We’ve all heard the word “disruptor” this year in more instances than one, but it’s nothing new in the industry.
2017 has been the year of the disruptor.
For those of us in lodging, Airbnb has been disruptor-in-chief, but from Lyft and Uber to Amazon and Alexa, few industries have been spared from the impact of new products, new business models and changes in industry-sector boundaries, many of which have been propelled by technology. Dictionary.com lists as disruptor’s first definition “to cause disorder or turmoil in”—a definition as dramatic as this fall’s hurricane season.
But if we look back, disruptors are not a new phenomenon. My first career was in telecommunications. I started working for AT&T in 1981, the year the U.S. District Court for the District of New Jersey issued its Consent Decree, opening the door to competition in the telecom industry. AT&T’s efforts to protect its monopoly on telephony services over the next decade were herculean, but in the end, competition, and the innovation that accompanies it, was too strong for any lobbying or regulatory dam to hold back. To this day, more than 35 years later, AT&T still refers to customer acquisition as “win back,” a term that assumes all customers belong to them, though some got lost and haven’t found their way home yet.
Another “disruptor” that gets less frequently categorized this way is Lululemon. In 2010, Nike, Adidas, and Under Armour dominated athletic apparel. Nike stores were some of the first to exhibit “experiential retail,” where people went to be entertained and engaged, rather than simply offered merchandise to purchase. Nadal and Federer, the Williams sisters, Lebron James and Michael Jordan all are sponsored by one or more of these brands. So how did these captains of athletics and leisure clothing miss yoga? Lululemon grew from sales of $1.3 billion in 2013 to an estimated $2.3 billion this year. This may be pocket change compared with Nike’s $30 billion-plus in annual revenue, but over the past four years Lululemon’s compound annual revenue growth rate was 15%, while Nike’s was roundly 6%.
The point is the following: You can’t disrupt unless the dominant players are resting on their laurels.
I visited Tokyo for the first time earlier this year. The SPG website showed me the Starwood Hotels & Resorts Worldwide branded properties in Tokyo, and Hilton’s did the same for their hotels. But I didn’t know Shinjuku from Shibuya. If I go to Airbnb’s website they ask what kind of neighborhood I’m looking for by having me prioritize 10 attributes like “nightlife,” “great transit,” “subculture,” etc. I chose the dining and nightlife categories and got results of two neighborhoods that might appeal to me: “Roppongi—equal parts shabby and chic,” and “Shibuya—crazy in the middle and calm at the edges.” Why can’t a major hotel website do that? Perhaps they don’t want to send me to Roppongi if they don’t have a hotel there.
The news is not all negative about disruptors or the dominant players they are disrupting. After the initial “turmoil” of disruption, the dominant players often revitalize their innovative skills and display the deep wells of talent that enabled them to become so large. During this year’s continuation of the 2016 trend of industry consolidation and corporate combinations, some of 2017’s acquisitions were bolder than 2016’s in crossing traditional industry lines. Hyatt Hotels Corporation’s acquisitions of two wellness brands, Miraval Group and Exhale, seek to not only serve customers while travelling, but also to serve Hyatt’s loyalty program members in their home communities. AccorHotels’ acquisitions are too numerous to recount in a short article, but also have crossed the lines from lodging to lifestyle. Their AccorLocal app is in its introductory stages, but signals the same brand expansion goal in hoping to become a hometown “concierge” for its users.
This fall’s Urban Land Institute Fall Meeting in Los Angeles had a hospitality panel that featured two interesting innovators/disruptors. The first one, PodShare, blurs the lines between a hostel and subscription-based housing. For a nightly, weekly or monthly fee, guests can sleep at any of the company’s locations (currently five locations in various parts of Los Angeles). A communal kitchen and lockers are available at each site. An interesting observation was that while theft is typically a problem in low cost hotels and hostels, PodShare’s total lack of privacy enables “self-policing” of the space. As the founder noted, there are eyes everywhere. Each “unit” is a lower or (up a flight of stairs) upper bunk that is open to the other bunks that line the walls. Sixteen to 24 beds can occupy a 2,000-square foot space.
The other innovator was Proper, which blends extended-stay luxury apartments with full time multi-family housing. In a single Hollywood high rise, apartments are offered either unfurnished, with one-year minimum terms, or furnished for luxury extended-stay hotel-like lengths of stay from one week to several months. The long- and short-term residents enjoy a rooftop pool and food-and-beverage services. They are typically of “like-minded” demographics and are entertainment industry focused, so the networking and socializing aspects of the lifestyle are appreciated by all.
Companies in all industries need to continually ask themselves, “what are we, and who can we be” in order to view their markets as young startups do. Until recently, no one would expect a hotel company to serve as a travel advisor on the neighborhoods of Tokyo, or to act as a receiving service for neighboring residents’ Amazon Prime deliveries. Anticipating customers’ needs and finding ways to satisfy, if not delight them, appears to be the best way to maintain or enhance a lodging company’s market position.
Andrew Cohan, MAI, is the Managing Director of the Horwath HTL office in Miami primarily serving Florida and the Caribbean Basin. A seasoned hospitality professional with extensive real estate, marketing and account management skills in North and Latin America, Andrew has consulted for leading branded management companies such as Canyon Ranch, Six Senses, Montage, Solage and Bulgari. He has extensive experience with health and wellness resort properties and has performed numerous feasibility studies for planned resorts in the Caribbean and Central America. He especially enjoys working on greenfield projects, teaming with land planners to determine the optimal resort configuration in order to fit market demand with destination and site attributes. As health and wellness have moved from the margins of the industry to become important components of mainstream hospitality projects, Andrew’s expertise has been in demand to conduct an increasing number of assignments for proposed resort properties, particularly as the industry recovery continues to strengthen in Central America, the Caribbean, Mexico and the “sunbelt states” in the United States. Email him at Acohan@horwathhtl.com.
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