Can it be business as usual for the hospitality sector?

Technology, demographics and globalization are among the various factors that have been significantly changing the landscape of business across industries. The hospitality sector is no exception. While these factors may threaten and disrupt traditional business models and value chains, the reality is that they also create significant opportunities.

TECHNOLOGY HAS CHANGED EVERYTHING
The impact of technology cannot be denied in almost every industry.

For example, more and more customers are finding it more convenient to shop using e-commerce. Some enjoy purchasing through online shopping facilities which are literally at their fingertips, rather than physically traveling to a store and having to deal with traffic, transport, crowds and similar concerns. For more technology-enabled brands, virtual reality has also transformed physical stores into experiential showrooms.

The same holds true for the hospitality sector, where technology has also become an integral part of the hotel service and experience. Almost every player in the hotel sector has an easy-to-navigate and user-friendly website, which not only showcases the types of rooms, food and beverage outlets and other services, but also allows customers to more viscerally experience the facilities offered by the hotels using the 360-degree viewing functionality. In the past, booking a room was done through phone calls and walk-ins, whereas now, a booking can be done almost instantaneously online, at the customer’s convenience. Another part of the hotel experience includes how quickly they can handle check-ins and check-outs, which has now been streamlined by the use of more efficient and effective reservation, front office and accounting systems.

However, the rise of technology has also led to more challenges and disruptors that are directly impacting the hospitality sector. One such disruptor is the digitally enabled sharing economy. Take Airbnb, for example, an increasingly popular homesharing service which is competing strongly with traditional hotels and accommodation providers — without even owning any property. By leveraging its digital platform to create an online marketplace which connects asset (home) owners to prospective customers, the company is able to “sell” rooms of varying types, locations and experiences. While the larger hotel chains believe that their target market is different from Airbnb users, the reality is that more and more consumers are switching to Airbnb because of its perceived variety, better value-for-money and the unique experience.

THE POWER OF DIGITAL INNOVATION
Hospitality companies need to understand how digital innovations can increase their value, allowing them to improve outdated business practices and expand market share. Social media, for example, allows the hospitality sector to advertise freely. Filipinos love to post pictures with friends and families in Instagram-worthy hotels. Instagram is an internet-based photo and video sharing application. Many of us take pictures of food and share them on social media, before we even get down to eating. Many also love to check-in our locations in social media, using hashtags that often include the name of hotels or resorts. Most urbanites today are already present in a massively connected digital ecosystem that allows instantaneous sharing of information, experiences, opinions and feedback. This is an important consideration for traditional hospitality companies — the speed at which they can receive real-time customer feedback necessitates and equally swift real-time response. Many companies have also engaged social media managers to handle and maintain social media accounts, thereby hopefully improving the customer experience while quickly addressing any negative feedback.

DISRUPTION POWERS COMPETITION
We should also consider how technology and always-on digital access have transformed the process of making room reservations, even with such options available on hotel websites. The rapid rise of various booking channels such as Trivago, Deal Grocer, Agoda, Tripadvisor, Booking.com, Expedia and others demonstrates the changing behaviors of consumers. Users now rank convenience, variety, pricing and user ratings almost as highly as traditional metrics such as level of comfort, star ratings and others.

These booking channels feature participating hotels in their websites and showcase the hotel prices, ratings, customer feedback and pictures — all in one convenient page, so that even if a prospective user has never experienced the selected hotel, they are given a good idea of what to expect based on the ratings and reviews from others.  On the side of the booking channels, they also represent the evolution of the traditional “agent” business model by enjoying a share of the hotel’s revenue — some are commission-based, while some impute mark-ups of the hotel rates. While this can be considered a huge benefit for most hotels, players also need to realize that the ability to instantly compare prices, value and room quality within a common vicinity has also changed the nature of competition.

Demographic shifts and preferences, coupled with technological advances, will also affect the hospitality sector. To attract tech-savvy millennials, hotels are becoming more creative in installing unique and social media-worthy spaces. Consider how, in 2016, Pokemon Go became a global phenomenon. Quick-thinking establishments realized the huge attraction caused by the app and opted to have the game developers install Pokestops in their virtual locations, thereby increasing traffic and exposure to the public.

In terms of facilities for guests, many hotels have also taken to enhancing the digital experience for customers, on top of traditional facilities. Take internet access — most hotels now offer free, high-speed internet access in rooms, unlike in the past where internet access had to be purchased separately by guests. With globalization, investors, operators, and brands are able to expand portfolios. The PAGCOR Entertainment City alone hosts five existing hotel brands.  Although the players in the gaming industry consider their hotels as ancillary or support to their gaming activities, customers in the leisure group will always book with these types of hotels, where they can play in the gaming facility and relax in their hotel rooms.  Certain brands are also expanding hotel properties in business districts. In Bonifacio Global City, for example, a number of hotels have opened in recent years.

THE UNIQUE CHALLENGES OF THE HOSPITALITY SECTOR
Disruptive forces are present across all industries. The planning, delivery and management of these disruptors require long-term vision, which may be difficult to establish in a rapidly changing world. Businesses must be able to foresee the future and constantly adopt new ideas — to think outside the box, develop future opportunities and to focus on their core offerings — excellent service and customer experiences. Given how quickly businesses are now becoming outdated, hotels need to think of how they can innovate to maintain business as usual.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

Grail B. Ragos-Rosario is a Senior Director of SGV & Co.