Explore how the latest travel and hospitality trends will impact the year ahead.
As we move forward into 2017 hoteliers, developers, designers and private equity funds are assessing whether this will be a year for growth in the hospitality industry. With an eye towards innovation, the design community could turn some of the challenges into opportunities.
The world has entered a new era of growth and transformation with global business travel spending hitting a record-breaking high in 2015 with $1.2 trillion. The labor market continues to strengthen with an average of 181,000 jobs added per month with disposable personal income up 3.4 percent. Residential prices crossed their pre-2008 peaks and key equity indices hit all-time highs in November. Phocuswright’s Online Travel Overview stated that the US leisure market reached $341 billion with market projections at $381 billion by years end. From shifts in the global economy, game-changing innovations, geopolitical turmoil, natural disasters, and rising consumer demands, 2016 constructed a landscape that will continue through 2017. While disruption often centers on technology and innovation, travel and hospitality organizations must keep a close eye on economic trends. Hotels and airlines are particularly vulnerable to the ebbs and ows of economic conditions with the recent recession serving as a harsh reminder that consumers are quick to cut travel from their budgets.
Hotels can capitalize on this healthy demand despite occupancy hitting its peak, as evidenced by major groups such as Marriott, Hilton and IHG who reported steady earnings and optimism towards a 3.1% increase in average daily rates (ADR) and 2.9% for revenue per available room (RevPAR), according to STR, Sourced from Hotel News Now. One of the most significant challenges hoteliers will face is sustaining growth as online private accommodation aggregators saturate the marketplace with new inventory. There is little doubt that companies like Airbnb already compete with hotels in certain segments of the market. This is critical because it marks a shift in consumer behavior – private accommodations have now altered consumer expectations on a fundamental level by redefining where and what constitutes a hotel. Following this is a demand for consumers to drive direct bookings, and online travel agencies will need to continue to advertise to fragmented marketplaces and leverage themselves with user-friendly bookings.
There is a long-standing relationship between travel brands and their customers, heavily built on trust and customer demand. But customers’ values, preferences, and expectations are not fixed, nor are they universal. With a transition from goods to services, apps and their seamless delivery platforms have raised expectations about what is possible via a few taps or swipes. And hospitality brands will find themselves subject to the same expectations. Those able to capitalize on changing expectations with speed and agility are more likely to capture their share of global travel growth. For designers, the overarching themes center around authenticity, removal of friction, personalized and differentiated experiences and on-demand functionality. Experience is now integral to core travel product offerings. Hospitality properties that respond to their geographic location through art and architecture, and those that embed current technology and functional FF&E, are the hotels securing the bookings for this generation.
No one strives to be inauthentic, yet many hospitality projects end up feeling that way.“Authenticity is the new definition of luxury,” Erin Green, vice president of development Americas of Rosewood Hotels & Resorts said at the recent Americas Lodging Investment Summit (ALIS) Conference. Architects and Properties need to provide authentic and unique products, as evidenced by the rising proclivity for craft beer, locally sourced food, indie movies and Airbnb – an emergence of goods and services outside of mainstream offerings that capitalize on trends. IHG is one example. The hotel giant disrupted the midscale category with the launch of its Kimpton Hotels and Restaurants, a brand focused on boutique and lifestyle travel. Kimpton Hotels, as well as other brands in the midscale segment, are beginning to see the benefits of redesigned guest rooms, reimagined public spaces, and creative updates around food and beverage programs. Additionally, leveraging tech with mobile check-in, fast Wi-Fi, and digital room keys can assist properties deliver elements of on-demand services. Last year, Kimpton Hotels introduced Kimpton Karma Rewards, which offers points to customers for social media check-ins, with points that can go toward a night stay or hotel amenities.
Established fast-casual brands continue to capitalize on shifting consumer behavior by creating meals with organic and local ingredients that are high-quality and served quickly. The question moving forward is whether the demand for fast-casual will continue. While farm-to-table is appetizing, only dinner services can support the cost of production.
Younger generations are using social platforms, such as Instagram and SnapChat, to market their own individual brands through picture and video-based content. There is no room for the sea of same in 2017’s social ecosystem, and travel’s challenge with personalization is rooted with automation and drive conversions. Every day, users of social networks reveal intimate information about themselves that could give designers a better lens into customer travel preferences. Designers and operators must navigate the technology paradox and understand what technologies consumers are ready to adopt, and what experiences will drive real value. From augmented and virtual reality to the Internet of Things (IoT), the promise of emerging technology has never been greater. Artificial intelligence (AI) is reaching a new level of maturity and poised to transform how consumers plan travel as well reducing operating costs.
Imagine a tired business traveler arriving at a hotel after a long red-eye flight. Upon entering the lobby, the traveler’s smartphone communicates with the hotel’s property management system (PMS) and automates the check-in process. The PMS sends a digital alert to the closest member of hotel staff to greet the guest by name and assist with luggage. When the traveler approaches the suite, the door automatically unlocks and the lighting, temperature, and entertainment settings adjust to the traveler’s preferences. This traveler will most likely book again with this hotel because the experience was exceptional.
Finally, hospitality organizations will need to conceptualize their brands as platforms for new opportunity and growth. Travel is fragmented across many micro-experiences. For example, during a single trip, a traveler may transact with a variety of suppliers
including hotels and private accommodations, airlines, and multiple modes of transportation. Organizations must realize the benefits of scaling across the travel experience – rather than trying to grow only within their vertical. As such, we will see a rise in mixed-use, multi-dimensional hospitality projects.
While Airbnb has enjoyed phenomenal growth in the rental space, the private accommodation pioneer realized that technology that connects renters with local hosts is an on-point platform for selling nearby destination experiences. Casinos and resorts are other examples of segments that stand to benefit by embracing a “more is better” paradigm. For major players in gaming and hospitality, attracting visitors may require a complete rebranding. Customer experience will drive more loyalty than points and miles. In this vein, hoteliers should reimagine the hotel experience to include strategic partnerships with retailers, restaurants, and local events and activities.
Hospitality brands should leverage an increased awareness of customer expectations, re-imagined technology strategy, and differentiated offerings to provide unmatched travel experiences. Loyalty will follow. In short, we can expect healthy consumer spending and a strengthening labor market. Consumers will continue to demand greater levels of authenticity, personalized experiences and multi-dimensional functionality – leveraged by enabling technology from augmented reality and virtual reality. Finally, travel and hospitality anticipates healthy mergers and acquisitions through strategic partnerships.