The Hotel Business and Critical Mass

Any hotel executive reading this will have arrived here via social media, Google, or as a direct reader via RSS feed. The same reader is probably reading during a commute, on a smart device, or using an iPad for night table reading. Technology has almost overnight, changed our personal and business lives in ways we never could have imaged even 5 years ago. You hospitality executives reading along now, I know you’ve pondered the thought; “Where does it all end?” The laws of physics tell us, that the intersection of business and tech must reach critical mass sometime. Here’s a look at the only two possibilities. Either we are approaching a roadblock, or we are not.

I was reading from the latest Hotel Yearbook last night, when I came upon one of author Woody Wade’s fictitious futuristic accounts of a hotel director. For those who have not started to read, “Hotel Yearbook 2036 – Eyewitness reports from the year 2036” is an unusual take on our industry, unique in its approach to examining the potential of the hotel business. Returning to our make believe executive though, Thomas Martin, CTO, of Mohring Hospitality Group, in Berlin mulls over the same question I’ve put to you, the boss of this made-up hotel group contemplates the speed, stress, and expense hoteliers undergo to simply keep up the pace, and I quote:

“No sooner have you decided on a solution, made the investment and implemented it across the hotels in your company, than something else comes along that’s “longer, lower, lovelier” as they used to say.  Better, faster, cheaper – that should be a good thing, right?  And in theory it is… but it’s not such a good thing if it means you have to upgrade every year at enormous expense, or risk being perceived as offering outdated tech to your guests – and falling behind in the back-of-house tech.”

Our hotel hero cries the all too familiar frustration of the cost-decision process, admitting to the defeat of compromising and falling further and further behind. He ultimately arrives at the concrete fact of it all, “he will eventually lose his job over the impossibility of it all.” Sadly, based on what we know from our associations with hotels, Mr. Martin is not wrong.

Woody Wade’s epic chapters on technological, social, political, and economic aspects of hospitality stretch onward. The author touches paints the fringes of potential with battery powered cars, eventualities like the Nicaragua Canal, 3D printed this and that, and so on. But the quintessential question sticks in the mind, “are we capable?” I know at least 2o hotel directors who smoke three packs of cigarettes a day. Their front desk people, sales people, housekeeping people, so many of them are ready to walk out the lobby doors rather than face another crisis moment. From a realistic perspective, technology has not made any hotel owner’s life easier. Vacations are not longer, profits are not really up, most owners simply eat, sleep, and work just like the average factory worker, albeit in slightly more picturesque surroundings. Maybe you are one of these owners, now you can glance at your Rolex, and realize the watch only tells time.

“Critical mass, is this guy crazy?” I know you are rationalizing right now. Admitting technology overload is as hard as admitting alcoholism or a failed marriage. Most people don’t want to own up to having made MASSIVE mistakes of judgement. And every hotel owner my business has ever been associated with, has made plenty. Growth, cost cutting, keeping up with the OTA’s, beating their brains out for direct bookings, I even know one executive who tried consulting a ouija board to find a perfect tech strategy. I put it to you, the hotel industry has already reached critical mass in several areas, an it’s rapidly approaching a technological critical point. Let me illustrate why.

A report by Roger S. Cline for Arthur Andersen Hospitality Consulting Services some time back discusses globalization in the hotel industry, and in particular the unabridged economics of the global trend. The author discusses how critical mass in a growth based hotel sector differs by company, but some aspects are also constant, such as:

“The pressures to expand beyond national boundaries have largely arisen from the need for growing hotel companies to reach ‘critical mass’– the point at which a network of properties is sufficiently large to satisfy the travel needs of the hotel company¹s most valued customers.”

In the case above we see the prediction for global concerns like Hilton and IHG being acted out now. Acquisitions, a consolidating of customer choices, Starwood and hundreds of smaller operations being gobbled up by groups that already reached critical mass regionally, this is a natural trend. But what most do not realize is, technological end game is approaching too. Or at least a way point. It’s interesting to note here, the report I cited above is about 20 years old now, but it was uncannily accurate with regard to the industry since. Critical mass already having arrived technologically is not all that far fetched a concept. If Cline’s arguments for the economies of scale for hotels were true, and they seem to be coming true, then the apex of technological enhancements may be at hand too. Let me show you why.

This study (PDF) from the Cornell University School of Hotel Administration in December of 2000 discussed many of the same dilemmas that now face hotel operators today. “How Wired Are We? The Selection and Use of New Technology in U.S. Hotels” offers us a real Deéjà vu moment, it’s a bit like a Hotel Yearbook 2016, from the year 2000 for instance. Technology to reduce operating costs, technology to satisfy guest needs and desires, technology for efficiency, competitive edge, blah, blah, blah, blah. The report goes so far as to break down hotel tech adoption into phases, and to slice and dice every aspect that leads to the “critical mass” we discuss here today. But reading this, and subsequent literature over the past 2 decades, leads me to the conclusion technology took us nowhere. Technology simply created its own sub-industry, and nothing more. No matter how I slice it, technological capacity for hotels or guests amounts to using a switchboard versus a single black corded phone in the lobby. Tech, so far, is just an added expense, like a mint on a guest’s pillow. Right now you are rationalizing again. You might be thinking, “I read this far to discover I wasted thousands on advanced systems?” Well, I am sure each of you wasted “some” anyway. Another quote may help cement this thought:

“In the second customer-service phase, which we term “value add-ons,” hotels provide guest-service technologies that provide little, if any, incremental revenue, but do enhance guests’ perceptions of the service that’s available.”

