Tools to help hotels to manage and optimize the digital guest experience
© 2017 Björn Radde
Publisher: tredition GmbH, Hamburg, Germany
ISBN Paperback: 978-3-7323-9337-4
ISBN e-Book: 978-3-7323-9338-1
No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other non-commercial uses permitted by copyright law. For permission requests, write to the publisher.
„There is nothing in the world that does not change, nothing remains eternally the way it once was.“
Zhuangz Zhou (369 286 BC)
In deciding to write a book about the use of innovative technologies in the hotel industry, two factors were crucial:
Firstly that, with their huge budgets, Online Travel Agencies (OTAs) like Booking.com, Expedia, Agoda, Orbitz and HRS dominate online distribution and, linked to this, the realization that hotels now have very little chance in terms of direct online sales. With a few exceptions, hotels rely on the OTA sales channel. However, investments already made in online marketing measures will change radically with the appearance of voice-controlled systems such as Amazon Echo and Google Home. This became apparent to me after visiting the Google Travel Executive Forum at Google’s EMEA headquarter in Dublin (Ireland), where it was impressively shown how advanced voice-controlled applications already are, and what future hotel bookings will look like. Even large companies like Booking.com and Expedia will find it increasingly challenging to influence how they appear in the relevant set in a voice-controlled search. Autonomous integration into voice assistant systems will be difficult for individual hotels and hotel chains. To this extent, hotel businesses and hotel groups should consider moving their marketing budget towards digital guest experience tools in order to, firstly, increase their revenue in the hotel and, secondly, to improve guest loyalty for future bookings.
The second factor that led to the writing of this book was that the hotel sector has enjoyed increasing occupancy over recent years. This means that many hotels no longer have a problem of distribution – occupancy rates are good. Revenues can no longer be increased by selling more beds, but only by opening new hotels or putting rates up. It is scarcely realized that guests who are already in the hotel can also be monetarized. Hotels invest little in existing technological tools to optimize the guest experience in the hotel in order to increase revenues during the guest’s stay and improve revenue per guest. The term ARPU (Average Revenue Per User), familiar in other sectors, is rarely used in the hotel industry, but it will probably become more significant over the coming years. To this extent, digital guest experience tools will become far more important.
Meanwhile, even the traditionalists in the sector seem to have caught on that digitalization in the hotel industry is not merely a trend, but rather a key change driver for an entire sector. Nonetheless, there is still some uncertainty when it comes to judging the speed of change and the question as to how the hotel operation itself should address this development.
I am convinced that only hotel groups and individual hotels that continue to invest in innovative technologies such as digital guest experience tools will survive the coming years. The hospitality sector is still not sufficiently innovative and is not entirely alive to this future digitalization trend. In this context, technologically innovative guest experience tools are an investment area within the digital hotel value creation chain that the hotel sector urgently needs to look at and use.
Only a few hotels and hotel chains understand the technological imperative and are using so-called pilots to roll out digital tools for their guests in the hotel (on-property). The momentum of onproperty solutions is set to accelerate and it is heading in only one direction. In the near future, the entire hotel will be digitalized.
Finally, I wish to point out that the contents of this book represent my own opinion. They do not necessarily reflect the views of my employer or of companies known to me personally. I have received no reimbursement of any type, either from my employer or from any company referred to as an example in the book, for mentioning them in the sections concerned.
Königstein im Taunus (Germany), February 2017
Björn Radde
Even though this book was written in my spare time, I would like to thank Richard Wiegmann (Managing Director & Chief Commercial Officer of Sabre Hospitality Solutions EMEA) for his trust and support during my work at Trust International and Sabre Hospitality. Without the opportunity to participate in congresses, trade fairs and events as well as the opportunity to meet with international hoteliers to discuss their digital challenges, this book would hardly have been possible.
Special thanks go to Olaf Slater (Director International Strategy & Innovation at Sabre Hospitality Solutions EMEA), with whom I have always been able to discuss constructively the new technologies and their application possibilities in the hotel industry. Olaf Slater has also accompanied me during the compilation of this book and provided me regularly with new information, contributed innovative ideas, and gave me valuable insights from the hotel technology. He has therefore played an important role in writing this book.
