Hospitality's recovery: Lessons for hoteliers from aviation

Hollywood suggests that the heyday for airline travel was probably in the 1960s, when an air hostess in uniform was the epitomy of glamour and passengers were wined and dined as if traveling in a mile-high, Michelin-starred restaurant.

Sadly, it didn't last. The cost of delivering such levels of service restricted access to air travel mostly to business travelers and wealthy individuals. Air travel, once novel and exciting, lost its luster and airlines were forced to adjust their services to fit the economic realities they faced.

It was only through the advent of the low-cost carrier model in the 1990s that airlines truly became a sustainable financial (and social) success story. Low prices opened the skies to those for whom air travel had previously been largely excluded, leading to passenger numbers more than trebling from 1.4 billion people globally in 1995 to 4.6 billion in 2019.

Phrases such as "city breaks" and "no frills" travel entered our lexicon as cheap air fares provided opportunities for hotels, restaurants, tour operators and other 'experience' providers to attract international tourism.

Technology was developed to make booking as easy as pushing a button on a computer or cell phone, while fares and services were stripped back to an extent that meals, luggage, and even seats became ancillary items attracting an additional charge.

Airlines became the gatekeepers of travel industry, with their websites and apps becoming the first port of call for anyone looking to travel. Revenue was maximized accordingly through partnerships with car hire companies, hotels, event providers, and credit card companies.

Worldwide airline ancillary revenues rocketed from approximately $32 billion in 2011, or 5.6% of global revenue, to $109.5 billion in 2019, or 12.2% of global revenue. Even as fares fell amid increasing competition, profitability grew due to ancillary revenue.

Hotels at the heart of travel

Then COVID19 hit and travel ground to a halt. The entire industry faced devastating losses in revenue as air passenger numbers plunged to levels last seen in 1995.

Airlines certainly face a challenging future in the post-pandemic, climate-conscious new world – but so too do many in the hospitality sector.

As travel reopens, there are many lessons that hotels can learn from airlines about maximizing revenue, particularly around the use of technology. But such learnings come with a robust caveat: hotels are most discernibly not airlines.

Hotels are at the heart of any trip, important to both business and leisure travelers alike and integral to shaping a visitor's perception of a destination.

A passenger might tolerate relative discomfort for a couple of hours on a plane if the price is right, however, you'd struggle to find a hotel guest willing to do so for several nights. Even in the no frills hotel sector, the compromise is on service rather than comfort.

Optimized room rates are key to a hotelier's ability to recover, but amid the rush to reopen and recover, there is a growing understanding that room revenue is no longer the only factor in revenue management.

In the same way that airline revenue models focus on revenue per passenger mile (RPM), rather than simply the cost of a ticket, many hotels are adopting the TRevPAR (total revenue per available room) model. TRevPar recognizes that revenue streams from other departments are just as important as the revenue gained from rooms. As a result, hotels are looking at ways to monetize all hotel offerings.

But whereas airlines have a captive market, quite literally for the duration of the flight, hotels face competition from other hotels, as well as from restaurants, bars, spas, golf clubs, business, and event centers when it comes to ancillary services.

The needs of the guest must always be the priority – or the guest will go somewhere else. The challenge is balancing these needs at a time when, after 20 months of crippling lockdowns and travel restrictions, hoteliers and hotel groups are screaming for revenue.

As is so often the case, innovation is forging a path through the adversity and disruption of challenging times. The digital transformation of the hotel sector – previously centered around bookings and payment platforms – is expanding rapidly to encompass the full guest journey.

A recent report found that 25% of respondents believe the main goal using technology is to improve the guest experience, compared to 18% who said it was to grow profits and 11% who said it was to grow topline revenue.

Hotel operators are rethinking the way they do business, and technology is providing them with the tools to do so. When considering the applications of new technology, talk often centers around the Next Guest Experience – but what does this mean for hotels and their guests?

Most hoteliers have become acutely aware of the value of online check-in/checkout since the pandemic struck. It provides time savings and increased convenience for guests, while improving guest and staff safety by eliminating pinch points in hotel public areas – thereby also freeing up staff for higher-value interactions with guests.

At one hotel group, a client of my company P3 Hotel Software , 60% of guests are using online check-in across all properties – and that figure will only increase. It's a great success, but it is its implications for the Next Guest Experience that are exciting.

Integrated digital transformation

Whether it is via an app, and interface or URL in an email, what online check-in/checkout demonstrates is the willingness of hotel guests to engage with technology which gives them greater control over their stay.

Combine this with advances in machine learning, and a brave new world of data intelligence opens for hoteliers – one which allows them to learn what their guests want and to tailor services and communications to leverage the accompanying commercial opportunities.

This shouldn't come as a surprise. After all, we've been booking hotels online for more than 20 years – but only now are the potential of software solutions being fully embraced to deliver the kind of integrated digital transformation that achieves the holy trinity of hotel objectives: improve guest experience, increase revenue, reduce costs.

Information captured by booking engines can be used to set enhanced room rates which reflect the rapidly shifting demands in travel, while also offering tailored room amenity upgrades and ease-of-use payment integrations.

Booking engine software can also remember guest preferences, enhancing opportunities to tailor loyalty programs and promotional offerings for restaurants, spas, and other optional hotel facilities.

Such functionality requires integration, though. Want to provide an option to reserve parking, book a meal, massage, tee time, or alert a hotel to your arrival?

Such capability already exists through APIs on hotel central reservation systems, but API software solutions need to be able to talk to each other, they need to act as one – they need to be integrated. Only then will a hotel, and its guests, be able to benefit from truly optimized services and experiences.

We are only a few of years from the point where hotel guests will be able to control and tailor every aspect of their stay from their phone.

Once booked, they will be able to alert the hotel to their estimated time of arrival, check-in to their room and receive a digital key, choose certain room features such as a temperature setting, being near an elevator, being on the ground floor, or having a large desk for work, and book a dinner or breakfast time in the restaurant.

Instructions will be fed back to reception, the operations, housekeeping and catering teams. An hour before the guest’s expected time of arrival or when their room is ready, the system automatically checks the guest in and a new SMS is sent to the guest, telling them that their room is ready, and the staff look forward to welcoming them at the hotel.

When it comes time to check out, all the guest needs is their phone – through which they receive a prompt via an SMS or email with details of their bill, including any chargeable additional items or ancillary services, which can be easily settled without the need to go to the hotel front desk.

Such a high level of self-automation is great for guests who can now manage their stay more effectively without constantly waiting in line. It also means hotel staff can be deployed in a better way to serve guests and engage with them instead of conducting manual, data-driven tasks.

The success of airlines owed much to them becoming the gatekeepers of the travel industry. In many respects it was a triumph of technology and convenience over customer service. It worked because airlines understood what their customers wanted – and invariably that was affordable air travel.

What do hotel guests want in our post-pandemic world? The same thing they always wanted – comfort, customer service and value for money. In an age when all they need to communicate, bank, book, order, and date is a cell phone, then they also want choices and to be in control of those choices.

Technology holds the key to this integrated digital guest journey – and it also holds the key to driving revenue as the industry recovers.