Will the Digital Age Spell Doom for Hotel Mega-Chains?
Jeff Edwards December 30, 2015
Travel and tourism concept. Booking hotel by smartphone and destination signboard. 3d
The same fingertip access to booking sites that killed the travel agent industry could change the way we think about hotel and resort properties according to a new report.
It’s far more likely today that a traveler will log on to a website to book flights and hotel rooms than consult a travel agent. This wasn’t necessarily the case a few short decades ago. As the number of travel agents dwindled in the face of the Internet age, airlines and large hotel chains have by and large been the beneficiaries. With the middleman cut out of the equation, the number of travelers booking rooms and flights directly online has skyrocketed over that same period.
The same computerized ease of booking that made travel agents an endangered species may soon cause a similar upheaval among the familiar names in hotel management. According to a report in Business Insider, companies like Airbnb, VRBO, Flipkey, and HomeAway may soon start to replace names like Marriott, Hilton, Ramada and Holiday Inn. Citing data from the McKinsey report, “Digital America: A Tale of the Have and Have-Mores,” technology writer Matt Rosoff notes that in much the same way travelers have used the Internet to bypass travel agents, consumers are becoming more comfortable using home sharing sites to bypass hospitality management groups like IHG or Starwood and may soon trend towards cutting those firms out of the mix in favor of booking directly with property owners.
In the past, developers of large hotel properties felt pressure to align themselves with a well-known name to take advantage of the reputation and marketing power of the large hotel groups. As more travelers begin to rely on the reputations and marketing influence of third party booking sites, that paradigm is shifting, and as any travel agent (or former travel agent) can explain, when change comes, it happens quickly.
[Photo: Getty]
The only thing the chains have bought you for some time is relative consistency in accommodation grade. The current missing piece is a well-defined, unified, hotel grading system that can't be gamed. Star ratings are played like crazy. A 2.5 usually trumps a 3 because most 3s are on a technicality (restaurant on property). Aside from the "resort experience", there are few resorts I've seen that are better than higher end 2.5s in the room department. Most chains are ripe for a disruptive technology ala what we're seeing in the taxi industry to obliterate them. Whoever can build a better rating system and reduce the cost from the current model will win. You'll end up using an app to book a room based on a new rating system; you'll know the app, not the chain they belong to, if they even bother with one anymore. It's like the private cab owners that pick up Uber fares because they make more money at it than they do through their traditional franchises.
Contrary to media hype, most people still aren't interested in paying to ride in a stranger's personal car or stay in a stranger's home. I'm pretty convinced this whole "sharing economy" is just a hipster fad.
The opposite point: technology could re-enforce large brands if they made it easy for frequent travelers to check in, access room, use the wifi, see past bills. If all I had to do was walk inside and the wifi would auto connect to my phone, I could check in with an app, and use my phone to unlock my room, I could see value. Alas, it seems none of the chains are really serious about this.
The sharing economy of accommodation websites is most likely to cannibalize the select service, budget, and perhaps midscale hotel properties first and foremost. Most upscale and luxury travelers will not be as comfortable using sharing accommodation sites and risking the lack of quality control and expectations. The highest level of luxury travelers do look into luxury villas and the like, but these have never threatened the luxury resorts and hotels in the many top destinations around the world. Marriott's acquisition of Starwood is evidence in Marriott's belief that this is likely to be true for quite some time--as Starwood's portfolio has the most impressive array of upscale, upper upscale, and luxury properties the world over. Marriott's acquisition of Starwood therefore ensures that it will serve those markets better than any other hotel group...and far more than any sharing accommodation website can ever hope to compete with. I suspect we soon will see Hilton or IHG make a play for another luxury hotel group like Hyatt (with Park Hyatt, Andaz, and Grand Hyatts accounting for these upper segments). We've already seen Accord make the play for the Fairmont/Raffles group. It won't be shocking to see the big boys making plays eventually for Peninsula, Mandarin, Shangri-La, Oberoi, Regent, Banyan Tree, Rosewood, and Four Seasons, even if they don't succeed.