Industry Update
Opinion Article20 July 2016

Hotel Leaders, “What’s Your MTP?” – A Question About Business Transformation and Technology

By Thomas Mielke, Managing Director, AETHOS Consulting Group London

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There may be no better way for hospitality firms to learn and gain inspiration for successfully transforming their businesses by leveraging technology than by looking at some of the "unicorns" that have successfully tapped into the hospitality sector.

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The firms that positively stand out in this respect all appear to have understood their "MTP", that is according to a recent book that should be on your summer reading list – "Exponential Organisations: Why new organisations are ten times better, faster, and cheaper than yours (and what to do about it)" (2014, by Salim Ismail, Mike Malone, Yuri van Geest). The simple acronym of "MTP" stands for "Massively Transformative Purpose" – a term coined by the authors, but a theme that has been echoed in many leadership books and entrepreneurial authorities (e.g. Jim Collin's Good to Great and the hedgehog concept). In Ismail's case, it boils down to three primary issues every business owner should be exploring and defining in order to become what the authors call "exponential organisations":

  • What are you good at
  • How, and in what areas, can you leverage technology to become better and more efficient
  • Consequently, tap into "externalties" for scale

Simple, right? The concept of MTP is one where businesses shift from a materials-focus to an information-based focus. In our industry, a company like AirBnB is a prime example for demonstrating the rhyme and reason behind MTP: This disrupting business does not build hotel rooms, it does not have a tangible brand, but rather offers a conceptual brand that stands for an idea and values, it does not create a physical infrastructure to get you into your hotel room/studio/apartment and neither does it deal directly with management issues such as housekeeping or maintenance.

AirBnB merely matches accommodation seekers with local accommodation providers. It taps into the general public to crowdsource offerings in order to lower its cost of supply and to create something bigger, something which is not only creating financial value for the firm and third parties but which is also giving back to the community by using minimal resources. "Exponential organisations" are thus those that have understood how to scale their organisational structures. They use staff and/or assets "on demand" to grow beyond their firm's organisational boundaries, to adjust to an ever-changing work environment and to secure expert know-how and/or assets at minimal cost.

It's interesting to note that the "exponential organizational" thinking of AirBnB was validated at this year's Boutique Lifestyle and Lodging Association's (BLLA) Hotel investment Conference in New York, where Ian Schrager (co-founder of Morgans Hotel Group) stated that, "Airbnb is a major, major threat, and I can't believe how many in the hotel industry are in denial about that. […] More of a threat than the OTAs [online travel agencies] are to the hotel industry." So, if in the past entire economies have had to adapt from export-driven ones to consumption ones – and we nowadays live in a world where people pay with Bitcoin or Apple Pay and have the ability to use a 3D printer to produce material or equipment – it would appear that the time has come to become more creative in using technology and to embed it into our business strategies. The time has come to re-evaluate of what or wherein the value of your business lies. In our industry, technology does not and should not only be thought of in administrative and/or marketing terms – so, how do you plan to push the envelope and transform your business?

How do hotel organisations successfully leverage technology?

Superficially, it would appear that in the hotel industry, technology is routinely considered merely in marketing terms or as a tool to streamline processes or administrative functions. Of course, there are exceptions… take for instance the amazing technological resources Royal Caribbean has incorporated into its Oasis-class ships that help shape memorable guest experiences. More often, however, businesses rely on technology to engage better, more proactively and in a more targeted way with the ever-connected customer through social media or loyalty program platforms. We also use technology to more cost efficiently sell our inventory through online platforms and Apps. And of course we use technology to digitise processes and thereby improve work-flow efficiencies. Hotel executives might argue that technology is therefore really just part of a much larger tool kit. But are we in fact kidding ourselves in thinking that technology does not already play a bigger part in our business?

Are hotel companies evolving into technology-led businesses?

Looking deeper and surveying some of the strategic moves that hotel companies have made throughout the past few years, it seems that more and more firms have started to look at technology more seriously. In fact, they have fully integrated technology into their business equation. Take Yotel as an example – the firm capitalises on automated check-in/check-out and payment systems and luggage storage handled by a robot to be able to focus on limited but value-added "facetime" with its customers. Customers book online and use automated kiosks to stock up on everything from a chocolate bar to an iPhone charger. An e-concierge/App helps travellers to better connect and engage with the local community and enhances the overall guest experience. Motion sensors in the room help to regulate room temperature and lighting. At face-value, none of this might count as highly innovate – but the reason why Yotel stands out is because it has built its business around technology. Here, technology is not merely an afterthought – it has become part of the company's DNA. Other firms have integrated similar "gadgets" that not only serve as a marketing and PR gag but also fulfil operational needs and streamline efficiencies (e.g. keyless entry systems, infrared sensors detecting whether or not a room is occupied).

Accor is another example to have gone "all-in" when it comes to technology: The company has made bold moves by acquiring the mobile developer Wipolo in 2014, Fastbooking.com in 2015 and Onefinestay in 2016. It appears that the firm is amidst a digital transformation, which is helping to drive direct bookings (capturing more of the business that would have otherwise gone to OTAs) and to collect better and more detailed consumer data. Moreover, Accor decided last year to open up its booking platform to third parties – thereby becoming de-facto a technology and distribution partner for independent hotels. This digital transformation, centred around improving its technology infrastructure and business intelligence, hereby seems to be at the heart of the firm's business strategy, affecting relationships and partnerships with all of its key stakeholders(consumers, employees as well as business partners). Other industry player, big or small, equally pursued a technology-led business strategy: US-based Choice Hotels started to invest heavily into its digital transformation and created a technology subsidiary in 2013 to offer property- and rate-management serviced to third party hotels (SkyTouch Technology). In 2014, Spanish Room Mate Hotels created BeMate.com, opening its platform and distribution system to third party owners (of apartments)…

Moving ahead…

All these firms seem to have taken marked steps in ensuring to better, and in a more meaningful way, implement and integrate technology into their business strategies. They do so without compromising their dedication to delivering customer service and creating memorable customer experiences. These companies have not "lost their soul" and are still staying true to their hospitality focused strategy – but they are equally trying to transform their business, make it more competitive and resilient to external circumstances. These firms are thinking about what they are good at and how technology can help them leverage those strengths. They are therefore trying to embrace technology and to ensure that it is not only an add-on strategy, but that it is at the core of their business plan… For many organisations, all this is certainly easier said than done. Still, businesses striving to be exponential organisations can begin with the informational foundation provided in this recent book. And business owners and leaders should ask themselves: What is their MTP?

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Thomas Mielke

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