Technology is not just the domain of CIOs. In the hospitality industry, the full spectrum of the C-suite needs to be up on it.
During the "Leaders Check In" panel session at the NYU Hospitality Investment Conference, a tech scrum broke out starring the heads of some of the largest hotel companies in the world. Though the hotel industry is often criticized for its inability to adapt quickly to new technology and the trends that come with it—the fault of several things, including the legacy technology that is difficult and expensive to ween off—hotel CEOs are all in agreement that smart tech is necessary for today's owners and customers, but must be deployed in a genuine, proper way that delivers real value.
Robots likely aren't going to replace the entirety of the hotel workforce, but automating some aspects of service makes eminent sense financially and physically. Chris Nassetta, CEO of Hilton, called the intersection "phygital," and it was a term his CFO and president of global development, Kevin Jacobs, picked up on. "We are in the business of people serving people. Technology will enable better service," he said. The way he sees it happening is driving an environment where workers spend less time with their "heads down" and more time with their "heads up" serving guests.
What the physical hotel of the future looks like will depend heavily on the tech touchpoints available on property and in the palm of guests hands. Stephanie Linnartz, president of Marriott International, said that they saw a 40-percent increase in their app usage during the pandemic that helped drive a 6 percent uptick in direct booking business. "We are going to spend lots of money on back- and front-end technology. Size and scale does matter with technology," Linnartz said.
Larry Cuculic, CEO of BWH Hotel Group, compared technology to a tool chest, where each drawer contained different types of technology: guest-facing technology (optimized website, mobile check-in and check-out, quality in-room entertainment); hotel-level technology, including a booking engine, PMS and POS tools; and regulatory technology focused on data privacy and things like restrictions on cookies. And it all comes down to one thing, Cuculic said: owning data.
According to Pat Pacious, CEO of Choice Hotels International, in the last 10 years, the biggest trends are in cloud computing, big data and mobile, of which he said allows us to connect with the consumer in a better way. For franchisees, it allows for real-time decision making that can mean real cash generation. "Mobile allows us to do revenue management in real time, to see where rate and occupancy is and when to reprice your rooms. Mobile is the biggest gamechanger for guests and owners," Pacious said.
Of course, it all comes at a price that is oftentimes passed on to owners. "It's about allocation of capital," said Elie Maalouf, CEO, Americas for IHG Hotels & Resorts. "There are fads and trends and we can’t afford to just spend millions—they better work," he said. "You have to make great strategic bets and we better be right."
Added Hilton's Jacobs, "The benefits of modern technology is that it's super flexible and fast. That’s also a burden." He referred to this albatross as "tech speed dating," where "now you have more things you can choose [from]. We can throw thousands of things at customers that can actually make it worse."
Jacobs also lamented what he called "tech debt," created out of the legacy infrastructures hotels have, many of which date back to the 1980s. 'We are working our way through it all," he said.
Just how important is technology and spend on it? For most, it's their largest budget item. "We aren’t buying brands or real estate," said Geoff Ballotti, CEO of Wyndham Hotels & Resorts. "We are investing in tech."
Growing the business
Without brand development, technology will not matter much for most hotel companies that depend on growth to satisfy their stakeholders and bump up their stock prices. How to grow often comes down to organic (building within) or inorganic (going out and buying). Pacious said the former has the highest return and Hilton's Jacobs added how much they like organic growth. It's how the company has grown of late, launching new brands such as Motto and Tru by Hilton, but, in some respects, Hilton's largest growth leaps came through M&A, such as acquiring Promus Hotels in 1998, which turned into the DoubleTree brand. In 2005, Hilton re-acquired the Hilton International chain from its British owner, Hilton Group plc, for $5.71 billion. Still, he said, "build is better than buy, for us."
Best Western 12 years ago was one brand but has swelled to 18, mostly organically. At Choice, of their 13 brands, half have come from within. Pacious said one of their biggest acquisitions was WoodSpring four years ago, which was a springboard to building out its extended-stay business.
IHG's Maalouf compared today's brand gauntlet to the proliferation of beer brands that now take up space on your local grocer's shelves. "Owners and guests are the two customers. Is there something they need and you don’t deliver yet? he asked. IHG now has 17 brands, but Maalouf said it's not about just pulling brands together for the sake of it. "It's because we see an opportunity of scale and what guests want and what owners will build and desire. We need to meet at that intersection or it wont succeed."
Is winter coming?
All are bullish on the prospects of travel, especially as the summer months heat up and people get back in the car and on airplanes. And though the specter of recession exists, most on the panel were not unnerved by it. "You mention the 'R' word, but our owners are prepared, Wyndham's Ballotti said. "Their balance sheets are in great shape. It's our job to ensure we are driving contribution to them."
According to Maalouf, the slow down in the economy doesn’t necessarily mean that travel goes down with it. "It’s not binary," he said. "Some sectors did well in the pandemic; ours got crushed." But as central banks move to try and slow down the economy, Maalouf feels the tailwinds, such as only 50 percent of international being back, with more to come. "We can recover in the next two years what we lost in the last two years," he said.
"There are headwinds," said Marriott's Linnartz, but noting the trillions in dollars of American savings through the pandemic, which very well may now be spent on services rather than goods. "There is pent-up demand for travel. If you can get through the pandemic, you can get through anything," she said.