ta 0502016 tab hospitality 4.0 neu - roland berger · think act –-˙ˆˇ˘ ˛ ˆ 4 the sharing...

think actbeyond mainstream

Leveraging digitization to attract guests and improve efficiency

Hotel Industry 4.0

2016

February

T H E B I g

32 THINK ACT

Hotel Industry 4.0

18%of European online bookings are completed on

the move – a figure that is rising fast.

44%of the European population in 2020 will have

grown up with digitization.

< 2/3of hoteliers collect guests' master data systematically;

not even half of them use it for planning purposes or to prepare tailor-made offerings.

THINK ACTHotel Industry 4.0

3

The environment within which hoteliers operate has changed dramatically in recent years. Online booking platforms have grabbed a sizeable chunk of marketing activities for themselves. The sharing economy a is flooding the market with a constant stream of new ca-pacity for overnight stays with no lead times. Mean-while, guests are expressing more and more specific demands that they expect to see met.

Before anyone these days decides to book a vaca-tion, they first conduct thorough research on the inter-net. They also listen more and more carefully to recom-mendations from friends and other travelers. In creasing numbers of reservations are channeled via a handful of booking portals, which in turn dictate per-booking charges to the hoteliers. The more direct and transparent competition between hotels created by these portals adds to price pressure. At the same time, leading hotels are trying out a number of digital technologies to optimize the way they approach cus-tomers and run their operations. All these changes are taking place against the backdrop of ever more volatile international economic and political developments.

Responding to this situation, Roland Berger and the Austrian Hotel Association (ÖHV) recently conduct-

ed the first broad-based international study to investi-gate the impact of digitization on hotel operations. Careful examination of 13 leading international hotel groups, 17 recent studies of the hotel industry and more than 100 technology start-ups in the travel and hotel industry revealed 19 relevant application scenar-ios for digital technologies. In a survey, these scenarios then tested against the experience and plans of 667 ho-teliers in German-speaking Europe. The results yielded a catalog of recommendations that can help hoteliers reestablish direct contact with guests and exploit the benefits of digitization for their own companies.

cOMinG tO tERMS With thE nEW MEDia cULtUREAt the dawn of the internet age, the hotel industry was one of the early risers, very quickly enabling direct bookings to be made. That, however, is largely as far as things went. Today, digitization is threatening to leave the travel industry in its wake and has already brought fundamental disruption to hoteliers' business models.

In just a few years, online platforms have raised their share of bookings in Europe from nothing to more than 20%, a figure that is still heading north.

Are hoteliers missing out on the next phase of digital development? Not even half say their own establishments are "digitally advanced".


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THE SHARING ECONOMY HAS CHANGED THE CULTURE OF HOW WE EXPERIENCE TRAVEL

a

Source: Roland Berger

In the new media culture, residual capacity of every shape and size is also bundled and made available for sale on internet platforms. This practice is common-place in the travel industry too and is growing extreme-ly fast thanks to attractive (last-minute) offers of ac-commodation, mobility and culinary delights. At the same time, private capacity that has never been used before and was not even accessible until recently is in-creasingly coming onto the market and edging out in-cumbent organizations.

To a greater or lesser degree, depending on person-al attitudes, these cultural shifts cut across every seg-ment of the population – every social stratum, level of education and age group. While older generations use the internet and smartphones primarily as an add-on to their accustomed communication and information habits, digitization has penetrated every aspect of life

Moreover, 70% of these bookings are channeled via only a small number of companies. B They are now the market's power brokers – and hoteliers can only stand and watch.

In what is known as the new media culture, infor-mation is available in real time. That alone makes it easier than ever before to compare vacation and ac-commodation offerings. Additionally, the fact that more and more people now own more and more mo-bile devices (such as smartphones and tablets) allows potential guests to communicate with others, find in-formation and make reservations at any time and in any place. Opinions are publicly accessible and shar-able the moment they are "posted", and every experi-ence is reproduced mercilessly and incessantly – in many cases before providers even have a chance to put things right for disappointed guests.

