Access the main content


#GLF18 | MKG Insight: How new technologies are changing hotel service production and the DNA of hospitality?

Vanguélis Panayotis, President of MKG Consulting, addressed the issues of productivity gains in the hotel industry as well as digital and artificial intelligence, which are today’s revolutions.

"After having spoken the day before about the change in the golden rule, then about the role of destinations, the tryptic of the product, the experience, the destination and the quality of the asset, we will see how to achieve all this. If we start from Servuction, from the production of service, will we have to cause a mutation in our industry’s DNA in terms of how we produce the service?

Let's look at the past: before Holiday Inn meant "Good quality and service, food and lodging". We had basic standards that had been defined at the time by the brands.

About thirty years ago, we wanted to move towards industrialisation and standardisation in the hotel industry. It was necessary to meet the simple demands of the customer: cleanliness / hygiene, safety. These basics needed to be mastered. Then it was necessary to restore the staff's ability to be in contact with the client: this has been the major disruption in recent years.

Isn't the real problem that we forgot our job along the way? What has happened in our industry in the meantime? We're talking making the customer experience enchanted again. What has changed in our sector?

We paid many more dimensions: security, Wi-Fi, websites, SEO, search engines, channel managers, yield managers, etc.. We have seen a succession of costs which did not exist 15-20 years ago get added to the operating accounts of hotels, in addition to connected objects or other investments that need to be made.

If I put 100€ on a hotel counter (French chain/independent), what do we have left?

  • The city tax
  • VAT
  • Fixed and variable costs
  • Wages and compensations
  • Social security contributions

This leaves an operating margin (20.5%). The gap between the French and German (28.1%) or Spanish (29.5%) margins is wide.

  • Building maintenance costs
  • Real estate taxes

EBITDA is 9.5%, in contrast to our German (17.1%) and Spanish (18.6%) neighbours.

  • Depreciation and amortization
  • Corporate income tax

The net result is 3.7%. This is significantly lower than the figures for Germany (9.2%) and Spain (10.2%). Despite everything, money is earned, but productivity gains are uneven across sectors. Since 1997, many sectors have made significant productivity gains, meaning value added per hour worked has been very high.

In the hotel business, we have not integrated digital productivity gains into service production and productivity at the level of hotel operations. Airbnb, Booking, digital native companies have extremely high productivity and they have integrated productivity gains related to digitalization.

The revolution has been accelerated by digital and digital has generated productivity gains. Meanwhile, we have had a linear increase in average daily rates for 20 years.

We have talked a lot about Big Data in the last few years, about how data needed to be collected. The Big Data mirage will come true with artificial intelligence, we finally found the ultimate Data scientist to get the most out of the Big Data we have in our hotels today.

The balance of power is: who has customer information? Hotel groups, distributors, GAFA,... Who will have this contact point, who will check the customer?

Artificial intelligence is today. In China, security cameras can recognize the faces of citizens walking down the street after recording them. We will find artificial intelligence in booking processes, customer information and knowledge, CRM , (preventive) maintenance, communication, etc.

The undercurrents of demand (the number of travellers in the world) are extremely solid, the distribution of value among the players in the sector is another subject. New entrants come to capture a significant part of this value, others will lose it, others will succeed in reinventing themselves, in self-disrupting. But the undercurrents are there.

What has the effect of time been on our phone compared to the hotel: today the phone is our bank account, our GPS, our Playstation, our encyclopedia, etc., many devices have been merged inside it while, for example, hotel reception has not fundamentally changed after all these years. Could we say that our sector has been enriched by so many new features?

We see the chatbots coming. Artificial intelligence at Booking, for example, is to go and discuss in order to make the best reservation possible and provide the best booking experience. From our study (with the DGE and Bercy) of the panorama of innovation in France in tourism and hotel industry, certain fields have been somewhat abandoned: product and organisational innovation, sustainable development.

To summarize, we are "staff intensive", we have productivity problems, and we have a market undergoing full reorganization by product and societal evolutions and what the customer expects now.

There is something in which we can invest that is extremely important: those who will support and save our companies are the ones who will work there, those who will be able to innovate, those who will be able to be in contact with customers, all constitute the great human capital we have within our companies.

Humans are able to create something the client will value highly, which is empathy. The problem is that if employees are not valorized and there is no longer access to customer feedback, we will not have many assets left... We need the best players to create this additional soul.

The way to win the battle with the client is in local authenticity, and those who will carry local authenticity are the people who work.

This article was published over a month ago, and is now only available to our Premium & Club members

Access all content and enjoy the benefits of subscription membership

and access the archives for more than a month following the article


Already signed up?

An article

Buy the article

A pack of 10 articles

Buy the pack

You have consulted 10 content. Go back home page or at the top of the page.

Access next article.

Sign up to add topics in favorite. Sign up to add categories in favorite. Sign up to add content in favorite. Register for free to vote for the application.

Already signed up? Already signed up? Already signed up? Already registered?