With technology changing the game, hotels increase competition with Airbnb

Hilton is launching a new "hostel on steroids" brand. (Skift Forum Hilton)

NEW YORK - At this week's Skift Global Forum, several dozen travel and hospitality insiders gathered to discuss some of the biggest issues affecting the industry, including disruptors like online travel agencies and Airbnb.

The opening session began with Skift CEO and founder Rafat Ali defining two new terms: “Overtourism,” the trend of popular destinations seeing more visitors than can be accommodated, which leads to “Permanxiety,” a permanent state of stress that frequently evolves from never fully disconnecting. The two buzzwords permeated many of the sessions, with speakers discussing both growth and concerns.

Are We in For More M&A?

Glenn Fogel, ‎CEO of The Priceline Group, was asked if the industry was set for a wild ride of mergers and acquisitions. “There’s a tremendous amount of capital, and people are looking for growth,” he said. On the other hand, the valuations are lofty—by many measurements—throughout equities. Historic numbers are higher than they’ve ever been, so it could be too expensive. The bottom-line answer is that I have no idea.”

The purpose of a corporation has gone beyond the capitalist idea of making money, Fogel argued. “The purpose is to do the right thing for all your investors and your stakeholders—your employees, your partners, they’re stakeholders. Your community is a stakeholder. If you want to be a long-term success, you have to recognize that there are many people you need to deal with fairly. Do things the right way [and] your business will succeed.”

How are OTAs and the Hotel Industry Working Together?

OTAs like Priceline, Fogel said, are leveling the playing field, a sentiment that was echoed by many speakers. “Big hotels can advertise,” he said, and noted that OTAs can help small hotels attract new business. “We translate our stuff into 43 languages. When people ask Alexa for a room, will it know about that little hotel?”

“We have fine relationship with OTAs,” Hilton President and CEO Chris Nassetta said. “OTAs or other intermediaries in the business are all about one word: incrementality. Whenever we look at our relationship with an intermediary, we [consider] does it make sense, can it add to our market share or bottom line, can it help make the owners more money that we may not have access to.” OTAs, he continued, provide the company with access to infrequent travelers. “For those types of customers, accessing them through intermediaries is beneficial. The dream is, of course, that we keep them.”

Fogel intimated, though, that some critics of OTAs may not want the field to be level.  

What About Airbnb?

The evolution of home-sharing was also a prominent subject of conversation on the stage.

“What Airbnb started as and what it’s become are very different things,” Nassetta said, noting that much of Airbnb’s listings now consist of full apartments rather than spare bedrooms. This trend, he said, makes Airbnb much more competitive to traditional hotels—and that’s what concerns him. “They don’t have a regulatory environment that matches ours,” he said. “It’s unfair to compete against someone with few or no rules.” If traditional hotels did not have to cooperate with organized labor laws, insurance policies or safety laws, they could be as profitable as Airbnb, he said.  

To compete with Airbnb, Nassetta said that the company would develop a micro-sized, inexpensive "hostel on steroids" for the urban market. “We’re not trying to be the cheap alternative,” Nassetta said. “We’re trying to be the premium alternative to Airbnb.”

“There is a lot that we’ve learned from all the alternative lodging companies in terms of going mobile for search and mapping,” said Geoff Ballotti, president and CEO of Wyndham Hotel Group. The biggest takeaway from the growth of home-sharing, he said, is the overall experience both online and off. Wyndham, he said, is looking to boost its appeal by having its hotels offer similar experiences.

Do We Rely Too Much on Technology?

Fogel described an ideal situation in which technology could help the travel industry. A canceled or delayed flight could be rebooked automatically—not just on the same airline, but on whatever plane is going to the destination next. At the same time, technology could help that one automatic change become a domino effect, changing a hotel booking, a car service (or booking rail tickets if traffic is bad) and any meal reservations affected by any one shift in plans. “And when I get to my hotel, I want check-in to be automatic,” Fogel said. “When I get to my room, because it’s been a stressful day, I want the minifridge to have beer I want. That’s the vision. We’re not so close to getting there. But we’re getting there.”

Lilian Tomovich, CMO and chief experience officer at MGM Resorts International, said that technology has made companies more effective—but noted that in some cases, businesses have gone to far, relying on technology rather than human connections. Ideally, she said, the two should be balanced. “Companies that place too much reliance on digital technology in recent years suffer from humanless customer service,” she said. “The ability for customers to interact with other people increases customer satisfaction, even in the digital age. Companies must develop experiences that allows consumers to easily move between digital and human interactions.”

Technology should enhance the customer experience rather than replace one-on-one interactions, she said. By using bots on a website to handle simple requests, a hotel can save time and effort in solving guest needs. But a real person should always be available to take over from the bot if the problem becomes more complicated.  

Hilton, Nassetta said, would also be investing in high-tech guestrooms, with spaces that automatically know what a guest wants before the guest has even opened the door.

What Does the Future Hold?

While Nassetta said that he was less optimistic than he was nine months ago, he is still “cautiously optimistic” because the economy—notwithstanding serious issues like North Korea and healthcare and all of the uncertainty around the legislative environment—continues to “chug along” at a reasonable pace. “If you look at any expectations for the second half of this year, and as you look into next year, people who are a lot smarter than me still think that you’re going to see both globally and here in the U.S. an uptick in [gross domestic product],” he said.

Specifically, Nassetta predicted growth in capital investments, which should drive hotel growth: “Tax reform is the most important thing for psychology of the business community to unlock capital investment and hiring, and that will translate if done properly.” Because of unit growth, both in terms of pipeline and new deliveries, Hilton is growing at the company’s highest rate ever. “We’re opening more than a hotel per day thanks to third-party capital,” he said.

So what segments are attracting that capital? With Hilton’s Tru opening nationwide and IHG announcing its new Avid brand, the midscale and economy sectors seem to be going strong, presenting a good opportunity for companies looking to attract travelers on a budget. “There’s a great opportunity for us to elevate the economy experience,” Ballotti said, adding that Wyndham’s brands make up 40 percent of the economy segment—one of the fastest-growing segments in the world. “It’s set to double to 5 million in 10 years,” he said. “We’re appealing to that segment. It’s not blasphemous to say the word ‘economy.’”

Stay tuned for more insights.