Only the paranoid (hoteliers) survive !

Only the paranoid (hoteliers) survive !

Booking.com is often seen as the champion of hotel distribution. People usually think that the insane amount of money that this organization invests in online advertising is its key strength. It’s true that cash always helps but it comes and goes and when they started they didn’t have any. On the other hand money didn’t save wealthy companies such as Kodak or Nokia from being whipped out.

What makes companies like Booking.com future proof is a culture of healthy paranoia that constantly pushes them forward. At your own scale, what can you learn from the paranoid?

Beware of learning curves!

Cash is NEVER the source of any sustained competitive advantage. The strength of Booking.com rests on its capacity to constantly anticipate market evolutions and develop their expertise before their competition.

Andrew Grove founder of Intel decided to tell his story in a book. The title is pretty clear: Only the paranoid survive !

Developing any expertise always involves a time incompressible learning phase that necessarily has a financial or human cost. At first sight, it even looks safer to remain in one’s comfort zone but eventually, the hammer always falls.

Catching up with your competitors when you’re behind is difficult because knowledge is not a linear process, it compounds exponentially with time. When Kodak realized that digital cameras were the future, they still had loads of cash available but could never acquire the expertise to compete in digital camera making. Picture it like this, when a disruptive technology appears there is always a slow beginning because innovators and customers are still learning what to make of this innovation. Thank God early adopters get it and are ready to adopt new technologies before they become mainstream.

Once the technology has developed clear competitive advantages and the market has become educated, then the technology skyrockets but you need to survive this initial learning phase also called the chasm. If enough of your competitors have already crossed the chasm and created a market and you haven’t started then it will be very hard to survive because you can’t skip the learning phase where you’re still mastering how to make your product and you can’t rely on early adopters because they are already all gone. As a result, you stalemate while your competitors are marketing exponentially better products.

Booking developed an expertise on web. They had early beginnings, then skyrocketed and it became very difficult for hoteliers to be competitive online. Luckily the market works in cycles and now web is being disrupted by mobile. Hoteliers missed the train of web distribution, hopefully, they won’t miss it a second time with mobile.

Nassim Nicholas Taleb shares his experience as a stock exchange trader in his book titled Black SwanNassim explains that if you focus on making models that work in normal market conditions (mediocristan) you might be OK for a while but the world isn’t normal (extremistan) and the first storm will wipe you clean. What he calls a storm in financial markets we could call it a disruption in a tech environment and that’s exactly the same thing. You should be prepared for the unexpected because it always happens. The real risk is not investing in a technology that doesn’t work but to miss the one that will become the norm especially when you already know what it will be.

 

This graph illustrates the dilemma we all face: We have a technology in place that has already reached its potential and no longer has the exponential growth it used to: web is an example (marginal improvement). Though it is tempting to continue on this known path especially when you see that there is a human, material and financial cost associated to the adoption of a new technology like mobile (cost of early use). Yet the practice ends up paying off and the balance ends up favouring the companies that developed an expertise (continued practice improves productivity). Companies that have lagged behind have now doomed to remain on the sidelines in a market where they will have a hard time catching up with the competition.  

In the hotel industry, the comfort zone is web and the space to conquer is mobile.

Most people think that the difference between web and mobile is the size of the interface. The real difference is the essence of each device.

Web makes search comfortable while mobile is a tool born for interaction. That’s why instant messaging is by far the n°1 activity that people perform with their mobile. In other words, making your website smaller won’t help you adapt to mobile. The key is understanding that the interface is different by nature and that you must learn to master it.

The term mobile first implies that mobile has become the reference tool for your customers. This does not mean that the web disappears but it is changing by adopting more and more features from mobile (what works on mobile will also work on web but not vice versa). The explosion of live chats is a symptom of this type of transfer: a thread of conversation, interaction and a high degree of personalization are all mobile-like features.

 

This image shows the first prototype of Skype chatbot integration in the Bing browser and lets you predict future developments.

The market didn’t wait for anyone to move towards mobile. In fact, Booking.com CEO Gillian Tans, is getting ready so that within three years, at least half of all bookings on the site will involve some way. By that, she means advanced forms of AI. Don’t all hoteliers share that same analysis? The difference is that Booking has decided to act on it and climb the learning curve and grow its AI in the same way that he grew his website in the 90s. The question is what will you do?

What is striking is that so far it is cool but not much more “practical” than a form. It’s just more consistent with the mobile interface and it evolves very fast. In 1995 a journalist explained to Bill Gates that the internet was really not practical either! Then we would have probably all laughed at Bill Gates and his useless idea. Who are you laughing at now?

Mobile is above all a change of attitude towards online sales.

Classic e-commerce processes confine you to a state of relative passivity towards sales. You have to wait for the customer to make his booking on his own before you can have any sort of interaction with him. In this configuration, the customer is in charge of 100% of the process which explains that on average only 2.5% of visitors to your site make a purchase and most of the rest goes to the trash.

A mobile first approach needs to be much more proactive. Instant messaging systems (Live chat Facebook, WhatsApp …) encourage each visitor to start a personal conversation with you. Chatbots and artificial intelligence make this approach viable for all hotels.

Technology is about opening doors. Each potential customer is free to interact with the hotel or not, but if he does so he instantly becomes a qualified lead that the hotel can act upon, get back to and convert into a customer. It’s never easy but it’s the best way to secure the sale, which suddenly becomes less of a chance and more of a responsibility.

In this context, instant messaging and chatbots make a lot of sense. Instant messengers are an opportunity for hotels to reach their customers and chatbots ensure the scalability and affordability of the whole process. 80% of customers queries are simple and repetitive. A chatbot can be trained to answer them, qualify the lead and close the sale, or get the customer data and transition to a human being to close the deal if the conversation becomes too complex.

Every business wants to sell more but we are at a point where a reallocation of resources is needed if you want to make a real difference. It is tempting to postpone or hide behind other projects or a supposed lack of staff. The differentiating factor is your awareness of the strategic importance of mobile and your will to keep on going for another round.

If you want to discuss more about innovation, mobile and AI feel welcome to get in touch: bde@colossalfactory.com

 

Benjamin Devisme ,

The Colossal Factory.