In this list Alex Alt (President of Sabre Hospitality Solutions) cannot be missing, who has always listened to my ideas whenever I met him.
I would also like to thank Dirk Führer (former Chief Executive Officer of Worldhotels and co-founder of Okanda), who has always been a valuable discussion partner during the book making process and has opened my eyes to the hotel industry.
I would like to thank Jens Klemann (Managing Partner of Strateco) for the thought exchange of customer relationship management in the hotel industry. I would also like to thank Peter Agel (Vice President Technology & Thinktank at the Travel Industry Club) for the always interesting exchange of expertise.
However, I am deeply grateful to my wife, Sarah, for bearing my passion for the subject of digitization and making this book possible at all. She has always supported me, believed in me, gave me the necessary space for writing, and frequently asked critical questions to rework individual passages or whole chapters. I would also like to thank my parents and my sisters.
A warm thank you goes to all proofreaders as well as to all who have supported me with this book and I have not mentioned here personally. This includes all team members of Sabre’s product management team located in Frankfurt (Germany), who have answered my technical questions and have read my unfinished drafts. I would also like to thank my colleagues at the Digital Experience unit based in Washington D.C. in the United States.
My last thanks go to all the critics who have wondered why I am writing a book at all, discarding the topic for foolish visions of the future, and holding time. This criticism was another motivator to actually be finished.
I would like to dedicate this book to my children!
Online distribution is increasingly important for the hotel industry in Europe.1 On average, over half of all hotel rooms in Europe are now booked online and this market share is growing rapidly. 2 At the same time, hotels are increasingly dependent on a few, large market participants.3 The Online Travel Agencies (OTA) such as Booking.com, Expedia, Agoda, Orbitz and HRS dominate online marketing with huge budgets.4 The role of the OTAs is no longer that of intermediary, but that of gatekeeper.
The power of hotel metasearch engines such as Trivago and Kayak has also increased substantially.5 Google, too, is now involved in this area. In November 2015 Google abandoned its Hotel Finder as a standalone application and integrated the function into its normal search results. This makes Google’s digital hotel marketing status even more significant. Particularly as the organic search results for individual hotels can no longer be found in the visible area.
In this context, it is interesting that the so-called review portals such as TripAdvisor and HolidayCheck play a major role on Google, particularly with user-generated content. But the review portals have become booking portals now, too. The review portal visitor can make a booking without having to leave the portal. The booking is made in the review portal’s interface.
With Google it is ironic that voice search, as a subject, has been of importance to Google for some years, and has been an established part of online searching for a long time. Even though searching by voice input using the various assistants is now pervasive, it is still often being used to avoid manual entries using a keyboard – but this might soon be changing. Even since before Google’s (Siri) and Microsoft’s (Cortana) voice assistants, users have been becoming increasingly accustomed to talking and asking questions using their smartphones. Up to now, the reply has appeared in a conventional search results list.
With the prevalence of physical assistants such as Amazon Echo and Google Home, users are increasingly expecting to receive replies via voice output, and not have to look at a search results list and put the information together themselves.
It is precisely this technical change, and users’ expectations, that is set to change the online distribution landscape in the hotel industry for good.
As well as online booking behavior and the technical revolution of voice-controlled systems, cloud applications, mobile Internet use, social media and big data are also changing social trends.
In the hotel industry, guests’ behavior is increasingly digital. Not just that hotel bookings are now made round the clock from home and most of them increasingly using mobile devices, but guests’ expectations of their hotel stay have been changed by digitalization. 6 A functioning WLAN (Wi-Fi) is now almost a basic requirement.7 Guests now also want, or even expect, digital check-in and checkout, a digital guest folder, digital delivery of newspapers, magazines and sightseeing tips, online table reservations in the hotel restaurant and online spa treatment bookings.