Look at HotelNewsNow’s 2013 list of technology trends, by author Ed Watkins. If you forget about the catchy buzz terms, the hyperbole we have all attached to tech trends, what the author cites from the likes of Hyatt, Kimpton and Marriott is really no more than complex than replacing black and white TV’s with color ones. Let’s be real here, creating business spaces and connectivity hubs is not interstellar flight. I’m not saying these amenities are not necessary, I just don’t think they should be bunched in with proper technology advancements, of which there are so few. Now that we can see clearly that technology enhancements are a constant, let me show you why hotel businesses get bogged down. Let me conclude with a stunning example of technology fluff.

Hyatt has led the way in innovative technology in the last few years. A friend of mine, Chris Brogan is their senior vice president, for strategy and analysis, one of the true pioneers in this digital space. When Hyatt was the first to really engage in predictive analytics for their business, the mission was to truly maximize profit by up-selling willing guests. This strategy is illustrative of two things. First, Hyatt is at “critical mass” within its current sphere. Second, the final innovative stage of market saturation for them is rate optimization. If you can accept that Hyatt has peaked with the exception of expanding into untapped or undeveloped markets, then I can show that current tech is almost maxed out.

This Skift report from last month tells of another Hyatt move, only one that is not so innovative as predicting guest potential and desires. “Creating Next-Generation Hotel Operations With Messaging Technology” tells us Hyatt is backtracking to the hotel switchboard concept of the early 20th century. A new WeChat messaging system is all the rage now, a system which is essentially a direct support mechanism to circumvent Twitter and other recent trendy connectives. The article is the long way around the barn to highlight Hyatt’s brilliant discovery that guest prefer talking to hotel staff, while at the same time plugging a third party service or two that offer messaging capabilities. I won’t help Skift plug those. My point is made. WeChat is simply a refinement, it is not paradigm technology innovation. Hyatt is reinventing a switchboard using the devices of guest communication. This is not expanding profit or Hyatt growth, it’s simply changing sheets. For crying out loud, some writers are calling the new WeChat community an “ecosystem” – as if the hotel chain were inventing Shangri-La. My reaction is, “Is this it, is this as far as we have come?” An app, Hyatt built and app? And Skift wants you to buy the report “The Future of Messaging Technology in the Travel Industry, Part I.” It’s only $295 dollars too.

Right about now your head is hurting, again. You’re wondering how any of this will help you get a better rate for your beds, or more rooms full even in the off season. Somehow I envision a hotel on a wonderful Island somewhere. One of those places that is always busy during peak season. In my technology brainwashed mind I see a lone hotel, with a giant digital sign 10 meters higher than the rest that reads; “Get Simplicity With a View Here!” Then 200 tourists exit a ferry, 10 of them calling via mobile to cancel reservations at a “high tech” hotel down the beach. You see, a lot of this technology craze, this distribution and marketing mayhem we see today, it’s about turning a bad hotel location or offer, into the one everybody sees first. “Free WiFi”, or cabinets that open with your iPad (yes, a friend who is a hotelier made this) cannot become hospitality. What has changed, what has really changed?

The Hotel Yearbook 2036 offers another clue from a made up hotelier. Jonathan Marshall, Vice President Asia-Pacific, Meteor Hotels and Resorts, in Kuala Lumpur discusses innovation and trends. Recalling an imaginary education in Lausanne, the hotel executive reflects on the past for marketing business:

“Thinking back on those times, what strikes me now is that communicating with the market used to be something you’d put some effort into in concentrated bursts of energy: It’s August, so I’ve got to start work on designing my Christmas leaflet. It’s March, so it’s time to get our summer program together.  And so on – everything had its season, its proper time.  But within ten years, marketing became non-stop, never ending.  In just ten short years, everything changed.  Everything.”

Has it now? Sit back and think for a moment. What has really changed? Is all this only the proliferation of marketing and marketers? And we have to consider, “is the so-called internet of things (IoT) running guests and service providers?” As for “critical mass” being achieved where hotel technologies are concerned, it’s clear we have reached the threshold, especially where human capability to cope is concerned. Any tech innovation that puts further demands on staff, without alleviating stresses, is on a negative net gain. Tech that simplifies is the only innovation that will matter in the years to come. Other than those, we see Hyatt and other brands returning to core hospitality services. Hotels are back to being hotels, rather than technology incubators and mega-marketing agencies.