Tomorrow’s guest – the future of the hotel industry

On the surface, a casual observer might think that the hotel sector is in good shape. By 2016, total hotel revenues are expected to exceed $0.5 trillion. Occupancy, revpar and average daily rates are all high. Yet strong trading figures are only part of the picture. Hotels are feeling the impact of a much deeper trend. As in other sectors, digital technologies are shifting the balance of power towards the consumer. At the same time, consumers are changing.

Over the next few years, we will see millennials becoming the primary consumer market. International guests, especially from emerging markets, are also growing in importance. For hotels, this means travellers increasingly demanding services (and languages) tailored to their needs.

Smart mobile devices present a major opportunity for hotels to personalise the customer experience. Yet the sector is lagging behind other industries, many of which are already using mobile technology to provide accessible, customised and relevant customer services.

"The biggest hotel brands may have announced mobile strategies," says Steven Perkins, global leader of technology at Grant Thornton, "but they are doing so far later than leaders in consumer packaged goods, personal banking and transport. Many are still focused on developing their websites, whereas the guests of 2020 will search, price-compare, book and check-in through apps on their mobiles."

Between now and 2020, hoteliers will have to use mobile technology to engage with their customers. In particular, they must consider apps to personalise the guest experience - from choosing rooms to specifying lighting and temperature levels. Some hotels are already making progress. Holiday Inn teamed up with Samsung during the London 2012 Olympics to enable guests to control their rooms' TV, air conditioning and lights with their smartphones, while various other hotels are rolling out apps to let guests use their phones to open their room doors.

Data set

Apps are just one side of the story, though. Hotels can mine insights from the customer data that smartphones generate to enhance their services. And, as digital-native millennials become the dominant consumer group in the marketplace, set to outspend baby boomers on hotels by 2017, the pressure on hotels to exploit the platform will intensify.

The hotels that build mobile-first strategies will gain a significant competitive advantage, but they should remember that this opportunity does not come without risk.

"Hotels need to understand where and how they can deploy mobile technologies to deliver the personalisation that consumers expect," says Erik Janse, information technology services partner at ConQuaestor Grant Thornton in the Netherlands.

The obvious starting point is user-friendly apps that enable mobile check-in and room selection. This will be especially important for commercial bookers and business travellers making brief visits to a location.

"Long queues at reception, checking in, typing in of stuff on the terminals - people will not have any patience with that approach in 2020," agrees leading futurologist, Dr Ian Pearson.

Many global chains are already responding. "We have apps that allow guests to input preferences about room temperature or what type of bed they need," explains Régis Kahn, director of strategy and e-commerce at IHG. "And now, when a guest passes a restaurant or retail outlet, a promotional offer or video can be delivered to them directly through our mobile app."

In the future, hotels must use mobile technology to personalise not just the immediate hotel environment, but also guests' overall experience of the destination. IHG has created Concierge Insider Guides, an app that provides local insights for guests. And the Ritz-Carlton app, launched in 2014, provides concierge services such as booking reservations, local city guides and special offers.

Hotels could potentially use such an app to strengthen their connection with the local community and compete with the 'authentic' experiences offered by rivals such as Airbnb. To do this, they may need to connect their mobile channels with external partners. For instance, Hyatt recently integrated with Uber, to allow guests to call cars from within their app. In the future, some external partners could simply be local hosts adopting the home-away-from-home aspect of the sharing economy.

On the go

Mobile will also be crucial for hotels to better serve rising numbers of guests originating from emerging markets.

In 2013, 97 million Chinese tourists travelled abroad; by 2020, this will more than double to over 200 million. Hotels cannot afford to ignore this trend and must tailor their services accordingly.

The Conrad Concierge mobile app already allows guests to choose Chinese TV channels, minibar foods and other amenities in Mandarin on their mobile before they arrive. By 2020, more and more travellers will expect such services, as well as other apps that break cultural and language barriers. Google and Microsoft recently released trial versions of apps that allow live human language translation. These will be widely in use within a few years.

As well as opportunities, mobile brings risks. Firstly, many leading hotels focus on providing a personal care service to seem more welcoming and differentiate their brands. If guests are expected to use their smartphone to manage their own stay, much of this differentiation is lost. "I call it the 'care economy'," says Pearson. "As technology becomes more sophisticated, it forces us to focus on the personal interaction side and that becomes a differentiator."

Another risk is that personalisation is heavily reliant upon consumers sharing their data. The European Commission is pushing for stricter regulation of personal data use, and hoteliers will be reading the headlines about data breaches and hacking losses with concern.

