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2017: Underlying trends

The physiognomy of the hospitality industry is gradually transforming depending on the fundamental trends that are affecting corporate life, consumer behavior, investment trends, the appearance of new practices and new concepts. The perception of these trends at the right time is key to being able to stay ahead, stay in control of them and make them a competitive advantage rather than submit to their pressure and run after lost time. The most delicate is undoubtedly to distinguish between fads and deep-set transformation that is not always evident.

Careful and well-argued observation of current events necessarily leads to the extrication of real orientations. This is what Hospitality ON has been doing for years, particularly through the events it organizes that allow it to regularly do a review while evaluating evolutions. Another look at these observations, leads us to offer an even more precise interpretation of these movements.

GLOBAL LEADERS SEEKING POWER

The move towards concentration has resumed with a series of mergers-acquisitions that left their mark throughout 2016. Worldwide importance is a must for those that wish to continue to play big league. It is a strategic choice without any other alternative for groups that are already in the lead of the ranking. Maintaining or strengthening positioning on the podium are among the priorities of groups that are backed by demanding shareholders. The merger between Marriott International and Starwood Hotels & Resorts perfectly illustrates this trend that will continue to be fed by other operations with a more or less significant breadth of scope. For the buyer it is about completing their array of brands and territorial implantations, and thus gaining importance. For the target, it is about shareholders up bidding and maximizing the return on their initial investment. While the phenomenon has always existed, to a greater or lesser extent, the protagonists, meanwhile, change fairly radically. After the concentration of the industry, when groups merged with one another, the time came for financial concentration with American investment funds – such as Blackstone, Starwood Capital, Colony Capital, Carlyle…- at the helm. They now must face the power of both public and private Chinese means. The strategic Chinese plan shows 280 billion euros investment on the tourism sector in the next five years, including a major share on national infrastructures as well as a share for acquisitions of Western businesses that bring knowhow. Jin Jiang, HNA, Anbang, Fosun and others are just beginning to wave their checkbooks.

A STRATEGY OF ALLIANCE AND DIFFERENTIATION TO EXIST ON THE PLANET

There is only room on the podium for a small group of competitors with the means and ambition to reach it. This does not mean that there are no other winning strategies. The constitution of alliances is one of them, like airline companies that have built complementary global networks such as SkyTeam for Air France and Delta, OneWorld for British Airways and American Airlines and Star Alliance for Lufthansa and United Airlines. Kempinski launched Global Hotel Alliance more than ten years ago with 35 brands; Louvre Hotels, before it partnered with Jin Jiang, had begun an alliance with Magnusson; AccorHotels partnered with Huazhu; more recently, Shangri-La and Taj decided to share their loyalty program. The goal is to allow territorial cross-marketing for clientele on the same level. We may expect other similar regional alliances. The other strategy chosentendance by more modest groups is public differentiation. With just 10 hotels, Peninsula is world renown as an undeniable luxury leader. Mandarin Oriental, Jumeirah, Belmond (ex-Orient-Express), Dorchester Collection, Ascott International … all have similar strategies that rely on the total or partial control of hotel properties. This involves major means and very long term maturity dates. This groups naturally strengthen their unique positioning through advertising campaigns that focus on the exceptional experience.

THE WAVE OF CONCEPTS ADAPTED TO MILLENNIALS

To govern means to foresee and thus begin got prepare for the customers of tomorrow, the Millennials, who were born with this century and have a different approach to commercial accommodations. The launch of new concepts is nothing new, but the underlying trend is towards multiplication in two distinct directions:

 • Hybrid concepts, new versions of youth hostels, that associate several of accommodations (dormitory, individual rooms, suites) with a festive F&B offer (bar with live shows and a variety of entertainment) complementary services, related to travel. These concepts are called: Generator, St-Christopher’s Inn, Meininger, Slo Living, City Hub, Joe & Joe, Yooma…. The list is not limiting and new creations on a growing market that has the double advantage of limiting initial investment and captivating bankers and investment funds.