Share ridesShare a

meal with someone

Meet someone

Stay overnight in someone's

home


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A HANDFUL OF BOOKING PLATFORMS DOMINATE THE MARKET

for the generation Y "millennials" born between 1980 and 2000. Together with generation Z (those born after 2000), this group will, by 2020, account for nearly half of all potential hotel guests. They are the very first gen-eration to have experienced digital disruptions from a very early age. Highly interactive and equally inquisi-tive, the global citizens who populate this generation are ambitious and keenly aware of the quality of educa-tion. They are open to anything and everything and don't like to commit themselves until the last minute. They expect an excellent digital infrastructure and op-timal service as standard. They share new experiences with friends almost in real time and listen to the re-commendations of others. They "mingle" freely, seek-ing contacts and both physical and virtual places of encounter.

LESSOn i: LEaRn FROM MORE hEaViLY DiGitiZED inDUStRiESUnlike bookstores and bank branches, hotels – physi-cal places where you can stay the night – cannot be re-placed by anything virtual. That gives them a major advantage over other industries. At least to some ex-tent, however, hotel rooms can be substituted by the private capacity that online platforms are increasingly offering, and that hoteliers have been suffering from for some years. That is why the hotel industry must learn from other industries that, at the present time, are more heavily affected by digitization. In the latter industries, the disruptions caused by new players have brought incumbent market leaders under huge pres-sure, forcing changes to legacy business models in the process. Forward-looking companies responded quick-ly to these changes and thought carefully about the ar-

Traditional (offline) ~49%

Others ~30% Leading

OTAs ~70%

Other online providers ~28.5%

Shares of the OTA2 market

OTAs ~22.5%

~3%

~6%Mobile

B

Source: Hotrec, PhoCusWright, Roland Berger

2 Online travel agents1 25 European countries, weighted

Bookings in Europe1


eas in which new digital opportunities could in fact boost their business. Essentially, there are three key areas where action is needed here:

→ Interaction with customers/guests → Optimization of back-office operations → Diversification into new business opportunities that

relate to traditional core business

The media, financial service providers, retail and tech-nology companies in general are among those sectors that have been most seriously affected by digitization. To date, the media industry has been disrupted by pre-viously unheard-of opportunities to publish content online and in new digital formats. Incumbent print media are painfully aware of this: Especially the fact that users have been and still are very reluctant to pay for content has caused traditional media companies' revenues to plunge spectacularly. Even so, some are successfully mastering the digital transformation by transferring human and financial resources from print to online activities, by setting up central editorial de-partments for all channels and by establishing pay-per-use models online – either for their own content or for external add-on services.

In the finance industry, today's clients can do every-thing online, from payment transactions to getting ad-vice to applying for loans and having applications ap-proved. All this makes bank branches and personal consultants increasingly dispensable. To make matters worse, a host of new "FinTechs" operating all kinds of financial services have rushed into the marketplace and are proving to be tough competitors for traditional banks. By consequence, more and more bank branches are being closed down and margins – on both retail and corporate client business – are dwindling.

Those banks that are still doing well scaled back their branch networks ahead of time, replacing them with new branch concepts at central locations. Equipped with digital counters and ultra-modern designs, these locations facilitate self-service and even let clients chat with investment consultants by video. These banks have also put online banking on a Web 2.0-compatible basis, incorporating elements familiar from social media platforms.

The disruption in retail is plain to see. Four out of five consumers have already made online purchases at least once – mostly from new players who have seized the opportunity and are continuing to build on their

Established players that successfully master the challenge of digitization:

→ Adapt their cost structures and basic systemic costs to changed conditions.

→ Have for some years been specializing in clearly delimited market segments. It's better to do a few things really well than to be average at a lot of things.

→ Move early to begin what can be a very lengthy change process. That gives them time to thoroughly plan the necessary steps.

→ Approach new media culture customers/guests by consciously focusing on their needs (even minor ones) and through holistic customer/guest management across all channels.

→ Provide 360-degree service within their chosen niche. To do so, they must accumulate and apply knowledge – a process in which poaching digital specialists from other industries saves time.

LESSOnS tO LEaRn:thE hOtEL inDUStRY nEEDS a nEW MinDSEt!

