The hotel industry is constantly growing and changing ever-more rapidly, and hoteliers must do what they can to stay on top of it all.
Bill Marriott correctly predicted that millennials were the next big thing, but how to capitalize on that is a question all operators today must get their arms around.
One way many large companies are approaching this is via acquisition. MGM Resorts International just acquired a stake in Sydell, a boutique lodging brand. InterContinental Hotels Group acquired Kimpton Hotels & Restaurants a few years back. Last year, Hyatt Hotels Corporation bought Two Roads Hospitality. In theory, these boutique brands offer the ability to scale at the same time they attract a more “millennial mindset” traveler.
Boutique hotels have a very different demographic of the traveler—they heavily favor millennials, hipsters, LGBT and non-traditional markets at a time when the major brand companies are adding more brands for many reasons. We saw just last month the announcement of the merging of Aimbridge Hospitality and Interstate Hotels & Resorts, which will create a management company that has more than 1,400 hotels. They will likely continue to snatch up small, boutique management companies in an effort to truly understand that market. Again, scale is part of the equation.
To survive and thrive over the next 10 years, a hotel company will need to thoroughly understand distribution channel management, social media marketing and where to find these new travelers who are currently staying at boutique hotels, Airbnb, VRBO and non-traditional lodging facilities.
Notice that the big brand companies have added “cool, new brands” to their portfolios. Hilton has added Tru, Motto, Signia and LXR. Marriott has added AC and Moxy in addition to Starwood’s Aloft and Element. IHG added Kimpton and most recently Avid. In addition, each brand has rolled out new prototypes for their legacy brands in an attempt to be more appealing to a broader demographic.
Adding these companies alone does not guarantee success. After all, as rates become even more transparent and non-traditional brands and companies continue to grow their customer base, new marketing techniques are required. Truly understanding pay-per-click, key words, SEO, Facebook remarketing/SEM and the myriad new digital marketing content and schemes is paramount to success today. Moreover, the use of technology to keep the customer engaged, coupled with the use of social media like Instagram to keep them posting about our hotels has changed the game from just a few years ago.
Large companies will continue to scale; non-hotel companies will enter our industry; and the company that wins will understand the advantages of cross-selling and serving customers in general rather than just hotel guests. As an example, why couldn’t a hotel have multiple restaurants, a WeWork-style gathering place with coffee/tea/snacks, a gaming room, conference center and a Home Depot-style outreach for locals. You live near the hotel and need a handyman? The hotel has several, each with different talents. Go online and book your handyman and you’ll be done searching.
The next 10 years will have changes far beyond the last 10 years. Remember, Facebook, LinkedIn, iPhone, Android, Twitter and many technology companies did not have these products 10 to15 years ago. Think about Amazon—it came out of nowhere and now has more than 100 million prime subscribers.
The future successful hotel companies will be one of two types—they will be conglomerates with massive scale and tremendous cross-selling opportunities, or they will be very strong niche players, hyper focused on a trend that will emerge from the many trends we see today. Will it be ecotourism, wellness tourism or independent boutique hotels? A combination of a few ideas? According to CBRE, “boutique hotels comprised just 3.2% of U.S. lodging supply in 2017 but 17.8% of the development pipeline in mid-2018.”
There are current hotel companies to watch, but keep your eyes on Amazon, Facebook, Google, Apple and other companies that could spread their wings. Watch for new trends like Equinox in New York City. They are targeting fitness and wellness, coupled with social spaces. Equinox wants to own that new package of sleep, wellness and fitness.
The hotel industry has become a mainstream big industry and has captured the attention of the world. One look at the number of hotel schools today will remind all of us that we are not just a noble profession—we are a rapidly growing, global giant of an industry with changes, technological and all, occurring at warp speed.
When we look back at the last 10 years, we will find that international travel demand improved, business travel steadily increased and the aforementioned technology has shaped travel in a relatively short time. Just 10 years ago, there were no hotel apps, no Instagram, no iPads and no meaningful digital marketing. Personalization was largely a luxury boutique thing, and automation was very limited. What is even more remarkable is that technology innovation might equal those 10 years over the next 24 to 36 months. To a great 2020 and beyond!
Robert A. Rauch, CHA, is an internationally-recognized hotelier, CEO and founder of RAR Hospitality, a leading hospitality management and consulting firm based in San Diego. Rauch has more than 35 years of hospitality-related management experience in all facets of the industry.
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