• “Limited service” hotel concepts: this is the response to the arrival of a new generation that wishes to maintain the codes hotel service but with a more relaxed, unstructured, approach: possibility to pay only selected services, technology with a powerful presence, very contemporary decoration, “cool” personnel: Aloft, Moxy, Radisson Red, Nomad, updated Golden Tulip, Vib, M.O.B Hotel… this is a promising hotel category based on new-build constructions and the conversion of outmoded properties. One imperative: central or very accessible location requiring imagination in the choice of sites.

BROADER GENERALIZATION OF THE SHARING CONCEPT

The sharing economy is invading all aspects of everyday life: accommodations, transport, restauration, skills and even workspaces… and the growing strength of independent workers: consultants, technicians, programmers … have led to another approach to the workplace. After Internet cafés, Starbucks has become the leader among informal co-working spaces with dozens of “clients” sitting in armchairs with their computer for the price of an exorbitant cup of coffee and a muffin. Since then the market has become more refined with co-working spaces in hotel lobbies, replacing former business centers that have become obsolete. It is an opportunity to transform unprofitable surface areas into profit centers through creative packaging: hourly, à la carte, light meals …. Many brands have already reorganized their social spaces: Holiday Inn, Le Méridien, Marriott, Hilton… Westin invented Tangent space. Other innovations in this area are expected.

Shared spaces has opened the way to new practices, derived from co-working, that lean toward co-living. Why not share an apartment to work a few days or weeks in a city? WeLive, CommonSpace, PodShare … are the first networks for these concepts that offer the possibility of living together around a shared kitchen, spaces for relaxation and work to create a temporary “community”.  These are just the beginnings of a new market just looking to follow the rise of the sharing economy. One sign of the times is that Jin Jiang has acquired a significant share of WeLive, WeWork, which is the most developed network to date.

THE LEADING PLAYERS IN THE DIGITAL ECONOMY WILL EXPLORE NEW TERRITORIES

The natural slope leads key Internet players, search engines, distributors and other sharing platforms, to broaden their initial playing field. This will not simplify things as overflow from specific areas into others upsets the readability of actions, potentially leading to conflicts of interest. The wait is on to see if Google will take the leap toward integral reservation, following initial steps with Google Hotel Finder. The search engine still hesitates about clashing with its two leading, referenced tourism clients: Priceline and Expedia. It is already testing a model that is a hybrid between reserving through hotel sites and links sponsored by online agencies, which appear at the top of search results. It is difficult to resist the opportunity to capture billions in online sales commissions when the necessary tools are available, including on other tourism sectors such as airline through Google Flights which is based on the price base of ITA.

Booking, a subsidiary of Priceline, thus expands its array of properties sold on its platform. Already more than 70% supply corresponds to non-hotel properties, holiday rentals, hostels, cabins, house boats… and even apartments through its Booking Home division. The distributor is positioned as competitor of AirBnB by acting as an interface with real estate agencies and, undoubtedly very soon, directly with private owners. AirBnB has also decided to no longer be just an apartment rental platform between private individuals. With the launch of Trips, the Californian giant takes on other tourist activities, that are presented as products by members and sold with a commission. By investing in Resy, a restaurant reservation, it is also dipping into F&B. A partnership is already underway with Vizeat, the site that arranges dinners in private homes. This first step could lead to a merger of the two platforms. Brian Chesky, co-founder and ceo AirBnB, does not hide his ambition to become a major online travel agency, affecting all aspects of travel including transport.

In short, everyone is increasingly stepping on the bandwidths of everyone else. The competition is unleashed with a positive aspect for hoteliers who will have the possibility of choosing between several economic models to manage their distribution. Unless of course they wind up prisoners of all these intermediaries by losing contact with the end customer.

