Why do hoteliers struggle so much with technology and how to change that in 2018 ?

Why do hoteliers struggle so much with technology and how to change that in 2018 ?

Key innovation management concepts for hospitality

My intent is to share some fundamental ideas for those who want to handle present and future hospitality. To be honest, I don’t know how to manage hotel operations. My field of expertise is innovation and marketing. I don’t pretend to lecture anybody. I am just tired of reading nonsense papers about the 8 things you need to do in 2018. We are already in 2018 dude, so it’s too late to start planning for the present. It might prove more useful to take a step back from the symptoms (short-term approach) and look at what causes the disease (long-term approach). We (hoteliers + Tech providers) need to get out of our comfort zone because we are at an inflexion point and the decisions we take now define how we will make money in the next 5 to 10 years.

If you read this article till the end you might see things from a different perspective and find new ways to make your business a little bit more competitive. Don’t expect a miracle: If we want to move forward we have to be aware that it will take time, effort and humility. It’s a NO PAIN NO GAIN kind of deal.

Hotels missed the web wave in the 2000’s and have been paying for this oversight ever since. Sebastien Bazin CEO @ACCORHOTELS summed it up in his speech on OTA’s: We could have bought them….. He probably meant If only we had seen them coming… We all have noticed that more than half of our online traffic is now coming from mobile. We are at the very same inflexion point as in the 2000’s except that now disruption is coming from a smaller device. Technology is cyclical we can do better this time if we learn some key INNOVATION MANAGEMENT CONCEPTS.

25% of reservations made through Booking.com come from mobile Vs less than 10% for hoteliers why is that? (more on this here).

Hotels value used to be based on real estate property (physical). Now it depends more and more on intellectual property (digital). In the digital world development cycles are getting faster and faster. Doing new things is not necessarily going to help. Everywhere I look, hoteliers want to move forward and innovate but there is no map of innovation so they run and run in circles with no apparent direction. The risk of getting lost is high. You can mitigate this risk if you learn how to use a compass and read the stars that can guide you when you’re in the dark.

What is innovation?

Most of the time we imagine that innovation is some cataclysmic event, like a storm that destroys everything that was built in the past. This is a misconception: even hurricane Katrina started as a light tropical breeze in Africa. Actually, it is a slow and gradual phenomenon. What happens is that we only notice an innovation when it has turned into a hurricane and it is too late so we get powerlessly dragged into it. We spend our time dealing with operational emergencies instead of anticipating and building a strategy that would make sure we survive on the medium/long term.

Let’s clarify now that we don’t need more staff. Understaffing is an easy excuse we use to make up for what we often really lack: VISION + GUTS. You know how many hotels you’ll manage in 2 years time. What you don’t know is how you’re going to sell rooms in 2 years.

Despite what we like to think, we very seldom innovate. We talk about innovation all the time but what we really do is run behind OTA’s instead of going our own way. When OTAs started to invest in web most of us ignored this new technology. The exact same pattern is happening today. OTA’s invest massively on mobile and AI because they know it will kill them if they don’t. Marriott got some Alexa gadgets in its rooms but seriously, what significant action are we taking on the hotel side? (To be fair ACCOR is negotiating with the GAFA betting that they will take over hotel distribution and kill OTA. Vive la France!)

OK let’s do something. But what?

What is innovation?

There are 2 types of innovation: incremental and disruptive.

  • Incremental: brings a marginal improvement to an existing process for a limited operational gain. It’s a new version of an existing product. Most innovation in hospitality is of this kind and it is really cool but not a game changer. Even though it is marketed as such.
  • Disruptive innovation: offers a radically different way of creating value and is a source of competitive advantage. The stakes are higher: it’s a higher risk/higher reward situation. For instance, going from a web first to a mobile-first strategy when none of your friends is doing so.

Every disruptive technology has a learning curve.

  1. Everything starts with an MVP (prototype) with limited features.
  2. The new technology adapts to the environment and to the organizations that use it and vice versa. At this stage technology is flexible and you can influence its development.
  3. Technology matures and it takes time!

If we want to leverage innovation to gain a long-term competitive advantage let’s remember that we are exploring uncharted territory. The deeper the disruption, the more challenging it will be to set it up and manage the project. Otherwise, it wouldn’t be an innovation at all and everybody would already be doing it! Innovating is being able to see the fully grown tree when what you have in front of you is just a seed + being ready to commit to make it grow (That is the hard part). Planting and grooming seeds are much easier than trying to plant fully grown trees. Did you know that the roots amount for up to 70% of a tree’s total weight? Innovation is the same.

