Investing in Technology Innovation - How Much is Enough?
In the first viewpoint of this panel, several experts weighed in that the Hospitality Industry does not properly invest in technology innovation. Apple spent about $15 billion in research last year alone… or 5.5% of its annual gross revenue. We ask ourselves these questions: Is this level of investment purely in R&D also necessary in our industry, and is it possible to get that kind of money? What's your take?
Adjunct Professor NYU Tisch Center for Hospitality, Founder & Director at NextGuest Digital
A recent HFTP Americas Research Center analysis of IT lodging spending, based on CBRE data from 5,640 properties with 72,135 average available rooms, determined that the average IT spend was a mere $1.90 per available room (PAR), including:
* Labor Costs for IT personnel: $1.04 PAR
* Tech Services for Operations, including HSIA: $0.35 PAR
* IT System Expenses for Operations (Rooms & F&B): $0.51 PAR.
In other words, at a projected RevPAR of $87.94 for 2019 (STR), the average IT spend, including IT personnel was a mere 2.11% from RevPAR. This is It! What happened to the recommended technology investments of 5%-7% from RevPAR (or from room revenue)?
This underinvestment in technology by our industry comes from the lack of understanding that we are serving technology-obsessed travel consumers who demand:
*Engagements that are up-to-date from technological perspective throughout their digital customer journey (mobile, website, app, social media, digital marketing, loyalty, CRS, CRM, etc.), as well as
* On-property technological experience that is equal or better to what they already have at home.
Hospitality must be transformed, which means adequate investments, into a 100% digital technology-enabled industry, powered by online, mobile, cloud, IoT, AI, automation, robotics and blockchain. Digital technology should be the foundation of every aspect of the industry: hotel operations, guest services, communications, revenue management, distribution, CRM and marketing.
Robust investments are needed in both categories of guest-facing digital technology:
- Guest Engagement, Acquisition, and Retention Technology – these are technology applications focused on engaging and bringing the guest to the property, continuing the conversation pre-, during and post-stay and eventually turning the guest into a loyal and repeat guest.
- Guest Services Technology – these are on-property hardware devices and software applications (on-premises or cloud-based) that provide or enhance guest services, improve guest comfort and satisfaction and enable customer service and communications.
Today, the vast majority of hoteliers are primarily focused on and investing in Guest Services Technology, while underinvesting in Guest Engagement, Acquisition and Retention Technology.
Unlike hoteliers, the OTAs are focused exclusively and investing only in Guest Engagement, Acquisition and Retention Technology since they do not have to worry about on-property technology and guest experiences. In other words, hoteliers’ technology focus and investments end where the OTA focus and investment begin.
It’s no wonder that over the last 6 years the OTAs have increased their market share by over 50% at the expense of the hotel direct channel. By investing heavily in technology applications to engage the traveler at all possible touchpoints of the customer journey, OTAs have monopolized the guest relationships and left hoteliers to do ...the housekeeping.