AFTER

BO

OK

ING

6


7

DURING BOOKING


BEFORE BOOKINGAFT

ER B

OO

KIN

G

1

6 2

5 3

4

Searching & being inspired

Refining & improving

Reflecting

Experiencing Booking

Still too few activities

Discovering & planning

c

anaLYticaL FRaMEWORk FOR thE cUStOMER JOURnEYGuests should be addressed in every phase


8

D

POSSiBLE DiGitaL initiatiVES FORthE hOtEL inDUStRY


Mostly established Mostly planned in the medium term Planned by a few hotels

19 relevant initiatives that should be tailored to guests (guest groups) and implemented

FOCUS ON OPERATIONS

Revenue management that draws on external data sources

App to open/lock room doors

Online check-in/check-out (via smartphone app or website)

Service robot for baggage storage

Internal (web-based) communication tool for staff

Service robot in reception

Self-service check-in/check-out (via a dedicated terminal in the lobby)

Service robot for baggage transportation

THINK ACTHotellerie 4.0

9

FOCUS ON THE GUEST

App for direct communication with hotel staff

Adaptation of media content for various channels

Regular newsletters for different target groups

Locally-based push services

Online room selection

Ground plan app for navigation

Presentation of offerings via webcam

Mobile digital concierge

Messaging app for hotel guests

Real-time feedback app

"Smart mirrors"/digital display boards


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short list of 39 application scenarios, attention was concentrated on those 19 that, in the opinion of the respondent hoteliers, can be implemented in the next three years at most.

The bad news is that, in talks with the numerous German-speaking hoteliers we surveyed, there was lit-tle evidence that such digital applications are being implemented in practice. And even aside from these applications, the hotel industry still has a number of white spots where existing opportunities are being left unused.

Take social media, for example. No channel other than Facebook is used intensively. Barely a third of the respondents currently have videos on YouTube, even though video has become the single most important online format. E

Another example is the systematic capture of guest data. More than a third of respondents do not concern themselves even with pure master data, and fewer than half of hoteliers who store data systematically actually do anything with it. Sales is no better. Just over half of hoteliers align their sales activities with seasonal fac-tors, but a far larger proportion draw no distinctions whatsoever between different guests (or groups of guests). 60% of hoteliers give online travel agents too much freedom, although active revenue management and controlling is needed across all sales channels.

By no means least, large stretches of the customer journey too are simply being ignored. Most studies and large hotel chains alike still restrict themselves to only two phases of the customer journey: "booking" and "experiencing" – with the latter often passively equated with guests' physical presence on the premises. As a rule, the customer journey phases "discovering and planning" and "reflecting" remain virgin territory, despite the fact that the customer journey as a whole is known to span six phases: c

Phase 1, "searching and being inspired": Future guests have not even thought about where they want to spend their vacation. They thus surf the net in search of inspi-ration.

Phase 2, "discovering and planning": Future guests have already made a tentative decision about the desti-nation and the kind of vacation they want (e.g. hiking in the Alps or a weekend city tour in Central Europe). They now look at the specifics: Where to stay? When to travel

success. By contrast, traditional retailers are shrinking their selling space and axing outlets while at the same time trying to set up profitable online shopping chan-nels. For them, integrating these channels – organizing multi-channel business, in other words – is a never- ending challenge.

Visionary retailers were also quick to use the inter-net as a vehicle to sell products to target groups beyond the reach of stationary retail outlets. Retail chains have begun to collect customer data systematically, analyze it and use it to target customers with personalized of-ferings and prices via multiple channels – using blogs and their own online shops, or even by distributing goods via Amazon and eBay. Organizational and tech-nical integration is referred to as omni-channel man-agement. Customers encounter this phenomenon in a seamless information and shopping experience, irre-spective of any given touchpoints with the retailer.

Among technology companies, disruption mani-fests itself in the possibility of pragmatically combin-ing different technologies and, in the process, transforming themselves from pure-play product ma n-u facturers into providers of brand-new customer- oriented solutions. That is an ideal way to accommo-date customers' need for convenience.

LESSOn ii: LEaRn FROM ViSiOnaRY cOLLEaGUES in thE SaME inDUStRYThe good news is that things are already happening in the hotel industry. Of the 125 digital application sce-narios our research identified, the 19 most promising ones are outlined above as food for thought. D To reach this point, the long list of 125 was cleansed of redundancies and checked for both relevance and a narrow focus on the hotel industry. On the subsequent

No two guests are alike. Hotel databases ought to know that.


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ACTIVELY CULTIVATING SOCIAL MEDIAExcept for Facebook, little use is made of social media

E

Source: Roland Berger (rounded values)

Implementation planned in the next three years

Not planned

Already implemented

Implementation planned in the next year

to and from their destination? What exactly to do when they get there?

