At IHIF, the new face of hospitality investment shows itself

IHIF

BERLIN, Germany — Hospitality investment is certainly not a brick-and-mortar business only anymore. This was made clear on the first day of the International Hotel Investment Forum, here at the InterContinental Berlin.

Investment into technology has never been more at the forefront of a hospitality company's strategy as it is now. While hotel companies are not technology companies, as Chris Nassetta, CEO of Hilton Worldwide, said during the CEOs panel, they have to think more and more like them, because that's what their guests expect.

David Rowan of Wired magazine made that clear—and showed why Airbnb is only the beginning. "Things change quickly," he said. "Emerging technology evolves fast and into something different.

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Consider drones. "Ten years ago they were controlled only by the government," Rowan said. "Now they are a hobby. You can't rest."

The near future of hospitality could look well different than its current state. And while robots manning the front desk may not be the norm, ideas such as virtual and artificial reality are not far off. And, as Rowan put it, it's all about an immersive experience for guests.

He offered six tips for hoteliers on how to embrace the guest, through technology:

  1. Embrace connectivity. "Be a tech enabler," Rowan said, adding that good, high-bandwidth WiFi should be the norm. 
  2. Design against friction points, or "The Desire Path,” as Rowan put it. Allow guests to create the experience they want.
  3. Interaction on guests' own terms.
  4. Accept the power shift. "People decide, not the CEO."
  5. Radically personalize.
  6. Tell a more authentic story.

Secure Surroundings
Hotel companies are doing all they can to improve the guest experience through technology. They also have a duty to protect guests. One way is to thwart cyber crimes, a topic which was discussed by Pwc global head of cyber security and data protection, Stewart Room.

"If you invest in hotels, you invest into data and you are then at risk. You have develop ways deal with it," Room said. "Activism can deliver change to business models.

"It is great that we are embracing new technology in the hotel space. But you can't just put new technology in without understanding the threats."

Room alluded to the General Data Protection Regulation (GDPR), a regulation in the making by which the European Commission intends to strengthen and unify data protection for individuals within the EU. It should be finalized later this year.

Meanwhile, physical well-being in a hotel is no longer something that can be taken for granted. A spate of high-profile terrorist attacks on hotels, soft targets, have proved that out.

Helen Loughborough, VP of global safety for IHG, explained how security in hotels needs a nuanced set of skills. "Our guests still expect a warm welcome," she said. "So you have to find that balance between security and hospitality."

She cleverly compared terrorists looking for civilian targets to water. "They look for the easiest route to cause maximum damage, and view hotels as convenient targets."

The impact, she said, is operational, financial and reputational. "If one hotel gets hit, the entire brand can be impacted."

Smart crisis management, she said, involves three measures: preparation, response, recovery.

CEOs Engage on Intermediaries
Distribution played front and center during the CEO panel led by Nick van Marken of Deloitte. While all the CEOs, which included Hilton's Chris Nassetta, Wyndham's Geoff Ballotti, IHG's Richard Solomons, Rezidor's Wolfgang Neumann and NH Hotel's Frederico Tejera, reported healthy brand and pipeline growth, much of the discussion turned to working with and without intermediaries.

"The reality is we are in the stage of the cycle where there is still runway for operating fundamentals, but maybe in the later stages for investment, and that’s when you see the M&A activity," Nassetta said. "It's a time when people look at ways to create value. Scale matters toward distribution and other areas. The ground swell for consolidation is to create bigger companies with more scale."

CEOs

Hilton recently launched its "Stop Clicking Around" campaign, a way to educate and direct consumers to book direct as opposed through an OTA or otherwise.

"The campaign is about making sure customers understand. They have been confused by the intermediaries and thinking they are getting a better value and experience," Nassetta said. "This is about getting loyal customers to understand they are getting the best value by booking direct."

Meanwhile, Expedia spends $3.5 billion pure year purely on marketing, so educating guests is a tough and costly proposition.

Others, meanwhile, were less concerned about scale. "It matters, but being big for the sake of being big is unnecessary," Solomons said.

"There's no doubt consolidation will continue, but scale is not a critical factor," Neumann said. "You have to work harder and be more innovative. You can compete with just a different approach."

No question intermediaries aren't going anywhere. "If you have loyal customers, then tackle them directly," Solomons said. "Most of OTA business today is price sensitive business for those who are brand loyal. But we must be clear to customers about booking directly: OTAs have said they are the cheapest, but that's not the case."

On the Airbnb front, the CEOs, though wary, remain largely not frightened. "I'm not scared," Nassetta said. "The business of [house renting] has been around for centuries. It's satisfying a different need. Airbnb is accommodations; we are hospitality."

"Airbnb is not new supply," Ballotti argued. "It's not rented out 365 days a year"—that's if hosts are above board.

Added NH Hotel's Tejera: "I'm fine with any business that is legal."

 

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