This presents completely new opportunities for hotels: the digital transformation of the touchpoints with their guests means that digital hotel experience tools offer the opportunity to be in permanent contact. Guests can be given the right information and offerings with great accuracy and no wastage.
Alongside the technological changes in the hotel sector, there is also currently a particularly positive situation in general in terms of financial figures. For example, the upward trend in all of the NH Hotel Group’s business areas in the first three quarters of 2016 led to a revenue increase of 6.7 percent to 1.1 billion euros, a 27.3 percent increase in EBITDA to 124.6 million euros, and a 1.8 percentage point rise in the EBITDA margin. The increase in RevPAR continued in the first three quarters (plus 6.3 percent) and is almost solely due to the growth in ADR (plus 5.2 percent).8
The economic situation in the German hotel industry continues to be extremely positive. According to the DEHOGA business survey, 68.6 percent of the hotels questioned between April and September 2016 rate their business outlook as good and only 5.3 percent as poor. 26.1 percent were keeping their business stable. This meant that the mood amongst hoteliers had again improved relative to the previous year. In overall terms, the outlook improved from plus 53.6 to plus 63.3 percentage points. The trend towards taking vacations in Germany has continued despite the summer weather being merely average. The vacation hotel sector grew in 2016. Urban tourism and business travel also continue to be unusually robust. As well as the positive situation in the economy as a whole, the price-quality ratio, relatively good in international terms, also resulted in growth in the German hotel sector.9
According to figures released by the German Federal Statistical Office, overnight stays rose by 3.0 percent to 349.7 million between January and September 2016. This is the seventh consecutive annual increase. Within this, the number of overnight stays by foreign guests rose by two percent to 62.9 million, while German stays rose by three percent to 286.8 million.10
Resilient European economies, the continued popularity of Mediterranean leisure destinations and Europe's importance for business travelers, should drive hotel occupancy and revenues in 2017, according to the latest PwC European Cities Hotel Forecast.11
Also thee U.S. hotel industry's three key performance indicators performed well in 2016, as occupancy was nearly flat (+0.1 percent to 65.5 percent), but ADR increased 3.1 percent to $123.97 and RevPAR rose 3.2 percent to $81.19 compared to 2015.12
The Australian hotel industry is responding to continued record international visitor growth. Through the first 11 months of the year, international arrivals to Australia increased 11.3 percent compared with the same time period in 2015, according to the Australian Bureau of Statistics.13
Africa is seeing a significant growth in international travelers, Hotels in the Asia Pacific region are reporting good performance for total-year 2016 and even the Mexican tourism industry experiencing its best performance ever.14
To summarize, it is apparent that hotels are finding it hard to compete with the online marketing power of the OTAs, and that the use of voice-controlled assistant systems such as Amazon’s Alex and Google’s Allo is set to disruptively change online marketing and make it even tougher for hotels to appear in potential guests’ searches than has been the case up to now. To this extent, shifting investment from online marketing to digital guest experience tools could be useful to achieve better monetarization of guests during their stay.
Add to this the fact that hotels currently have high occupancy rates and good RevPar. Maintaining spending on online marketing is not recommended in this situation, either, since empty bed capacity is limited. Supported by changed guest behavior in terms of using digital devices, and changed expectations, only investing in technologically innovative guest experience tools will create the potential to generate more revenue per guest and thus, ultimately, increase profits.
This book does not focus on underlying technicalities or detailed technical descriptions of digital guest experience tools. Care was deliberately taken to only go into important technological issues in order to provide the necessary basic understanding and to reduce the complexity of the subject. The primary focus of the book is rather to present the options for using innovative technologies in the hotel industry in order to illustrate the potential for increasing revenue, reducing costs, and improving competitiveness, guest satisfaction and loyalty.
The book also aims to provide an overview of future application scenarios for hotels in order to prepare hotel businesses and hoteliers for the unstoppable digital changes in the hotel sector.