Already, a hotel management company has admitted data breaches at 14 branded hotels. To become recognised as secure custodians of data, hotels must rethink their risk management, ensuring control across the organisation. For those that get it right, there is an opportunity to show real value to guests.

Not only must hoteliers satisfy the demands of empowered and digital-savvy guests, but they must also understand how they can extract meaningful insights from customer data. They can use this to further segment their B2B and leisure customer bases, and anticipate future guests' wants and needs.

At the same time, hotels should see social media as a vital channel to engage with consumers. According to Mintel research, Hilton is currently dominating the sector's conversation on social, claiming a 45% share of voice through its prize competitions on Facebook and its @HiltonHelp guest assistance team on Twitter.

This is giving the hotel chain an advantage as it seeks to acquire new guests in a world in which hotels are losing traditional touch points with consumers.

Hotels will also need to build an IT infrastructure that can support growing data-driven demands and handle new challenges around risk. Meliá Hotels International, as one example, is committing more than $1 million over the next three years in technology and digital marketing expertise. Meanwhile, Accor has committed $225 million to a major digital transformation project. To compete, others must take action quickly or risk getting left behind.

New blood

The sector is about to enter a digital talent war being fought on multiple fronts. As businesses reshape themselves around digital, there is a surge in demand for tech skills - from strategic digital planning through to data scientists and programmers.

Hilton has demonstrated, through its success on social channels, that hotels with dedicated staff and expertise in social marketing will dominate the conversation. At the same time, hotels should consider how unfavourable comments on social media can do significant damage to their reputations. Many have already brought in people to monitor customer reviews and respond where necessary to regain goodwill or counter malicious campaigns.

Some hotel executives have seen this in practice as front-of-house teams use their digital skills to respond to guests' needs. To ensure they have people with the required mix of advanced technical skills, hotel HR teams must reconsider their approach to talent management, reviewing how they find, assess and recruit new staff.

Talent recruitment is not the only priority for hotels - they should also rethink their internal training activity. Over the next few years, hotels must focus on up-skilling these employees, and translating complex back-office data analytics into user-friendly systems that will enable front-of-house staff to personalise guests' experience. Hotels' efforts to recruit digital-savvy talent will be futile if they do not equip that talent with the right technology.

Hotels will also need to learn to gather data in new ways. Some of the most innovative means of creating personalised services rely on sensor technology to understand customer behaviour. The Ericsson Mobility Report for 2014, for example, predicts that the number of active cellular machine-to-machine devices will increase three to four times by 2019.

This opens many opportunities for differentiation, if hotels can learn to use sensors effectively. Westin Hotels is already trialling new smart-sensor technology that allows it to track guests' sleeping patterns and offers personal coaching tips to help them sleep better.

Change the channel

As consumers use online intermediaries to find the cheapest rooms and the most convenient locations for their trip, hotels face a future in which the strength of their brand has dwindling influence over customer choice. But the hotels that can get branding right in a digital era face a clear opportunity to grow market share.

This is even more important as the value of traditional channels dwindles. According to a Mintel study in 2014, only half of guests will visit a hotel's website before booking. And many business travellers will arrive at a hotel that has been booked for them by others - they will have no visibility of the brand before check-in. If guests aren't visiting the brand's websites, hotels have lost a vital channel to communicate their brand message.

"If you take an OTA [online travel agent], you have no brands," explains Eric de Neef, EVP and chief commercial officer at Rezidor. "The OTA is just a distribution channel."

In response, hotels should develop new touch points to communicate with their current and prospective customer base. Hotels need to learn to talk to their customers through mobile, social media and online channels more effectively.

Some hotels are already using digital to support their branding in this way. This is most notable among smaller independent and boutique hotels, of which the websites frequently contain well-crafted content about local attractions, restaurants and things to do. citizenM, for example, produces citizenMag, its own 'online lifestyle magazine'. As guests share this content on social media, they are making the hotel brand stronger.

Over time, as we have seen in other industries, hotel brands will increasingly become content publishers. They must consider what is likely to appeal to their guests and make it available through the most appropriate channels. A guest's perception of a hotel's facilities and service will influence their future choices. An extreme experience, whether good or bad, is likely to make them voice their feelings on social media.

"The experience you have at the property level is now the only thing that hoteliers own," believes de Neef. "Brand communication comes through in the hotel experience. The most successful brands will be those that anticipate guests' needs and deliver the promise accordingly."