INDUSTRY REPORT - 2018 Hotel Industry Innovation Report
By Carlos Martin-Rios, Associate Professor at Ecole hôtelière de Lausanne (EHL)
Ecole hôtelière de Lausanne (EHL) recently released a comprehensive Hospitality Innovation Industry Report, authored by Dr. Carlos Martin-Rios, an Associate Professor at EHL.
The key objective of this research is to increase knowledge about the adoption of innovative practices by global hospitality businesses, and to support the integration of innovation strategy into hospitality business strategy.
Understanding what innovation is to cultivate it
Few would argue that innovation is essential to business growth. Yet, it seems surprising that for many hoteliers something as simple as defining innovation can be a challenge.
Innovation is both a process and an outcome.
- As a process, innovations can impact a corporation's internal stakeholders (inward-facing), target end-users (outward-facing), draw from outside knowledge (open innovation) or respond to vertical integration and exclusive control (closed innovation).
- As an outcome, innovations are defined in terms of their degree of newness or radicalness. Solutions that are new to an organization are counted among 'incremental innovations'. A 'radical innovation' provides solutions that are 'new to the world'.
Yet, the hospitality industry is less prone to innovate than other service activities.
In the hotel industry, like in most service activities, the interplay between customers and firms broadens the scope of innovation and departs from the narrower technology-driven innovation dominant in manufacturing.
However, not only developing truly innovative concepts (i.e. ideas that add value to an existing service) and embedding them within a hotel's operations, present their own sets of challenges - but as true innovations often breed copycats, creating strong differentiators and barriers to inhibit imitation, can be daunting for hotel operators.
Hospitality Innovation Report: Key Takeaways
Who are the biggest innovators in hospitality?
We put six innovation scenarios to test and asked hospitality industry executives what scenario(s) were more likely to take place in their organization within the next three to five years.
Two main groups emerged:
- One from innovators in big corporations, who intend to move beyond incremental improvements for sources of breakthrough innovation. Although hospitality corporate leaders in innovation remain in the minority and are unevenly distributed across geographies and ownership structures, a few standout companies are demonstrating that innovation can be a driver of renewal, efficiency and lasting business value.
- The other from small/medium-sized enterprises (SME) and family businesses, who tend to believe they do not have the resources to develop their own innovation strategies and for whom innovation management will remain elusive.
What factors can support driving innovative business practices?
The report identifies seven evidence-based factors that drive innovative business practices, regardless of size, ownership structure or region.
Innovation needs to be more strategic
This was the overwhelming conclusion drawn from the study.
One leading innovation factor: highly innovative firms have typically engaged in non-technological innovation. Research results show that technological innovation alone will not be sufficient to hold competitive advantage over the long term, so harnessing the non-technical kinds of innovations (in organizational innovation, workplace, marketing strategy or business models) is critical.
One example: investing in technological innovations along with 'creative workspaces' where employees are empowered to develop new ideas and test new concepts.
In the short-medium term, innovation is what will determine the productivity performance and competitiveness of hospitality companies, whether independent hotels or national or multinational chain hotels.
Big hospitality innovators will look beyond incremental improvements for sources of breakthrough innovation.
However, a considerable proportion of executives consider that innovation strategy will remain one of the most elusive dimensions of organizational routine and performance.
- A quarter of leaders surveyed believe that innovation activities will be outsourced to third-party businesses and/or organizations.
- A majority of independent hotel owners believe they do not have the necessary resources within the company to develop their own innovation strategies.
- International multi-brand hospitality firms seem to be better prepared to develop innovation strategies and to deal with long-term conditions.
Nevertheless, the research shows that it must be demand-led, inclusive, sustainable, and open to external collaborations.
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