The publication aims to be a textbook and manual that attempts to illustrate the options for deploying innovative technologies for the hotel industry. The hope is that it will particularly inspire the target group of specialists in hotels and hotel groups, i.e. eCommerce managers, eBusiness managers, digital marketing managers and marketing managers. The book also addresses the chief marketing officer and, if there is one, the chief digital officer. Hotel owners, hotel directors and business leaders (directors and CEOs) should also feel it is relevant to them, of course. But anyone interested in technology or hotels is also very welcome to read the book.
The book aims to inspire people to think, to show future developments, to probe new avenues, and to put forward specific implementation ideas. The content should not be regarded, however, as an instruction to implement all the tools immediately. The number of tools and the usefulness of implementing them will differ from hotel to hotel.
This book is not only intended to provide practical ideas, but also to be used in education and research, and to spark academic debate.
The Introduction having once more highlighted the relevance of the digital guest experience as a subject, the second chapter will indicate the main issues underlying the digital customer journey in the hotel industry and in the hotel, and explain the paradigm shift that is occurring and will occur in the pre-stay phase, and focus on the digital guest experience in the hotel. The term ‘digital guest experience’ as contrasted with the term ‘customer journey’ will be delimited and pinned down.
The third chapter will then describe digital guest experience tools in detail. For each tool, we define and describe in detail how it is used in the hotel, the challenges faced, and what return on investment it brings in terms of growing revenue, reducing costs, creating competitive advantage or improving guest satisfaction. In some cases we provide an overview of the future development of the digital guest experience tool concerned.
The book describes nine different tools, laying no claim to completeness. Developments in this sector are so dynamic that no author could record all of the technologies and deployment options in the hotel and publish an up-to-date summary. Care has been taken, however, to cover the relevant trends.
The fourth chapter then deals with the potential financial, technological, psychological, legal, strategic and operational barriers that exist or could arise when implementing digital guest experience tools. The chapter also attempts to explain ways in which these barriers may be reduced.
The book concludes with a brief conclusion and a look at the future which states that future editions will add to the list of digital guest experience tools. At the rear of the book, as well as the bibliography and list of figures, there is an index so that readers can quickly find the page they are interested in.
Great care was taken in selecting and citing the literature that supports the statements made in this book. As the subject concerned is an innovative area in the hotel industry, there is little information in the conventional secondary literature that reflects the current or, indeed, the previous research situation. Alongside academic publications we often refer to online articles and blogs. The information that was found and used has been carefully reviewed to ensure it is plausible and valid. In general, we attempted to achieve a certain balance between online and offline sources in order to underline the book’s credibility and academic claims.
While the subject of the customer experience is, indeed, a modern phenomenon, it has been debated for several years. For example, customer experience as an academic issue goes back to around 1982. As the construct of the customer experience, with all the behavioral science papers, would go beyond the remit of this book, the sections that follow only go into the theoretical background briefly.
There has been very little focus on customer experience in the hotel sector in past publications, even though the industry is predestined for academic research in the area of customer experience. Although here the concept has to be adapted to guest experience, which is indeed done in the definition in the next section.
As society has become digitalized, the customer experience has also been digitalized in many areas of the customer journey (particularly the on-property phase). This book aims to reflect this significance. To this extent, the content that follows always focuses on the digital aspect, and always refers to the digital guest journey and the digital guest experience.
The customer journey is based on funnel-based buying process models, the basic thinking behind which can be traced back to the AIDA model used in research into the effectiveness of advertising.15 The AIDA model postulates that consumers pass through the stages of attention, interest, desire and action.16 Building on the thought behind the AIDA model, funnel-based models (also known as branch purchase funnels) map a consumer’s purchase decisionmaking process and originate in the Sequential Multistage Process Model.17 This model shows, in simplified form, the buying process in a market compared with rival brands. The process divides up the decision-making process that a consumer goes through when purchasing a product into different, sequential stages.18
A further development of funnel-based buying process models is the customer journey – their journey through the purchase decisionmaking process.
Synonymous with the expression ‘customer journey’, the expression ‘consumer decision journey’ is also used in the literature.1920