Moving Forward: New business models for the hotels of the future
What does the blurring of the traditional business model mean for the hotel of the future? A combination of external and internal forces has been eroding the traditional business model; but this has not been a slow, gentle re-shaping. Over a period of a few years, the global recession, the rise of social media and advancements in consumer technology have combined with a myriad of other factors to reveal the new face of business. The hospitality sector is now adapting to these changes – but what are the biggest changes on the horizon, and what will the new face of the hospitality world look like?
Greater efficiency in a global marketplace
A more efficient business is a more cost-effective business. Whether it's time or resources being wasted, hotels are, like many other businesses, re-imagining what a successful business model in the future will look like. There is a move away from a post WWII 'cookie-cutter' approach, which focused heavily on Western (specifically American) consumer expectations; towards a much more international experience. This is in keeping with the new, global economy which for the first time includes the BRIC and CIVETS nations. Big hotel brands now need to figure out the most efficient way to target multiple markets without sacrificing tailor-made services for each market.
Management of the brand portfolio
As hotels move into new territories – Western chains moving into Asia, for example, or Middle-Eastern chains moving into the West – they are re-evaluating existing portfolios to ensure that their brands fit different regional demographics. As mentioned already, brands need to understand how to provide global services with a local feel. Added to this is the need to encompass the full range from budget to luxury, and this in turn will put new demands on portfolio management – for example, sub-brands will proliferate as chains try to cover as wide a spectrum as possible. Our view is that hotels will manage the change by relinquishing the idea of 'one brand; one strategy' and moving towards a management system which includes different strategies and different operating processes to ensure that all sub-brands are catered for.
Business models opening up to include new revenue streams
Greater experimentation will lead to new customer offerings – in part perhaps encouraged by the diversification of brand strategy. Experiments can begin small and, if successful, will work their way up the chain. This low-risk approach will lead to a resurgence in innovation. Some examples already in practice include hotels which offer, respectively: 24 hour check-ins, room auctions, and low cost carrier-style pricing models. Another trend is the introduction of hotel ancillary services such as selling products used in the hotel. Westin Hotels & Resorts sell their own branded beds and pillows to guests, while other hotels have moved into re-selling high street and luxury brands. Dubai's Burj al Arab Suites promotes its use of Hermes bathroom products, for example. Taking this trend to the next logical step – linking up with popular consumer brands – has already happened with the opening of the first Giorgio Armani hotel. In the future, co-branding could see the faces of sports and music stars used to sell hotel rooms, just as they are used now to sell Pepsi and Coca-Cola.
Substance over style – a greater focus on quality of service
This means that the selling-point of a hotel is no longer just about, say, the name of the chef in the kitchen – it's about whether the quality of the food is excellent and whether staff listen to guests and recognise their individual preferences. For example, one hotel has opened up the hotel kitchen so guests can talk to the chef. In the social media age, this is doubly important as a guest's experience (good or bad) can be shared across multiple online platforms in a matter of minutes. This new, open approach means a fundamental shift in design and training. And as service is an experience, not a facility like a pool or a gym, the star categorisation system begins to look outdated as guests will not want to know whether the hotel can provide an Indian head massage, but rather, whether the staff will accommodate their wishes.
The brave new world
The new face of the hotel industry will be a multi-faceted one; combining multiple strategies with multiple sub-brands. Globalisation demands nothing less. And while there are challenges for management, this new business model will have a more flexible, creative and service-orientated style.
Amadeus
Amadeus is a leading provider of advanced technology solutions for the global travel industry. Customer groups include travel providers (e.g. airlines, hotels, rail and ferry operators, etc.), travel sellers (travel agencies and websites), and travel buyers (corporations and travel management companies). The Amadeus group employs around 15,000 people worldwide, across central sites in Madrid (corporate headquarters), Nice (development) and Erding (operations), as well as over 70 local Amadeus Commercial Organizations globally and has a presence in more than 190 countries. The group operates a transaction-based business model. Amadeus is listed on the Spanish Stock Exchange under the symbol "AMS.MC" and is a component of the IBEX 35 index. To find out more about Amadeus please visit www.amadeus.com, and www.amadeus.com/blog for more on the travel industry.