By now we all understand that mobile is essential but vision without action is useless.Booking.com has seen the tree and it is growing. Booking.com launches Booking Assistant

Graph 1: Mature tech Vs. disruptive

This graph illustrates the disruption phenomenon. We have an incumbent technology (tech1) that everybody knows and has been using for a long time. If you look at point C it is clear that tech1 is a better performer than tech2 so most people are focussing on the short term and choose tech1 because nobody ever got fired for making the safe conventional choice. However, a little bit later (at point D) tech1 reaches the limit of its potential and is now a cash cow => you’re getting milked while tech2 is more agile and better performing. When you build your tech infrastructure think about today but also about tomorrow (2-5 years) because change takes time and the cost is high. The high cost is not an excuse to stay with tech1.

Why is it so hard to innovate?

Changing is hard for 3 reasons: Size, Strength of legacy and management

1) Size. A hotel or chain has more in common with the Titanic than with a regatta boat: you’re stuck to the orientation you take for a long time. Changing direction once you’re at full speed is nearly impossible. So it is an absolute necessity to watch for threats coming from very far. The watchmen on deck saw the iceberg 1h before impact but it was already to late. The boat was too massive and the process of changing course so complex and involving so many different actors that collision was impossible to avoid even though everyone did their best.

Graph 2: Mature tech Vs disruptive: a market perspective

(Source graph 1-2: The Innovator’s dilemma)

Graph 2 illustrates the same reality from a different angle by incorporating the notion of market (sweet spot). You can still see tech1 and 2. At point C tech1 is competitive in the market and able to fulfil customers current expectations. Tech 2 is only starting to meet its market constituted at first from visionary and agile customers with realistic levels of expectations. At point D tech1 still exists but lives on its installed customer base that gets milked because the tech has become obsolete (out of market because it is now too expensive, too heavy, insufficiently agile, etc…). Now you know why Opera reports are so pricey!

The legacy effect is also visible. It is impossible for tech1 to reinvent itself and become tech2. It is like trying to change your DNA. Tech1 has invested so much into accumulating development and expertise on its own perimeter that it is impossible to change course when it becomes obsolete.

Legacy consists in perpetuating a logic that has become obsolete in a world that changed without us noticing. We follow the elder’s opinion because for millions of years most people didn’t make it to old age. Any mistake meant death. So the elderly were those who had got it right all their life. But back then, technology cycles were much slower. It’s only in the last couples of centuries that technology has improved at a faster pace. The bronze age cycle lasted for thousands of years. Web lasted for 20. Changes that used to happen over dozens of generations now happen in less than a generation. Your experience might slow you down.

Temptation is strong to settle for marginal changes instead of questioning what we have built until now. The best example in the world is my Grandmother: France went through 3 currencies changes over the last 60 years and my Granny still reasons according to the 1960 monetary standard. It is very hard to shop with her because you need to multiply everything by 6,55957 and then multiply that by 100. In a hotel context, that sounds a lot like hoteliers struggling with their systems. The first meaningful step towards innovation is acknowledging the power of legacy to minimize its effect on your organization. Any technology is like a living cell. The older it gets, the bigger the chances of it becoming a cancer cell. That’s life. As soon as a tech becomes a hindrance: CHANGE IT.

The 2 graph above should help you visualize the life cycle of innovation. Back in the 90-2000, web deeply disrupted distribution. Now, consumers are mobile first. It does NOT mean that they do everything with their smartphones. Far from it. It simply means that their reference device is the mobile. We often think that we have mobile covered because we have a responsive website. However, responsive websites are an incremental adjustment to a disruption. Instead of bringing web to mobile we had better bring mobile to web.

Interface conditions behaviour (More on this here). The logic behind mobile is dramatically different from web.

  • Web 2000: SELF SERVICE supported by a big screen, keyboard and mouse optimized for search/Browsers such as Google made it easy for an average bloke to book a room (without having to log in a GDS complicated framework). They did this from the comfort of their home thanks to a modem.
  • Mobile 2020: PROACTIVE INTERACTION suported by a small piece of hardware made for interaction on the go. Tiny touch-screens make traditional navigation awkward but fit your pocket perfectly/4G network allows for instant connectivity 24/7 everywhere. Artificial intelligence is the key to mobile development as its navigator of choice because it makes it as natural and easy as texting in a communication thread which is the most popular way to interact on a mobile device.

