By Aaron Shepherd
There is an old parable about the oak and the willow. When a storm approaches, everyone assumes that the mighty oak will be the last one standing, yet its rigidity causes it to shatter under the storm’s force. Meanwhile, the willow bends with the wind, leveraging its flexibility to survive the storm unharmed. In the travel and hospitality industry, being the willow means adaptability, speed, and efficiency. It’s clear hoteliers today face a stark new reality: technology is more vital to all aspects of hospitality and travel than ever before. Why? For one thing, it’s a competition game changer. The next decade will be about who can take advantage of the latest technology effectively and use it as a competitive advantage.
Technological transformation has become a fundamental component of all industries; however, the hospitality industry is confronting various challenges that have placed it center stage. The sector has been reconfigured due to several factors—such as the rise of online booking platforms and integrated services, changing guest behavior and the demand for personalized experiences, and growing complexity in distribution — all of which have been hastened by the pandemic. These changes have increased pressure on hotels’ profitability.
An organized, ambitious tech transformation can have a comprehensive impact. Our Digital Quotient Survey in the consumer and hospitality industries revealed that digital leaders generated 3.3 times the Total Shareholder Return (TSR) of digital laggards between 2016 and 2020. This supports the idea that technology will be a crucial driver of next-generation hotel industry growth, fuelling integrated customer experience, smart offerings, lean operations, and emerging business models. Hotels should create an action plan to evaluate the maturity of their IT landscape and their underlying organization and operational model. With these insights, hotels can then make the right strategic investments in technology to supercharge their performance.
Technology at the core of the hotel industry’s transformation
The hotel industry has undergone seismic shifts over the past decade. The COVID-19 pandemic sped up many of these trends, leaving hotels struggling to keep up. Guest activity has shifted more online, and many traditional hotels have struggled to broaden their technological capabilities and distribution capabilities. Moreover, hotels have sometimes observed dramatic changes in how guests book and engage with brands. Overall, guests are becoming more connected, less loyal, more informed, and definitively channel agnostic. Guest booking habits are also shifting toward eco-friendly, local, and authentic experiences in both casual and high-end categories.
To respond more effectively to these trends, hotels can utilize technology as a core enabler across several areas of next-generation hospitality. Technology supports the seamless integration of online and offline channels with smart digital services that facilitate end-to-end guest decision journeys. Reliable, personalized offerings optimized through advanced analytics can be updated in nearly real-time and supported by attractive digital content. Technology solutions for the supply chain include advanced, real-time management, cross-channel order management; and automated logistics, HR, and finance. Finally, a robust tech foundation can broaden hotel business models beyond the traditional core business to generate additional revenues, diversify guest touchpoints, and increase guest data.
Traditionally, hotels’ tech architecture primarily focused on the property network and supply chain. Online booking capabilities were developed through a separate effort that used commercial solutions that were only marginally integrated with legacy systems, impeding the ability of hotels to implement truly integrated guest journeys (and achieve real-time availability visibility). Best-in-class hotels have delivered a distinctive, consistent guest experience across channels by migrating to an architecture that supports all touchpoints with shared functionalities, such as reservation modifications, room preferences, and payments.
At the same time, data is often fragmented across systems or partly consolidated in on-premises infrastructure with limited scalability. Also, most hotels have implemented only limited data and model standards, making it difficult to reuse and scale analytics use cases. To unleash the power of data and accelerate value capture, leading hotels implement cloud-based data platforms that enable automation and reuse over a set of defined protocols. Digital native Airbnb, for example, leverages guest data to calculate customer lifetime value and inform strategic and tactical decisions based on the value of specific guest segments. It uses these insights to shape decisions such as whether to run a marketing campaign for a specific segment or whether or not it should enter a new market.
Legacy hotel architecture also typically relies on monolithic and outdated applications that severely hinder agility and upgrades, resulting in higher overall costs. Transitioning to a modular, microservice-based architecture can enable organizations to achieve greater flexibility and scalability. The architecture of next-generation hospitality is fully integrated, powered by data, and highly modular.
At a time when guests are demanding greater flexibility, customization, and responsiveness, many hotels lack the tech foundation to meet these expectations. The solution is a comprehensive overhaul of the tech architecture and operating model. Time is of the essence, so hotels should take all the necessary steps to speed up the transformation. The benefits will not only be felt throughout the guest experience but also on the bottom line.