The race for relevance: How hotels can stay relevant in a new economic paradigm

I love hotels.

I love hotels because they hold the promise every day of celebration and exploration, desire and intrigue, connection and seduction, flair and grace… Where else can you find that outside of Hollywood?

Most importantly though, I love hotels because they are living, breathing microcosms of our cities, communities and cultures.  

For as long as we’ve had civilization we’ve had hotels and whilst the evolution of hotels has kept pace with civilization for most of the last 3000 years, it is incumbent upon us, as modern day hoteliers, to ensure this transformation continues to stay abreast with the evolution of the world we live in.

Since 2013 I have been lucky to work with hundreds of hotel team members across Australia, New Zealand and Europe to help them get better at what they do. During that time, I have travelled to 59 cities in 20 countries amassing 624 nights on the road, mostly staying in hotels - some of them our brands, others not.

What I’ve learnt is that, across the world, regardless of the location or category, hotels are struggling with the same thing – establishing and maintaining relevance.

We now live in a world where people are choosing to stay in a stranger’s spare room over booking a hotel. Where once people would aspire to meet, do business and get married at hotels, people are now taking their meeting and event business elsewhere. Where once the best chefs and finest cuisines where found in hotels, discerning diners now view hotel dining as stiff, over-priced and bland, certainly not worthy of their Instagram feeds.

Hotels are experiencing a crisis of identity. As star ratings become less relevant, and with hotel categories become increasingly blurred, it is becoming tougher for us to deliver a clear value proposition to our guests — a reason to choose our hotels over an alternative. Hotel rooms have been commoditised, forcing us to compete on price and leaving us beholden to the digital behemoths who have essentially stolen our customers and are now selling them back to us at a premium.

So how can hotels reclaim their relevance, reestablish their place in their cities & and better serve their communities?

I don’t have all the answers, but what I do have are some questions that we should consider in order to build better hotels, create more meaningful experiences and make more meaningful contributions to our communities. I think the hoteliers who can answer these questions will be able to establish a truly sustainable competitive advantage in the increasingly complex paradigm we’re operating within:

  1. How can we better serve our local markets and communities?
  2. How can we view our hotels as multi-use spaces?
  3. How can hotels shift from purely physical experiences to ‘phygital’ customer experiences?
  4. How can we broaden the appeal of hotel careers and attract the talent we need for the future?

How can we better serve our local markets and communities?

The majority of what most hotels do is based on the traveler coming from out of town- someone from a different city or a country. Selling rooms will always be our core business, but I think we’re missing a valuable market which is at our doorstep: the family living next door. The local residents. They live around the hotel, or they go to an office around the hotel, and 90 percent of them never dare to enter our hotels, because they fear they won’t be welcome or simply because they don’t think there is anything there for them. They may not need a room, but there is heaps of other stuff they do need.

Hotels need to turn into true neighbours and expand into their communities and engage with locals. Hotels should be a place for guests and locals, a portal to the local culture and an active participant in the community.

Here’s a few questions for us to consider:

How can we empower individual properties to take on the aesthetic and the qualities of the local community while maintaining the brand flavor for guest? We know generic spaces are unappealing to guests who don’t enjoy spending time in a hotel that looks the same as every other hotel. To address this, we need to embrace alternatives to a one-size-fits all approach to hospitality and branding while maintaining the brand flavor for guests. Since 2016, we have seen sweeping uptakes in occupancy, ADR, and RevPAR of independent hotels revealing that they are outperforming their branded brethren in the majority of cases. Why? Because more and more travelers are seeking ways to experience a destination in a more authentic, local and unique way. Cookie-cutter hotel experiences are things of the past replaced with unique hotel experiences that allow guests to “live like a local”.

What products and services can we develop that are specific to locals? Food & Beverage is the obvious answer here, but there are heaps of other services that hotels could get into, among them having hotels assist locals with simple tasks and solving everyday solutions like holding packages or keys, handling laundry and other basic services. Maybe the dry cleaner has someone’s dress, but he has to close his shop at 6 p.m. Why doesn’t he drop the dress off at the hotel next door, and send a text to the customer and say it’s waiting at the front desk? It’s so easy. Accor Hotels is dipping its toe in this area through their pilot AccorLocal app connecting services provided and curated by Accor hotels to local city inhabitants.

How can we become an active participant and contributor to the local community and culture? Maybe it is opening up our spaces to the community, perhaps its curating experiences for our neighbours? What about, for example, offering current, underused and non-revenue generating public spaces as gardens that locals and restaurants to use? Hotels have the potential to become the cultural centers of their communities, like a town square or museum. A good example is US brand Proper Hotels that are designed to showcase what’s happening in its neighborhood. The hotels partner with individuals, brands, and institutions in each of its cities, who can use the hotel space to create, collaborate, and share art, music, and technology.

We need to change the way people interact with their hotels. A hotel should no longer be just for travelers or guests, but for everyone and anyone who has the ability to interact with them and to use them.

How can we view our hotels as multi-use space?

