Article courtesy of ATW Connect
Written by Carolina Sass de Haro
Carolina Sass de Haro shares three main trends that are transforming the industry.
Before we get to the trends, it is important to understand what the hospitality industry represents. According to Phocuswright’s travel research, when considering hotels, global room revenue alone is US$520 billion. But home and apartment rentals should also be included in the equation, because they are now mainstream and certainly helped redefine the industry. Alternative accommodation represents another $77 billion and that is a conservative sum. The combination of the two makes hospitality the largest travel segment in the world, larger than air for the first time.
So, now that we have a dimension of the sector, we can move on to the three main trends shaping these businesses.
TRAVELLERS WANT TECHNOLOGY TO IMPROVE THEIR STAY
Travellers are digital and there is no coming back from that. From the sum presented above, 40% is booked online globally. Technology is cheaper and more available than ever, but it is only valuable if it improves the guest experience. Phocuswright analysts found that 65% of U.S. hotel guests place high importance on hotels investing in tech to enhance their guest experience.
Around 60% of global guests use messaging while traveling and they are comfortable with messaging for services, contacting the front desk to get local recommendations, interacting with customer service and even comparing and choosing other travel products. You might be surprised that most guests believe that getting proactive recommendations from a travel company is helpful and that would even lead them to join a loyalty program if they got personalsed tips.
There is a huge opportunity to increase ancillary revenue in the hospitality industry just by using technology to provide tailor-made offers and enhance the overall guest experience.
INTERMEDIARIES LEAD ONLINE
Many people all over the world use websites or apps to get their travel information. It’s far ahead of the second most popular – recommendations from friends and family. When shopping, travellers have many options: search engines, OTAs, TripAdvisor, metasearch sites, supplier sites, Facebook, Instagram, home or flat rental sites like Airbnb and HomeAway, destination websites, and more.
It is interesting to note that all these channels work together, not alone, and rarely against each other. They are all partners (not competitors) when it comes to delivering traffic during the shopping process, each getting a bit of the action. But when a traveller books a hotel room, it really narrows down the playing field. With price being the biggest driver (followed by convenience) and travellers’ perception that OTAs have the lowest price and convenience (in terms of breadth of offerings), an OTA is the most likely booking choice. To make things even harder, hotels can’t keep up with OTA marketing spend. In a recent analysis we found that Booking.com gets half of its traffic from paid search.
Marriott/SPG brands get only 5%, relying more on organic search and people going directly to the brand. Instead of fighting the OTAs and other intermediaries, hotels should make the effort to get to know their guests after the first stay, converting them to direct booking and possibly a loyalty program. But keep in mind that members want benefits more than anything else and that doesn’t mean that they are loyal to the brand. You must keep working hard to offer the best personalised benefits and special prices.
PRIVATE ACCOMMODATION CHANGES THE MIX
The typical traveller now considers staying in all types of accommodations. While it is true that younger travellers are more likely to stay in a private home or apartment rental than older travellers, we are seeing a change as the alternative model becomes mainstream and more known. As hotels and home/apartment rentals become more integrated, cross shopping increases, and Phocuswright’s travel research reveals 54% of renters having also considered a hotel when shopping for a place to stay.
Also, it has become a lot easier to book homes and apartments, with seamless platforms, instant confirmation and easy payment methods. But, on a global basis, people still prefer hotels nearly two to one, at least in terms of incidence. The reasons why most travellers prefer a hotel are simple: They prefer the services and amenities of a hotel and they don’t see private accommodation rentals as such a bargain.
Private accommodations are changing the mix, but the good news is that there’s room for everybody. The important thing is to have a clear brand value proposition and cater to your consumers’ specific needs. In the decade since Airbnb was founded, the rise of private accommodation has dramatically expanded traveller options and virtually redefined the greater lodging industry. Private accommodation market gross bookings were projected to hit $36.6B in 2018. Phocuswright’s landmark studies on this segment, published in 2013 and 2017, rigorously analysed market size, consumer and industry trends and the rising role of digital.
Visit Phocuswright’s website to explore their vast collection of global travel research.
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