What will the future hold for the hospitality industry in 2015?
Global financial and consulting firm Deloitte has issued the follow-up document to the highly successful Hospitality 2010 report. The original report, published in 2005, predicted what the trends would be that would shape the hospitality sector over the course of five years. On point, the predicted trends for 2010 were the growth of emerging markets, the value of the brand to the consumer, the importance of technology and the value of sourcing, developing and retaining staff.
Global Managing Partner of Deloitte Tourism, Hospitality & Leisure Alex Kyriakidis says, “The combination of global economic uncertainty and the resultant impact on the consumer means that, as an industry, action is needed to respond to the new world order. More than ever before, the consumer will be value-conscious irrespective of segment. Simply put, the opportunity is to be a game changer or a spectator.”
The follow-up report published in 2010 titled Hospitality 2015: Game changers or spectators? identifies some of the key trends set to shape the international hospitality industry by 2015.
Engaging the new consumer
Traditional source markets like the UK and USA will see a rise in the well-travelled, affluent, time-rich Baby Boomer generation, while emerging economies like India and China are seeing a significant rise in the middle classes. Baby Boomers are predicted to be more experienced, confident travellers than previous Next Stop South Africa (NSSA) travellers who will enjoy authentic, off-the-beaten-track experiences.
The growth of the middle market
The rise of the middle classes and domestic tourism and effects of the global economic recession on consumer buying behaviour means that while much recent development has focused on the luxury market, the real growth potential lies in branded mid-market and budget products.
“Half of humanity is middle class… That middle class needs hotels,” says President and CEO of Starwood Hotels and Resorts Worldwide, Inc., Frits van Paasschen.
Supply currently exceeds demand and as the market gets more saturated, luxury hotels will increasingly be differentiated by the emotional appeal of their brand, while the mid and budget-end of the market will be differentiated by their loyalty programmes.
Social media and platforms like Twitter and Tripadvisor have turned the tables, with the consumer now seen to “own the brand”. The transparency of social media quickly highlights inconsistencies between the brand promise and delivery. A helpful tip on how to deal with negative reviews on these platforms is to have an open dialogue with your customers – good service turnaround can increase loyalty and market share.
Whatever you do, don’t ask one of your staff members to post a positive review to counteract a negative review. If consumers see through this it will cause even more negative publicity, tarnishing your brand.
Technology, online marketing and social media
In the words of Strategic Hotels Capital CEO Laurence Geller: “The problem with technology is that because its development is evolving so quickly, there is a danger of spending a lot of money on new technologies only for it to be insignificant or outdated in a few years.” What do you look at then, for your property over the course of the next five years?
The key areas identified by the report include online booking and mobile technology and tied to this data security, online social networking, Customer Relationship Marketing (CRM) self-healing technology for your IT network, Artificial Intelligence (AI) to forecast food and beverage requirements to minimise waste, smart card technology and in-room product innovation.
What will the hotel room of the future look like?
The answer in short: ultimately, the consumer will decide. Expect alarm clocks that wake guests up by increasing the amount of light in the room, for a calmer start to the day; floors with built-in sensors to guide you to the bathroom in the dark, televisions that work with voice recognition and can tell you what time breakfast is served, use of mobile phones to unlock doors and the ability to SMS your room preferences to the hotel to have your environment perfect on arrival.
Factors that drive sustainability include the fact that hospitality is an asset-heavy sector with a large environmental footprint. Regulatory changes will have an impact while the consumer’s awareness around environmental sustainability is growing daily. It is predicted that, although few consumers will be willing to pay extra for green hotels, values-plus-value will become a key priority for consumers.
The recommendation from Deloitte is that hospitality businesses must build an environmentally responsible brand, embedding a 360-degree view of sustainability in their business model.
“[The] InterContinental Hotels Group (IHG) views sustainability as a business issue and it is core to the company’s five-year strategic plan,” says Senior Vice-President of Corporate Social Responsibility at IHG, David Jerome.
The global economic recession has slowed down the rate of staff turnover, with less hiring and fewer job transitions, but the turnover rate is expected to increase rapidly as the economy begins to pick up. Key to the brand promise is the talent of delivering it, and hotel operators need to put strategic plans in place to retain their critical employees.
Online travel agents (OTA) and hospitality
The much-debated relationship between hotels and online travel agents (OTAs), such as Expedia, was also put under the spotlight. Often a tug of war ensues between hoteliers who feel that they are losing control over pricing and their inventory and the OTA, seeking inventory and rate parity for their customers.
A recent study by Cornell University looked at the value of visibility, or the “billboard effect”, experienced by hotels that are represented on an OTA website. The research concluded that the hotels not only received additional bookings via the OTA channel, but also enjoyed an increase ranging between 7.5% and 26% in the number of bookings made through their own website and hotel booking system.
Threat of the unknown
Economic uncertainty, volatile oil prices, fluctuating exchange rates, and events such as acts of terrorism and natural disasters all create sudden shifts in demand. These occurrences must, however, be planned for and best practice measures include organisational restructuring, business continuity planning, flexible pricing and loyalty and customer care.
Reference: Behind the Starwood’s Hotel Expansion in China, Bloomberg Businessweek, August 2009.