Changes in consumer behavior, led by Millennials, are driving shifts in retail & leisure strategies – venues are becoming much more flexible. Coffee shops have liquor licenses, fashion retailers sell muesli, and barber shops are bars – the new consumer works, eats & plays where hybrid-culture is fostered.

And hotels are no different – lobbies have always been spaces for business meetings and an opportunity for third party business, however, traditionally, they have been designed as transitional, functional spaces, rather than dynamic multi-speed, multi-purpose spaces.

Travelling as much as I have, I have seen great use of space in hotels but I’ve also seen many examples of unthoughtful use of space. In most hotels, conference rooms sit empty in evenings and on weekends, rooftops are accessible for plant and equipment service only and lobbies are utilised predominately as transition spaces. Not only does this problem make the spaces less attractive for locals, it’s also making hotels a less attractive asset class compared to alternative investment options. We need to look at our spaces in terms of value per square metre – value to our bottom line, the value of the asset and the value to our community.

The questions we need to ask ourselves are:

How can we leverage our expertise in different ways to convert under-performing spaces into value generating spaces? As hoteliers, we should be looking at our business through the eyes of our owners and consider the value we are creating per square metre. We need to analyse our use of space and put forward business cases to owners to transform under-utilised spaces into revenue generators that will ultimately improve the value of their asset. We should also consider the triple bottom line and consider how we could create community value in these under utilised spaces. The hotel of the future is not about robotic concierges or a room full of high-tech gadgets. Instead, it’s about experiences and we need to design our spaces to accommodate these new consumer habits, increasingly blurring the lines between hospitality, retail and entertainment.

Can our hotel developments afford to stand alone or should we view hotels as part of a set of interconnected spaces? Some of the coolest developments we have been a part of in recent years are where our hotels sit as part of a larger, mixed-use, precinct style development. Examples include our Adina Apartment Hotel in Bondi, part of a development that includes residential and great restaurants and high-end retail that enhance our guests’ experience. We’re also working on an Adina Apartment Hotel as part of a precinct development at the former Pentridge prison in Victoria. This project will offer our guests a huge range of activities, shopping and dining in an integrated space, driving demand for and enhancing the experience of our hotel. This model is also increasing popular amongst investors as it allowing developers to spread their financial risk.

How we can become curators of experiences and leverage partnerships rather than trying to “own” every part of our customers’ experience? Our new Callie Hotel in Brisbane is another example where the development is really establishing a community and precinct, built around a great hotel which integrates the services of its neighbors and partners. The project will bring together best-in-class retail, gym, spa, restaurant and bar operators to deliver an integrated and curated experience for hotel guests. Hotels don’t need to stand alone anymore, these integrated models deliver value to guests, owners and operators. This heralds a shift in the role of operating companies. Where once value was generated by owning the whole guest experience, now our role is more about helping owners curate experiences for guests, through partnerships and enabling us to focus on the business streams that we are experts in. According to research from Deloitte and Doblin, hotels in the future will empower guests to choose and customise their experience, build partnerships to expand the hotel’s capabilities & facilitate the explorative nature of guests.

We need to embrace the changing role of hotels in our communities and think more broadly about how they are composed and positioned.

How can hotels shift from purely physical experiences to ‘phygital’ customer experiences?

What is digital and what is physical has become entangled in our consciousness and daily lives, to the extent that those of us born after 1990 no longer distinguish between the two. The digital revolution began with the conversion of as many real world happenings as possible into a digital form. Today, the opposite is becoming common place - the virtual is beginning to reveal itself within the physical.

As far as digitalisation is concerned, hotels are way behind most other industries in understanding that we live in this new phygital world. We now need to view our customers’ journey as three dimensional, transcending the traditional physical touchpoints. It’s no longer enough for us to merely dip a toe in the digital pool.

The questions we need to consider are:

How can we facilitate a seamless and holistically managed travel experience for guests by integrating services traditionally beyond the purview of a hotel? We know travelers face immense complexity booking and managing their travel experience and, like me, most travelers don’t want to expend the mental energy for every trip. To address this, hotels should take on greater responsibility in managing the repetitive tasks of their customers reducing the friction within a travel experience – this is definitely something that would sway my decision on where to stay.

You need only to look to Airbnb to get a glimpse of the future. They are shifting from an accommodation platform to a trip platform - they want to own their customer’s entire trip. Similarly, the big OTAs and are winning loyalty because of their ability to help customers with their entire travel experience – accommodation, flights, cars, dining, tours etc. They’ve created a one stop shop and removed friction for travelers. If we’re to compete – we need to do the same.

How can we can we get the balance right between high tough and high tech? I was on the business jury for the EM Cup in Maastricht earlier in the year where students from Europe’s top hotel schools debated this exact question. The winning team argued we should be investing in high-tech as long as that tech enables us to get better at the high touch stuff. We know guests look for the convenience of technology but we also know they crave the human touch. To address this, hotels need to provide the right level of automation and personalisation and put enabling tech in the hands of highly capable, empathetic people who are empowered to stage personal experiences. Our approach should be to always view technology and systems as an enabler of the experience and not the experience in itself. I have unfortunately ween far too often examples of technology in hotels creating more friction instead of removing it. Technology for the sake of technology is not the answer.

