The hot topic of Management Models of the Future at the Window to the Future (W2F) Conference was introduced with a short story of the evolution of the hospitality industry by Ted Teng, President and CEO of Leading Hotels of the World; at first, the hospitality industry was in majority family-run businesses, they had the bargaining power. The industry was then fragmented following a division of revenue, where the ownership and operations were separated. An element to the story was added by Andrew Katz, Partner at Prospect Hotel Advisors, the shift towards real-estate-light models. Operators sold their real estate, created frequent traveler programs, investors demanded frequent cash flows, owners and OTA’s set higher fees – every stakeholder is asking for their share of the cut in today’s hospitality industry. The question lies at the heart of the fragmented business model, who is the customer?
Jörg Arnold, General Manager of Hotel Storchen in Zurich adds another essential piece to the puzzle, by reminding the audience that there are still independent hotels who created their own brand for almost a century and can retain it timelessly. Some hotels have pristine locations and can rely on their direct bookings, in Hotel Storchen’s case over 55%, and on repeat customers. Andrew Katz suggests a threshold for hotel’s need to turn towards brand acquisition, 200 rooms upwards.
Yateendra Sinh, the moderator of the panel and CEO at Lausanne Hospitality Consulting, points out that the traveler-base is increasing and will keep doing so, suggesting that there will be more opportunities in customer acquisition in future. The latter topic is vividly discussed during the panel, especially the refreshment of the industry since the omnipresence of OTAs, Ted Teng is nevertheless confident that there is a possibility of re-acquiring customers in future.
The hospitality industry is highly fragmented, an interpretation from scholars is that it is witnessing a brand identity crisis through continuous creation of new brands and repositioning of existing ones. Ted Teng is convinced that the hotel group Marriott is not going to stop doing so in future. Two fragmentation trends can be observed, first of the service providers, the hotels, but also on the other side of the coin, the demand. In an opinion piece by the Editor-in-Chief D. Gursoy of the Journal of Hospitality Marketing and Management (2018), the importance of identifying which customers are niche and innovative in today’s fragmented segments for the future was underlined. Here, the focus is again on the customers – how can they be satisfied with their new itch for unique experiences?
In response to this question, new brand strategies are developed to create relationship and bonds with clients to create long-term value. Each company has a different consumer-brand connection; therefore, it is important to identify this unique bond and develop a strategy accordingly in a second step, and finally design the experience. With J. Arnold’s example, A. Katz commented that in the hospitality industry, one needs to take time to evaluate each company individually, Ted Teng stated “owner by owner, asset by asset”.
In future, independent hotels and chains will have to limit their replication of brand strategy and learn how to re-acquire their customers. Since May 25th, the General Data Protection Regulation gives hospitality leaders and professionals a structure for their use of data in the hospitality operations. This no longer presents a threat but an opportunity to learn how to use artificial intelligence in the most efficient and least costly way to understand their customers, owner by owner, asset by asset.
The definition of the customer is still vague and will need to be redefined in future, who is the customer in the hospitality industry? Is it the employee, the franchisee, the investor, the traveler walking through the doors of the hotel? The answers will potentially lead to a redefinition of the industry itself, is it purely hospitality? As Ted Teng observed, hospitality and real estate are in constant friction in the industry. The hospitality industry in future will serve as an opportunity to re-connect, to re-establish tangible human interaction and relationships. This opportunity was as well suggested in the High Tech vs. High Touch panel of the W2F Conference; our industry will be the ideal solution for clients seeking a High Touch experience. As Andrew Katz stated, “a slowly growing beast”, the hospitality industry is nevertheless expected to evolve steadily in future.