TECHNOLOGY EVOLVES TOWARDS A MORE INTELLIGENT HOTEL

We have gone well beyond the telephone-remote control and the smart TV, today, the entire hotel from reception to rooms, room-service, and meeting rooms that are getting up to speed with smart technology. The hotel industry is recovering its experimental dimension by testing applications, services, equipment that will find their way into private homes tomorrow. Each group has its laboratory and experimental laboratories, these have become marketing arguments to project themselves into another dimension. Tablets have been outmoded, replaced by Echo, the personal assistant from Amazon, or Siri, Apple’s artificial intelligence. Humanoid and resolutely avant-garde robots already welcome clients 24h/7 in “space” lobbies. Robotics is still in its infancy, but Citizen M has opened the way with its automated luggage check in New York. The Smart Hotel is becoming more widespread, authorizing mobile check-in anywhere in the hotel. Technology makes it possible to physically decentralize functions, making the use of spaces more flexibility.

The flipside of this technological boom is the risk of dehumanization of the hotel industry. While automation lightens and simplifies tedious tasks, they must go hand in hand with redefinition of reception jobs and accompaniment of clients by personnel, who are undoubtedly more polyvalent, more extraverted, even more familiar with its environment. The example of Radisson Red Brussels illustrates this trend that is taking down the barrier between clients and employees.

A NEW USE FOR DATA AS THE ULTIMATE MARKETING TOOL

Technology also makes it possible to collect and centralize volumes of information about each real or potential client.

From the time a person enters the internet through a connection to the website, to the reservation center, right on up to posting a comment on TripAdvisor or the quality control website, as well as all digital interactions in services at the property itself, the client feeds his or her profile, gradually revealing him- or herself, manifest expectations, preferences, behaviors. Data accumulates and the real challenge for hotel groups is to manage it in order to extract useful information from it, in order to identify a profile without aggressing it, to project a desire without trespassing on intimacy. We have gone from Kardex to the digitized loyalty program leaving plenty of room for algorithms that systemize more than they individualize. It is about moving to the next stage, the one that will set one-to-one marketing on a grand scale, the surprise effect through intelligent data analysis. A new level has been reached with the use of blockchains, an open book that feeds itself continuously, that is connected to “virtual currency” that may be in the form of points to accumulate and spend.

Hotel marketing also must get accustomed to new data, the quest for immediate reward. In the same way they expect an answer to their SMS in the next 10 seconds, in 2017 clients will not wait patiently for points to accumulate. Immediate benefits is the byword for new generations, but it is complex to incorporate in a program seeking to develop long-term relationship.

THE HOTEL REGAINS ITS POSITION IN THE COMMUNITY

Paradoxically, all the technology that gives a property visibility around the globe could make it forget it is first and foremost an address in the city. The emergence of the boutique hotel phenomenon already rises out of this will to integrate the local spirit and become a neighborhood reference, a lively center with its own personality even if it is part of a chain. This is what W does in its success at being unique while integrating the city and yet projecting a similar image throughout its global network.

This logic is reproduced by many brands in their battle against the unification of concepts whilst proclaiming themselves the ambassador of each destination. This commitment may be found in new generation concepts, youth hostels and hybrid hotels, which are first and foremost bases from which to explore the city, to meet the local community. The next step is for the hotel to draw in the local community, so they adopt it as the local watering hole, as the place to go work, as a platform offering services that is always open. This is precisely what a group like AccorHotels has in mind when it presents the challenge to transformer its 4,500 addresses worldwide into as many local concierges and new profit centers.

ENVIRONMENTAL AND SOCIAL CONCERNS ARE IN THE DNA

Once a competitive edge, a Green label – any - will increasingly be a natural given in the customers’ eye. Its absence will be more evident than its presence. Sustainable development through different means: energy positive building, energy savings and natural resources, waste treatment … has become a part of the trip and a choice criteria in for more than one third of travelers, according to a recent study by the UNWTO, as a prelude to the year of Sustainable development. 2017 will undoubtedly be the opportunity for hotel groups to reaffirm their commitment to sustainability through their operations, and also through their social responsibility program. The second component in the concern for sustainability involves local populations, associated with operations, through training programs, charity operations and other social initiatives. The hospitality industry has often been a pioneer with a real legitimacy that it can defend further.

More directly, the hotel supply also increasingly takes its inspiration from this holistic approach, which associates the stay with wellness, gastronomy and responsible agricultural practices.

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