Screenshot of Bing navigator. If you want to know the whole story the bot is supported by a light version of Skype. Google is on the same track with Google+, Hangout, Allo etc…

Quick mention on voice: I think it is not a disruption but rather a natural evolution of chatbots.YES SIRI WILL BE ABLE TO BOOK ROOMS. If you want to be strong on voice AI start with text chatbots. Do you remember your first website and how it started small and got better and better? It is exactly the same process here. What you need to do, and I know it is very hard, is CHOOSE TO START and accept that you need to learn to walk before you run.

2) Management. In 2016 Nokia CEO ended his resignation speech with the following words: We didn’t do anything wrong, but somehow, we lost. Nokia did everything by the book, never made a tech faux pas because it never took the risk of investing in a market that was emerging at the time: Smartphones. Back then nobody knew what it would become. It happened with Kodak as well: In 2000 their R&D team invented the first digital camera that delivered inferior quality than film photography. The team was cast aside and the project was forgotten because it didn’t make sense to invest in an inferior technology (Point C). Kodak continued to ignore digital photography until the quality of pictures became comparable to film (Point D) but it was already too late because they had accumulated 10 years of technological retardation. And it compounds like interests. Very quickly catching up becomes impossible.

As long as executives are rewarded for keeping the status quo and risk their job/credibility if they dare to innovate, we won’t be able to make any significant progress. So everybody in hospitality invested on responsiveness which is the obvious choice but rare are those who really tried to really think about mobile at all.

Some ideas to get over resistance to change?

Add new abilities to your team such as innovation management. Cost doesn’t need to be high. it is a cognitive and management challenge

  • Cognitive challenge: Understanding what drives innovation: I didn’t invent anything everything in this article comes from reading books and personal experience. With only 2 books that you can buy in 1-click on Amazon you’ll gain a strong knowledge base to manage innovation: The innovator’s dilemma and Crossing the chasmHere is a small video to introduce the innovator’s dilemma that I love (you still need to read the book).
  • Management challenge: the job of a manager is to make sure his/her team has everything it needs to take initiative and to take the blame in case a project does not work. Nobody knows the future, we can only make educated guesses. An idea would be to, tell your team to choose 4 project this year, with at least one being outside of the box (more on this here). Google encourages its teams to use 20% of their paid time to work on innovative projects of their choosing. Most of these projects are inconclusive but all Google’s greatest hits came from this initiative. If you are a business owner, remember that your staff is not making the choices that will benefit the most to your company. They consistently make the choices that are less likely to get them fired.
  • Bonus: build your critical spirit on industry trends. The concept of Hospitality Bootcamps is fantastic: No presentation, a mix of 20-25 hoteliers and hospitality tech experts get together and everyone writes down 1 topic they’d like to discuss. Then among all the ideas, they choose the 3 they want to discuss over 3 sessions of 25 minutes each. The ideas that emerge from these sessions are way more powerful than those from traditional conferences. Hotels and tech providers really listen to each other. Here’s a short video of what we have done in Europe and could be replicate in your country. (If you decide to do this wherever you are, call me, I’d like to join.)

How to differentiate real innovation from gadgets?

So far this article looks a lot like a praise to innovation but failure is very frequent in innovation. In Europe over 93% of hospitality startups don’t last more than 5 years. It’s probably roughly the same in your country. So if we are going to roll up our sleeves and get our hands dirty we had better be sure that we have made the right choices.

  • Look for global trends. A high potential innovation usually comes from a structural change in technology, society or a mix of both that affects not one but many industries. Hospitality is not that special! We have to get out of our niche and compare ourselves to other sectors that face the same challenges we want to solve. This kind of analysis isn’t a guarantee of success but not doing it is the best way to fail.
  • From general to specific. When analysing the potential of an innovation the following graph on Instant Messaging can be useful. Its impact is palatable in a number of industries that share comparable characteristics with hospitality: stong focus on customer service.
  • For example, the global success of generic actors such as Intercom proves that there is a global business need for instant communication. However, generic companies business model usually consists in avoiding any kind of specialization in a niche market. It doesn’t make sense for them to go the extra mile and invest in the specific needs of a niche market such as hospitality. That’s when you start looking for specialized actors whose mission is precisely to create specific solutions for your niche market.

This analysis only represents my vision of the Instant Messaging market and is subjective.

From left to right: Specialty from generic to our niche (hospitality)

From bottom to top: Features from least to most advanced

Thanks a lot to Annabelle and Carlos for their help on this article.

Your move!

Benjamin Devisme,

The Colossal Factory