fast growing; monosodium glutamate (MSG), trans fats, salt, white sugar, white flower, fats & oils, endangered species and others.
- Hygiene receives lots of attention and foods safety requirements are constantly watched by the authorities and hotels are making bigger efforts to comply.
- Quality of water also on the watch list and UV technology used in most places.
- Highly recommended that hotels work toward ISO 22000 certification that addresses food safety and sustainability.
- Efficiency and productivity monitored very closed. Hotels may have to automate some parts of the dining experience in particular where there is shortage of personnel.
- Consumption of wine, red in particular, on the increase everywhere.
- A trend that is creating interest is the Uber-Chef (Chef on call and/or delivery of food) .
- Curiosity; most eaten food in the world? Bread and Rice.....
- Integration of wellness into guests experience and respond to the needs of the "healthy conscious traveler" by providing attractive facilities and programs based on well-being;
- World-class studios/workout facilities, Top quality bedding, Healthy selection of food items on the menu, Body treatments rooms, Health-enhancing room, Yoga room, Oxygen room, Stones-Laconium and Salt Saunas, Cold & Hot Plunge Pools, Steam rooms, Lap swimming pool and others as per available space and consumer’s demand.
- Eat healthy, Sleep healthy, Move healthy, Feel healthy, Play healthy, Work healthy, Travel healthy approach.
(Size and facilities based on number of rooms and location/type of the hotel)
People & Training;
- Mobile-electronic approach to training
- Online communication/feedbacks
- Quality employees’ facilities for both male and female. Meals, lockers, rest areas, connectivity, recreating, entertainment, etc.
- Technology that can measure productivity/efficiency
Environment (Building and M&E Plant);
- Leed (Minimum Gold) Certified Building (Leed Certification or a local certification is mandatory in most countries)
- Use of E Glass for windows (Low thermal emissivity / energy efficiency)
- Wind turbines and Photo-voltaics (PV) solar panels (Electricity generation)
- Computerized building automation system (Prevention-efficiency-costs)
- Smart chiller optimization controls (Efficiency & costs)
- VRF zoning air conditioning (Variable refrigerant flow system)
- Solar hot water systems (Central heating & solar heat use in conjunction)
- Water conservation technology (Cost savings & reduction of carbon footprint)
- Automatic voltage optimizer (AVO) (Balance power supply voltage)
- Energy recovery using energy wheels (Reduction of indoor pollutants)
- Energy recovery using Run around coils (Energy recovery heat exchanger)
- Variable speed drivers (Used to control the speed of machinery)
- Heat pumps (Transfer of heat from one place to another place)
- Energy efficient lighting & LED (Fluorescent light-energy saving light)
- Waste management system (Prevent waste, reduce consumption-energy)
- In room guest sensors to control temperature and lighting
- All electric vehicles/shuttles
- Paperless operation, front and back of house
- EPEAT certified electronic apparents only
- Public areas dimmer controls
- ISO14001 Certification
- Others as per new technology-trends
Note: All those are valid and useful products-systems. Hotels have to decide on specific needs and priorities. Leed certification and ISO14001 certification provide useful guides and directions.
Possible new innovations/technology (under experiment as of early 2015)
- Cloud computing is revolutionizing the operations of the hotels. It saves money, it provides access to systems from anywhere and it is flexible
- Introduction of Robots butler for basic services/tasks?
- Self-service kiosks check-in/out and iPads
- Be your own concierge and iBeacon sensors & virtual concierge
- Keyless entry, using a smartphone to open doors
- Housekeeping iPod Touches in order to respond to customer faster
- Holographic conference
- Apple pay, WeChat or other similar mobile payment
- Back of the house mobile platform for basic services
- Internet phones & feature phones (news, weather, sport, hotel services, etc.)
- Digital comment cards
- Transformation of traditional hotel lobby into multifunctional spaces with all available technology
IMPORTANT PERFORMANCE MEASUREMENTS
Hoteliers are by nature proud individuals and in some cases a “bit innovative” on claiming market leadership for their own hotel…. It is an industry practice/ requirement that the RGI and the Market Share reports are done by a 3rd party (STR or similar) and those becomes the official data on the market position of the hotel as it compares with the performance of the hotels within the approved competitive set.
In addition to those it is very important to have an accurate measurement and comparison process on the overall performance of the hotel. Measurements are to be based on Volume and on Percentage. Monthly and Year-To-Date performance as compared with the approved annual Budget and with the previous year (YOY).
- Basic measurements for budget-targets-monthly forecasting plus for Incentive-Bonus;
- Source and type of business and booking channel/s used.
- Nationalities, seasonality and length of stay.
- Rooms segmentation performance (for each segment).
- Business generated by own systems-channels; Web, Mobile, Loyalty program, Promotions etc….
- RGI and Market Share as compared with the competitive set.
- REVPAR, Occupancy%, AHR/ADR.
- GOR, Operating Expenses, GOP, ADGOP.
- Departmental Profits; Rooms, F&B and others.
- Labor Cost, Productivity, Employees turnover, Promotion Within, Training time.
- Online Ratings (TripAdvisors & others).
- Supporting Measurements;
- TREVPAR (Total revenue in the hotel per available room).
- TREVEPEC (Total revenue per client).
- GOPPAR (Gross operating profit per available room).
- REVPAS (F&B revenue per available seat per outlet).
- REVPAM (Banquet-catering revenue per available square meter).
- Costs (Revenue related)
- CPA (Cost per customer acquisition including commissions).
- CPC (Cost per click)
There are other measurements.....but if a hotel does all the above in the most accurate way, (Including the monthly forecasting) that particular hotel will be in an excellent market position.
Note; Creation of growth and value for an hotel organization is the responsibility of the leader/s by being on top of the market at all times, innovate as per trends-consumer expectations, make best use of technology, maximize on all opportunities and of course produce results-exceed investor expectation. Also growth and value is created by a well-motivated and committed team of people.
Increase customer’s loyalty, volume of business, market share, profitability & ROI. In order to prosper, must work in an innovative environment at all times as cannot afford to relay on past success & old technology and have to accept the fact that most products and/or systems in hotels will become outdated and have to be replaced by newer and better ones.
Also must remember that hospitality is about human interaction and delivering memorable service, value and authentic experience is the ultimate objective of hotel business. Innovations and technology are very important but not as much as the positive attitude, warmth and care that a well-motivated and committed team of hotel people can provide to the customers.