Deloitte EHIC 2015: Customer innovation and service interaction
With Europe and London in particular having an exceptional year of hotel transactions so far, it was no surprise Deloitte's 27th European Hotel Investment Conference attracted a 'full house' buzzing with activity. This year's theme 'Changing gears: a new era? reflected the tone. According to Deloitte, in Europe since 2008, there has been €11 billion ($12 billion) worth of investment solely in the luxury end of the hotel market, and London continues to be the main target of this investment. Deloitte's Nick van Marken added that there are to be a further 2,500 luxury keys in the UK capital by 2021 and that comes with a further £3 billion ($4.6 billion) of investment.
The Innovators - In Overdrive?
One of the most interesting panel discussions - The innovators - in overdrive?, featured Allie Hope, Head of Development, Virgin Hotels; Michael Levie, COO, citizenM and Sharan Pasricha, CEO, The Hoxton, was moderated by Simon Oaten, Partner, Deloitte.
Oaten introduced the session, highlighting how the hotel sector is ripe for innovation - "that special piece, the juice, magic dust, that allows a company to grow faster at a better rate, margin and higher contribution."
Technology and Digital
Levie, who always contributes to an engaging conversation didn't disappoint and took a cautionary approach quoting Dr. KH Kim ,"87% of innovation fails within the first year - it's good if it works, but this could be very different" he said.
"Citizen M doesn't change underlying business processes, we look at different business propositions that forces the process (of innovation). Technology is important, and we (hoteliers) are not good at that - data is foreign. Citizen M focuses on experience and distribution technology."
Moving to Virgin Hotels Hope said the brand's focus is on the variety of customer touchpoints and engagement pre, during and post stay, and how to do things differently, "we leverage technology and we don't look to design our own - ours is more 'plug and play' that the customer controls. Our community approach is based on guest interaction, and buying decisions based on like minded individuals" said Hope.
Pasricha's approach had a clear insourcing and digital strategy, saying, "we view Hoxton Hotels as a developer, operator and digital studio. We insource web development, analytics and marketing functions - we're heavily focused on digital. Public areas are relevant and vibrant, and we aim to bring the outside neighbourhood onto property. We aim to 'stitch' the customer journey together. We stay clear of leading on property technology innovation - our in room technology use updates made in the residential property sector as a guide."
OTA's and Distribution
Oaten then moved the conversation onto OTA's and the distribution of hotel room inventory.
"We aim to keep pace with OTA's and sell by segmentation" said Levie, continuing "corporate rates is a volume business, if 70% of your hotel inventory is being discounted on historical data with no segmentation it's not a good position to be in. The budget airlines do a good job, and there are currently no systems to aggregate hotel data, although this will change soon. OTA's do lots of work, they're smart, we hoteliers are in the dark ages. OTA's are your billboard, they are the coccaine of the industry - you become addicted, go to the clinic and get clean!" he concluded to shrieks of laughter from the audience.
Pasricha's approach to OTA's and distribution was more focussed on how OTA's fit into The Hoxton's overall digital strategy , " we use OTA's as 'taps' to turn off when we need to. We spend a disproportionate investment on digital understanding engagement. It provides us with insights and optimisation" he said
Hope was less complementary to OTA's, " with only 70 million customers, we are looking at how to best tap into them. OTAs a necessary evil."
Levie countered saying, "OTA's are not a necessary evil, hoteliers have no clue their spend on distribution. If a brand delivers - great. A brand doesn't allow digital acquisition. Hoteliers have distribution choices, use OTA's to position yourself and know your distribution cost. Promoting through different channels at a different cost increases promiscuity"
Short Term Rental and Extended Stay
In a Deloitte hospitality survey prior to the conference, only 16% of their clients said they "worried about Airbnb" and the short term rental sector's impact on hotel performance. Hope outlining that Virgin US had 50 residential units, said " we sit on the fence with Airbnb distribution, we're very much thinking about it. Our guests are 70% business customers, we offer a residential feel, guests tend to stay longer for family and 'bleisure', and we have a strong wellness component, and target Marriott customers who maybe feel slightly alienated."
Importance of People
Oaten then asked the group about the importance of people within a hotel organisation. "They're our 'special juice' said Hope, "people are at the core of everything we do. Finding talent is difficult. We hire on attitude, and personality traits. We try to find the mentality of each member of the team - it's their energy and personality that drives profitability, we let them do it their own way. The number of quality people available allows us to cherry pick" said Hope.
Pasricha said Hoxton Hotels overinvest and overspend on people, spending around 20% of total budget, recruiting more non-hoteliers, than hoteliers and consciously placing less focus on recruiting direct from hospitality, "we aim for good IQ / EQ balance - if they are smart enough, they will figure it out, and our team immerse themselves in the open neighbourhood."
Touching on marketing and guest profile, Pasricha said Hoxton Hotels' room sales were evenly split between corporate and leisure. Our public places attract a local audience, meetings and events too, "we have a great product and proposition - we're more inclusively democratic than exclusive, and aim to keep it simple because we're just selling sleep".
CitizenM targets frequent travellers, and the mid market. "If the curtain and bedspread are the same colour and material, you know you''re staying in a bad space" said Levie to hoots of laughter. "We allow our guests to find us and vice versa, this is critical - it takes guest satisfaction way up. Be clear what you are not, say 'no' - we don't want to prompt disappointment" said Levie.
In closing Oaten asked the audience what they felt would be the most important hotel innovation of the future - technology or people? The audience 'spoke' with around 20% choosing technology, and 80% people innovation. Panelists disagreed, with Pashricha and Hope selecting 'people' and Levie both technology and people.