Great Depression gave AirBnB, Covid-19 will transform hospitality forever!

Arne Sorenson, the chief executive officer of hospitality company Marriott International said the coronavirus outbreak has been more severe for the hotel chain than the Great Depression and World War 2. Sorenson, who has led the company since 2012, said in an emotional video message to the company’s employees, that in most of the company’s markets, the business is running 75 per cent below normal levels.

Covid 19 still at large with no signs of slowing down anywhere in the world except China. Hospitality sector may come down to its knees and take 3-4 quarters or may be even more to bounce back to health.

Cut to Great Depression of 2007-09 when Airbnb came around. In fact, co-founders Brian Chesky and Joe Gebbia started the site in October 2007, two months before the Great Recession began. A conference was coming to town, hotel rooms were sold out and the two put up a part of their San Francisco loft for rent. And so a company was born, a poster child for the “sharing economy” movement. Over the next few years, though, Airbnb also became the go-to site for hosts and guests who shared something else in common: desperation and underemployment. In New York City, hipsters and freelancers started renting out their bedrooms and sleeping on the couch. Why? So they could pay the rent.

Cut to pre-coronavirus days say last quarter of 2019. When everything in hotel industry looked pink but wasn't. Over the years everyone came and ate into hotel revenues but industry chose to ignore the change. OTAs slice away a big portion of Hotel margins from room revenues (OTA share is as high as 30%). Although they pass a sizeable chunk of this margin to customers but hotels are the ones who loose and not OTAs. Online restaurants recommendation companies like Yelp, Zomato and TripAdvisor cut into F&B revenues of Hotels by connecting guests with restaurants, cafes and pubs nearby. Reducing hotels to just value breakfast kitchens.

Uber and Ola took away significant portion of concierge revenues of hotels. One has to be a total nut case to ask the hotel to organise the pick-up from or drop to Airport. Hotels kept on charging 1.5X -3X of the market price for the commute and delta convenience they provide over market. Uber came along and provided similar convenience if not higher at half the price and made hotel concierge services redundant.

Enter the real game changers AirBnB which is global alternate accommodation giant now running more than 8, 000,000 rooms across the world. And OYO which is new age hotel chain operating 50,000 hotels and 500,000 rooms only in India. In India alternate accommodation and new age hotel chains like OYO, Fab and Treebo account for 25% of room supply nearly 750,000 rooms.These new companies took a big chunk of their millennial customers. Millennials who account for 35-40% of all hotel bookings never got from the hotels the service they demanded and deserved, who then questioned themselves why pay more? and moved to alternate accommodation.

Cut to present world is facing the common enemy Covid-19. Hospitality industry has overall seen unprecedented fall in demand. This however leaves hotels with time to take a step back and introspect. Hotels have always resisted change with a standard operating protocol - dismiss a new business dynamics early on as total absurdity, something guests will hate, followed by ridicule the size and impact of the change and when they start feeling the heat it is already too late to act. But, not anymore hotels must transform themselves and upgrade their technology stack for post cornavirus era.

Let’s first look outside at what guests use and love beyond hospitality and why? Let’s examine experiences which apps like Ola, Zomato, Swiggy and Paytm provide. These apps deliver quick results, super high convenience, personalisation, 24X7 support and most importantly provide efficiency. This is what guests expect from all products, brands and services they use including hotels they stay in. Hotels need to stop looking at rising guest expectations as a threat but as an opportunity.

Give the immersive mobile experiences millennials are used to. Hotels need to think holistically and ace their competition and wow their guests. The kind of investment hotels have done and the kind of staff they have on their disposal it is not an impossible task. It is just a matter of taking up the challenge and act decisively. Improve guest experience (GX) using mobile technology and take it to a level that makes it unviable for the competition to compete.

Use mobile technology to improve GX right from the time of booking to well post the check-out to deliver experiences and services hitherto not possible, and introduce new revenue streams. As the guest experience improves, ratings of the hotel on various platforms improve, leading to higher occupancy, higher ARR (Average Room Rent) and ofcourse higher RevPar (Revenue Per Available Room = ARR X Occupancy). As hotel's occupancy and room revenues improves they have a leverage over OTAs to negotiate a better revenue share.

Hotel ratings are very powerful in hospitality business and need special attention, especially getting ratings from happy customers. Presently, rating are limited to guests who are dissatisfied and rate you down as an act of vengeance. Hotels need to have a frictionless digital journey to collect guests feedback. If feedback is good redirect them to OTAs and Trip Advisor and incentivise them with cupcakes and masala sodas. And if the feedback is bad intervene immediately and try to solve the issues asap and minimise the risk of public rant.

Focus on direct bookings by making your website more efficient, that is get more bookings per website visitor. Visitors who are just browsing on hotels's website, should also book and book from hotel's website only. Introduce loyalty programs to reinforce the repeat business from happy customers. Surprise them with extra services and preferential treatment. Also empower happy guests to share their experiences with friends and for each booking they generate reward them with cash back.

Now comes the non-room revenues that is revenues from other hotel services like in-room dining, food and drink venues in the hotel, spa, salon, swimming pool, retail etc. The biggest problem with non- room revenues is there is total lack of creativity and flexibility. Fixed menus, fixed pricing, archaic mechanism to raise awareness and provide access to these services is the problem. Hotels need to think out of the box and deliver with passion. Make the access of non-room services and outside hotel 3rd party services available on the hand held and that too in 1 click. Offer deals and discounts on F&B and other services to increase consumption.

Use mobile technology to bring in operational and staff efficiency - make every worker count. VSS Founder of PayTM once told me when I was working with him at PayTM that for any business bottomline growth is as important topline growth, and I couldn't agree more. Cutting down the flab and wasteful expense is as important for hotels as bringing in new guests and revenue streams. Optimise operations, give full visibility to hotel management on what's happening on ground in real time, make each process more visible, trackable, measurable and efficient. Efficiency always lies in future as Kunal Shah Founder of Cred has postulated in his Delta4 theory. I would add to it and say efficiency is the future. Hotels need to operate with an eye on efficiency in all aspects of their business.

Pilferage is another big challenge troubling the hospitality industry for long. As per Ashish Tulsian Founder of Posist a top restaurant POS company, pilferage is rampant in hospitality industry and is one of the important focus area of their solution. It is so prevalent in restaurant business that restaurant managers in job interviews are more interested to know which POS solution is being used by the restaurant than the salary discussion. Hotels are no different, pilferage in room revenues and non-room revenues is unrestrained. Hotels must use technology to plug the pilferage by bringing in transparency, visibility and multi-point revenue reconciliation.

Why Hotels have never tried something like this on scale and why now? Hotels can know upgrade their technology on the software as a service (SaaS) model. Shekhar Kirani Partner Accel Parters said in his recent podcast Building SaaS Business out of India for the Global market that SaaS is the new era of the software where in software is delivered not in the form of cds but over the internet from the cloud as mobile services. The cloud based softwares are sold on subscription based business model where you pay as you go, rather than one time expensive license cost and then hefty fees for regular updates.

Also both the guests and hotel staff now own well specced mobiles with high speed internet connection making adoption easier. And most importantly the demand from the guests who are looking for compelling mobile experiences like Ola, Swiggy, PayTM etc is a big driver. Need of the hour is vision and resolve from the hotels to embrace the mobile technology.

We at Trinn (sweet sound of a table ring bell) a Smart Hotel SaaS Platform that will empower hotels to regain the ground they have lost to competition. At Trinn we have a mobile first, guest centric and integrated approach to improve GX, drive revenues and bring efficiency in hotel operations. If you are a hotel owner and want to understand more feel free to write to me or message me thanks.