Phase 3, "booking": Future guests know where they want to go and book with a company or on a website where they feel safest, or feel they will get the best price. This can be done on a hotel, airline or OTA website or at a bricks-and-mortar travel agency, for example.

Phase 4, "refining and improving": Having booked the basic aspects (e.g. flights, accommodation and rented cars/transfers), future guests set about booking addi-tional offerings (e.g. skiing lessons for the kids, guided museum tours, meals at a restaurant, a mountain guide). Some of this is done over the internet or by phone before the vacation begins, while the rest is done locally – using a local event app, other offerings at the destination or via the hotel.

Phase 5, "experiencing": Experiencing means that guests have reached the accommodation they booked at their destination and are now spending their vaca-tion there, or using it as a base for further travel.

Phase 6, "reflecting": The guests have returned home and are posting their experiences on the internet, tell-ing friends and relatives about them and receiving per-sonalized newsletters from the destination or hotel.

In addition to these 19 digital application scenarios, nine general recommendations can be passed on to the hotel industry. These are classed either as must-have "standards" or as "opportunities", depending on their urgency. The must-have standards, as the name sug-gests, should be put in place or aligned with the state of the art as quickly as possible. Hoteliers should then set about exploiting the wider opportunities afforded by digitization in order to regain control of their commu-nication with (potential) guests.

iMPLEMEnt thE StanDaRDS – thESE aRE MUSt-haVES BEcaUSE thEY aRE EVEn MORE iMPORtant nOW than in thE PaSt F

DiGitaL MaRkEtinGDesign an attractive, modern website. Put the technol-ogy in place to ensure that your site loads quickly. Keep

52%

11%

14%

23%

81%

9%

3%

7%

41%

49%

9%

12%

30%

11%

15%

33%


12

navigation intuitive and set up a booking engine that is fast and easy to use! The website should also be opti-mized for mobile devices, as 18% of online bookings are already made while users are on the move. Profes-sional photography aligned with seasons and target groups should – as ever – be a given. Good design and attractive visuals in particular are an excellent way to set yourself apart from the crowd. Another important aspect is optimizing the keywords on your website and conducting professional search engine optimization in line with your specific target guest groups. Communi-cate your value proposition consistently! According to Google, more than half of the potential guests who see a hotel website address on an OTA site subsequently continue directly to this particular hotel website. Stay with these potential guests as soon as they arrive on your website and steer them toward bookings. The most important criterion for bookings via OTAs is what is alleged to be the best price: Let potential guests know that your website guarantees them the best value for money – thanks to package deals and special ser-vice quality, for example. Again according to Google, YouTube is the source of online inspiration for today's users. Videos are viewed throughout the customer journey, but above all before a decision has been made to book. Post attractive videos of your establishment online – videos that are suitable for mobile consump-tion. Become a content provider. Supply content that goes beyond mere information about offers: Include what guests have said about the hotel, for example, sto-ries that encourage viewers to dream and discover, re-ports on past local events, announcements of forth-coming events and video messages from your staff. Give potential guests an incentive to book on your own website.

DOn't SELL SERVicES, SELL EXPERiEncESCapture your guests' enthusiasm by making their stay with you something special. Give them a sense of life-style. Emotional bonding fosters loyalty and leads to positive postings and recommendations on the inter-net. Even if you decide simply to offer basic, low-cost accommodation, be aware that modern digital stan-dards are now expected even here.

PaRtnERShiPSIf your own operation is too small to organize special activities, seek to establish partnerships – for example

with like-minded hoteliers in your own country and/or internationally. Another alternative is to support an initiative or platform for your particular locality. Part-nerships can center on topics such as staff training and development, the selection and purchase of applica-tions and software for data management, and joint marketing activities.

DiGitaL inFRaStRUctUREYour internet infrastructure should be an optimal means to an end, not a cause of complaints. Make sure internet connections are good with plenty of band-width even in the room on the most distant corner of your property and even when your hotel is full. You should also provide public spaces where guests can surf in comfort and interact with other guests. Larger hotels and hotel groups should automate or digitally optimize all core processes – such as pricing, revenue management, operational materials management, supplier management, personnel planning, account-ing and invoicing – to the greatest extent possible.

DiGitaL SaVVYYou or your locality should seek to recruit staff from heavily digitized industries – possibly even from an in-ternet firm – and deploy them in digital marketing, data collection/analysis and sales. Initiate a change of culture, moving toward a new media culture in your own establishment. Launch a focused training pro-gram for yourself and your staff. Connect with univer-sities to help your establishment push on with pilot projects and innovations.

