The rate of technological change in the hospitality industry has been extraordinary. Growth in the number of mobile users, digital intermediaries and the emergence of disruptive hospitality models such as Airbnb have transformed the market and created the need for a digital revolution. In particular, changes in consumer behaviour and online renditions of traditional distribution platforms are pivotal to transformations in the future of hospitality.
One of the most fascinating characteristics in the evolution of technology in the past few years has been the increasing speed of consumer adoption. From the first ever radio broadcast in 1920, it was another 38 years before the technology reached 50 million users. It took mobile phones 27 years to reach 50 million and for the internet 17 years, while it took Facebook just 3.5 years, the iPad 1.5 years and Google+ 0.3 years. Customers today anticipate digital innovations and are quicker than ever to embrace them.
We can see this willingness to adopt digital innovations continue in 2016, as the number of mobile users has overtaken desktop. The number of travel bookings made through mobile devices is also on the rise, and is predicted to increase further from 15% in 2014 to 35% in 2018. A further trend developing today is that 65% of leisure travellers and 69% of businesses travellers are now initially inspired to travel by online sources. These changes in consumer behaviour reflect an increased desire for relevance, personalisation and ease of access from travel operators. The implications for travel providers is a mastery of all stages in the customer journey – obtaining a complete understanding of how digital can influence each juncture from initial inspirations to action and reaction.
A perpetual digital transformation and knowledge of customer behaviour will be key to ensure that services are up-to date with the latest developments and consumers are consistently presented with a path of least resistance from their initial inspiration to booking. With such a digital transformation, the capacity for instant feedback through analytics and ease of customisation with flexible online or mobile platforms is greatly enhanced. In addition to changes in customer behaviour, broader industry adaptations to accommodate them such as the growth of metasearch providers, comparison platforms and new disruptive models have resulted in a shift in the nature of distribution and traditional value chains.
It isn’t a secret that Google is everywhere and it’s often hard to remember a time without it. Google’s continued ability to transform the balance of industries can’t be underestimated - particularly when the spotlight focuses on ‘the next big things’ such as Big Data or the Internet of Things. Search engines have shifted the value chain towards digital intermediaries, which now account for 15% of the hospitality industry profit to the disadvantage of hoteliers and advantage of online travel agents who have seen the share of hotel bookings double from 12% in 2009 to 24% in 2015. Alongside the traditional search engines, metasearch providers - which allow customers to compare thousands of prices and options instantly - will continue to rise in influence.
Customer to customer (C2C) players such as Airbnb, Home Away and other potentially disruptive models also present a challenge to the status quo of the hospitality industry. Their current margins are around 20%, and it is important to take lessons and learn from other industries and reactions to new digital models - such as Uber’s challenge to the taxi industry. The high-rising-and-falling start-up culture and open, unpredictable nature of technology today means it’s more important than ever to be aware of all potential challenges to the status quo and understand every means to adapt to them.
Perhaps the greatest influence of C2C players is that the balance of power has shifted towards consumers. Digital has given consumers a far greater means and platform to influence the opinion of others through social media and review sites, and more information and power of selection thanks to comparison providers and search engines. This is a trend that extends beyond the hospitality sector and underlines the continued need for customisation and understanding of the complete consumer journey. Never underestimate the value of detail in achieving this – something a margins or top-line percentage alone cannot provide.
Predicting the future will always be a treacherous undertaking. While it is incredibly valuable to understand the current state of an industry and the directions it might take, there is ultimately no telling what world-altering technology, market-changing model or fundamental shift in attitudes is waiting around the corner.
Digital transformation will continue to play a pivotal role in the direction of the industry, but perhaps the only certainty is that the future of hospitality will never be boring.