Hotels need to embark on a new chapter – the digital one already written by Amazon
And now it is at risk of losing even more market share to technology giants with massive budgets and a deep understanding of e-commerce strategy such as Amazon and Alibaba.
That was the premise of “The Next Big Industry Threat,” a session Monday morning at HITEC, the Hospitality Industry Technology Exposition and Conference taking place in Minneapolis, Minnesota.
Presenters contend the hotel industry can fend off these threats by adopting a retailing mindset and using technology that supports that model, rather than relying on outdated property management systems.
“It’s quite clear we missed the boat on a lot of these past threats, and it’s also quite clear we need to get ahead of this one,” says Lyle Worthington, chief information officer of The Student Hotel.
Nick Price, CEO of NetSys Technology, uses what he describes as the hotel industry’s past missteps with online travel agencies to illustrate why it needs to act sooner rather than later.
When OTAs first came on the scene, he recalls, the hotel industry doubted the ability of these new “internet intermediaries” to be successful at selling rooms.
“I remember the conversations at the time – they’ll never be able to do it, they’ll never be able to compete with our wonderful loyalty programs, people come to our hotels because they want to talk to us… they feel part of our brand. How many of those things are true today? Any of them? No, not really,” Price says.
By 2010 industry executives were welcoming the opportunity to partner with OTAs, he says, but instead companies such as Expedia and Booking.com did a better job than hotels at using technology to meet the needs of travelers, resulting in these and other OTAs now controlling a substantial percentages of sales for some brands and independent properties.
“How many industries can say we’ve essentially given our product away for somebody else to sell over the course of 20 years? That’s a pretty embarrassing thing to say,” Price says.
And now the next wave of disruption is looming – driven by retailers such as Amazon and Alibaba that are defining a successful e-commerce experience.
The crux of the hotel industry’s problem, says the presenters, is that it has failed to recognize it is a retailer and, as such, needs to use technology to package its products and create an online shopping experience that meets the needs of digitally-experienced customers.
“For some many years… I’ve heard CIOs say, ‘We’re not in the IT business, we are in the heads-in-beds business. We’re in the face-to-face guest service business. We’ll let someone else figure out the technology problem. We’ll focus on the guest’,” Worthington says.
“That has failed. It has failed miserably. It was even failing before this new digital consumer came into the market, before this shopping cart thing was even part of our reality. Our biggest threat is lack of understanding technology and technical architecture.”
Instead, Price says, hotels continue to rely on their PMS, even though those systems lack the modern capabilities that consumers have come to expect from companies like Amazon, such as the ability to purchase multiple products in a single shopping cart with a one-click payment method at checkout.
“We have restaurants, we have golf courses, we have spas, we have meeting rooms. Our industry has maybe 15, 20 products we could sell, but you can’t arrange those products for sale digitally in one place without every one of them having their own selling mechanism. And that’s just a lousy architecture,” Price says.
“We are at the end of PMS-centric architecture. That chapter is closed. Close the book and move on to something better.”
A retail-style system would also enable hotels to create meaningful packages for guests, as a way to engage loyalty program members and to offer consumers something they can’t get through other distribution channels.
“Maybe on our digital platforms we can sell that customer our guest room, we can give you that four hours in a meeting room, we can allow you to make a restaurant reservation and a limo transfer and then our product becomes differentiated from the OTA model,” Price says.
Price also says by eliminating reliance on the PMS, the industry can move beyond the antiquated notion of a “room night.”
“Why can’t it be a room minute or a room second or a room hour? If we were thinking like modern retailers of course we would do that,” he says.
“PMS companies are still creating this stuff and at the core of it, it’s still a room night. Am I the only person … who thinks this is wrong?”
The solution, he says, lies in a system that uses a set of APIs to manage the many products a hotel can sell combined with a unified booking and payment system.
“The Alibabas and Amazons are the places I would look. This is a retailing problem to solve and they have way better retail technology,” Price says.
“And it starts with us, not the technology suppliers. It starts with us, the buyers, to be more questioning, demanding and informed.”