SEiZE OPPORtUnitiES – SEt YOURSELF aPaRt FROM thE cROWD anD BE a WinnER

F

OnE SiZE DOESn't Fit aLL!Address your guests as individuals, taking account of everything that makes them individuals! Having estab-lished a clear profile and positioning ("What does my hotel stand for?"), digital tools today allow you to culti-vate relationships with guests through every step of the customer journey. Do digital marketing the way start-ups do it: modern, agile, focused on communication with a defined target group and at low cost. According to Netaffinity, it takes potential guests an average of 24


13

days to progress from "searching and being inspired" through "discovering and planning" to "booking" (phases 1 to 3 of the customer journey). During this time, they encounter information about a given hotel at least 21 times. The implications are clear: Manage all these touchpoints with potential guests by proactively providing content in all phases – not just "on request", because that is too late!

GUESt DataCollect more specific guest data and use it intelligently to boost your business. If you know that your guests have different preferences, why send them all the same standard newsletter? If a guest requests a firmer pillow on their first visit and, on their second visit, finds it al-ready in place on arrival, the impact should not be un-derestimated. Automate your data analyses and the way they are channeled into digital marketing.

REVEnUE ManaGEMEnt, Ota ManaGEMEntTailor your use of OTAs to periods when you have ex-cess capacity. OTAs are a good way to acquire guests when you cannot do with your own resources. Con-versely, if you nurture your regular guests more system-atically and encourage them to book via your own web-site, you will have less residual capacity (and will pay less money to OTAs). What residual capacity there is can still be offered – selectively and with seasonal ad-justments – in collaboration with the OTAs.

DiGitaL aPPLicatiOnSDigital applications can be used to optimize your back-office operations, but also to cultivate a guest-cen-tric orientation. Think carefully about which digital applications D support your positioning with regard to relevant guest groups, provide pragmatic solutions and reduce your cost base in the long term. When you find the right ones, implement them!


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StanDaRDS

chancES

collect and use guest data

Launch digital applications

Manage Otas

address guests individually

Optimize your digital marketing

Become more digital-savvy

Form partnerships

Perfect your digital

infrastructure

Sell experiences, not services

F

GEttinG hOtELiERS in ShaPE FOR thE DiGitaL aGE

About us

WWW.ROLANDBERGER.COM

15THINK ACTHotel Industry 4.0

Roland Berger, founded in 1967, is the only leading global consultancy of German heritage and European origin. With 2,400 employees working from 36 countries, we have successful operations in all major international markets. Our 50 offices are located in the key global business hubs. The consultancy is an independent partnership owned exclusively by 220 Partners.

The Austrian Hotel Association (ÖHV) represents more than 1,300 top hotels with a total of 160,000 beds. These establishments in turn constitute around two thirds of all of Austria's 4-star and 5-star hotels. Their 47.6 million overnight stays account for 36% of all overnight accommodation in Austrian hotels and serve 41.3% of international visitors to Austria.

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PublisherROLAND BERGER GMBHFreyung 3/2/101010 WienAustria+43153602-201www.rolandberger.com

This publication has been prepared for general guidance only. The reader should not act according to any information provided in this publication without receiving specific professional advice. Roland Berger GmbH shall not be liable for any damages resulting from any use of the information contained in the publication.

© 2016 ROLAnd BERGER GMBH. ALL RIGHTS RESERVEd.

WE WElcOmE yOur quESTiONS, cOmmENTS ANd SuggESTiONS

Österreichische Hoteliervereinigung OLIVER SCHENKPublic Affairs & [email protected]

EditorRITA [email protected]

CREDITS (PP. 8, 12, 13)icons made by Freepik from www.flaticon.com

DR. VLADIMIR [email protected]

ANDREAS TIEFENGRABERPrincipal+43153602-301Andreas.Tiefengraber@rolandberger.com

This publication has been prepared for general guidance only. The reader should not act according to any information provided in this publication without receiving specific professional advice. Roland Berger GmbH shall not be liable for any damages resulting from any use of the information contained in the publication.

© 2016 ROLAnd BERGER GMBH. ALL RIGHTS RESERVEd.

ta 0502016 tab hospitality 4.0 neu - roland berger · think act –-˙ˆˇ˘ ˛ ˆ 4 the sharing...

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