What invisible technologies can we deploy to enhance the customer experience? Personally, I believe the biggest opportunity for hotels lies in the deployment of technology that is invisible to guests but that enhances our ability to improve the customer experience. A simple example is effective Customer Relationship Management tools that enable us to build detailed profiles on our guests to understand their behavior and preferences in order to personalise their communication and experience. This combined with effective social media listening can trigger and amplify great guest moments and build true loyalty. Leveraging the incredible amount of data available to us, we should also build more comprehensive voice of guest programs that help us make decisions, particularly when it comes to investment in CX.

We can’t afford to think of our customer experience as only a physical one. We need to evolve if we’re to maintain relevance in this new social and economic paradigm.

How can we broaden the appeal of hotel careers and attract the talent we need for the future?

Regardless of where I am in the world, Hotel Managers all talk to me about the same challenge – how do we attract and retain great people to staff our hotels? We’re in a war for talent that we are fighting on multiple fronts and in my opinion, we need to re-examine the traditional structures and models that have served us in the past but that are no longer serving us today.

According to a report released by the Koran Ferry Institute, “Only 30% of Millennials who enter Hospitality related post-secondary education join the industry, and only 15% join hotel operations.” This discrepancy shows a perceived misalignment between the emerging workforce and what they believe our industry can offer them in terms of job growth and opportunity.

As an industry, we have a lot of work to do to broaden the appeal of our industry for millennial talent and I think there are a few questions we can ask our self when it comes to attracting talent for the future:

How can we redesign our organistional structures to align with our evolving business models and the emerging workforce? Over the last 10 years I have watched the structures of hotel teams evolve. Where once we had large, hierarchical structures with clear departmental divisions and specialist roles, we now have flatter structures where the lines between departments are becoming blurred warranting more cross-skilled, generalist roles. Where once the structure of our teams was built around building efficiencies for operators, we are now seeing hotels structuring their teams around the customer. This, combined with the advancement of technology and the diversification of hotel services, means we are looking for a different type of talent than we did 10 years ago.  We need to rethink the make up our teams, the competencies we need and the profile of our ideal team members. E.g. is the notion of separating rooms and food and beverage serving us or is it creating silos and breakdowns in the customer journey because they are operated independently? At TFE Hotels we have brought together Sales, Marketing & Revenue Management into one team. Where traditionally these functions are separated with often conflicting priorities and KPIs, bringing them together has enabled us to build strong alignment and approach problems and opportunities in new ways.

How can we offer more flexibility as a way to attract high caliber talent? One thing all of us in the industry need to re-examine is the old notions of a hospitality career – that you must be willing to work long hours, nights and weekends. That to move up, you have to move around and that you have to have followed a traditional, linear career path to achieve senior management positions. People seem to be less willing to do all of these things, so we need to rethink our approach to flexibility. 10 years ago, we interviewed candidates. Today, they are interviewing us and if we want to attract great people, we have to create the kind of workplace that is attractive to the emerging workforce. We should consider more part time roles and job sharing in place of full time roles, we should consider flexibility in terms of working hours and location wherever possible and we should be open to fast tracking talent with non-traditional career profiles who have the capabilities we need to take us forward.  Last year, Movenpick created an Excom-Y, a dynamic team of Millennials who mirror its Executive Committee to closely collaborate with the hospitality firm’s executive team as it looks to glean fresh ideas on how to attract millennial talent.

How can we blur the lines between back of house and front of house? The traditional view of hotel staff is that they should be hidden away from guests with offices and staff areas often buried in the basement and behind closed doors. The sheen and glamour of an international hotel career often dissipates immediately for new entrants to the industry when they first enter the back of house areas of a hotel with no natural light, that haven’t been refurbished in 25 years and with technology that pre-dates the fax machine. How can we retain talented millennial talent if this is their employment experience? One approach is for hotels to blur the lines between front of house and back of house, integrating public spaces with workspaces for hotel team members. Allowing team members access to hotel facilities, just like guests. The modern consumer doesn’t expect the unesacary separation of staff and guests. I stayed at Zoku in Amsterdam recently who have a wonderful mixed use rooftop space for co-working, food, drinks and meetings. Here, the staff work in the public co-working areas, alongside guests and customers. They worked from apple laptops and took phone calls from guests using headset connected to their PC. They operated in a completely paperless environment and they have small rooms they can duck into for private conversations. They were approachable and relatable, and looked exactly like the customers they shared their space with. They wore a casual and comfortable uniform, they type that clearly identified them, but at the same time, would be cool to wear out to the pub after work.

It’s a simple case of square peg, round hole. We need to shape our workplaces to fit the needs of the emerging workforce instead of trying to shape talent to fit our often antiquated structures and culture.