Post Featured Image

Room service 2.0? Hotel tech finally moves into the digital age

Digital technology has spurred an upsurge in competition and an ever-wider range of accommodation options for travellers, pushing the lodging and hospitality industry to look carefully at how technology can improve sales and drive efficiency.

The travel industry as a whole is in robust health. Arrivals of international tourists, a global industry measure, grew by 7% in 2017 and are expected to grow close to a further 40% by 2030 to an industry worth around $12 trillion.

A large factor in the recent upswing has been the growth in the number of travellers from Asia, particularly China. Outbound travel by Chinese travellers has nearly tripled since 2008 with strong growth set to continue in the decade ahead.

Despite the rosy picture and the potential for almost guaranteed growth in demand for accommodation however, a widening range of options, and growing traveller appetite and comfort with alternative accommodation is piling on the competitive pressure.

Global head of Airbnb for Work, David Holyoke attributes the company’s success at truly understanding the goals and expectations of millennial-generation customers, “our growth is down to a clear understanding of a generation and what they value. Generation X for example pioneered self-service and self-booking in travel; with Millennials it’s about the experience and the blurring of work and downtime.”

It’s not just about Airbnb either. The market for house-sharing in China grew by more than 70% in 2017 where local start-up accommodation platforms like the Jack Ma-backed Xiaozhu.com, compete head to head with the US pioneer in house-sharing.

For the traditional hotel industry too, digital technology is starting to play a more important role. While room booking sites are now a standard industry component of hotels’ sales and marketing plans, new solutions are exploring the role that digital can play in improving yields in in-hotel restaurant and dining options.

Among them is the start-up ResDiary, recently acquired by Accor Group, which helps restaurants, and a growing number of international hotel brands, optimise the yield from restaurant tables without compromising standards or service quality by allocating reservations more efficiently.

The company’s founder and chief executive Mike Conyers explains, “For hotels to do better at F&B they have to do better at attracting outside customers by using integrated reservation management. It’s not easy – you need a system that accounts for a restaurant’s ability to prepare and serve customers at the right pace – if you don’t you can overload the system and the service can fall apart.”

Payments are another area that are getting much greater attention in the era where over half of all travel reservations are now made on the internet. Alex Mifsud, founder of travel payments technology provider Ixaris, “Today, hotels are increasingly reliant on online distribution for their sales – whether direct or via third party aggregators like Booking or Expedia – focusing on how they make and receive payments can add as much as an additional 3% to the bottom line.”

Digital disruption in lodging is still very much at a 1.0 phase of development. While Airbnb, like Uber, has helped to reimagine an industry virtually unchanged since the dawn of mass tourism, the model remains a linear one, with travellers asked to pick from an ever-growing number of options and so far, very little digital assistance to make it easier to book or choose from the range of options.

As the industry adjusts to the potential of digital and starts to experiment further, automation in distribution and booking as well as alternative forms of ownership and payment are likely to form part of the new normal. As Mr Mifsud remarks, “As an industry we have to be bolder and brave in embracing the spirit of this new age – we need to think like Elon Musk who applies truly radical thinking and approaches to help what seem like intractable challenges.”

Crowdvilla, a Singapore-based start-up is hoping to do exactly that. The company wants to take the concept of the sharing economy brought to life by the likes of Airbnb one step further and apply it to physical ownership of property. A sort of timeshare for the digital age.

With the company’s first properties expected to be available for investment by the middle of this year, Crowdvilla is using blockchain and developing what could be the world’s first cryptocurrency backed by property. Co-founder Darvin Kurniawan explains “We wanted to take advantage of the social aspect to the sharing economy – what we see is a new paradigm in the concept of asset ownership. The idea behind CrowdVilla is that the property can be truly shared between stakeholders while also helping make the real estate market more liquid.”

Despite the early stages of the impact of digital on the internal mechanics of hotel bookings and property management there’s no going back. As global hotel booking agents like Booking.com increase their listings of individually-owned apartments on their sites even the home-sharing disruptors are being disrupted.

Not that this appears to worry Airbnb very much. The company is a winning example of how the established industry will have to learn how to respond (at scale) in the face of waves of change – whether to appeal to new types of travellers or add new functions to increase site traffic and loyalty that go beyond the traditional formulas for loyalty and customer retention.

Mr Holyoke attributes the company’s progress to the way the company was conceived, “Airbnb’s in a unique position because we’re a platform and not handcuffed by past architectures – the platform and the simplicity of our checkout process means we can structure data to improve personalisation for customers.”

For the established hotel industry transformation along the lines of Airbnb will be no easy task. But with competition for accommodation increasing, it’s this kind of joined-up thinking – incorporating the customer journey, from deciding which channel to book from, through to payment and checkout that will determine tomorrow’s digital lodging leaders.