Corporate Groups and the Future of the Hospitality Industry
By Ron Shah Founder & CEO, Bizly | September 24, 2017
Airbnb and home sharing has irreversibly impacted consumer leisure travel around the world. Put simply, vacation travelers have changed their preferences. They want to crack open the windows, save some money, and live like a local, and this trend is only accelerating. While hotels have been able to keep high occupancy rates for now, ADRs and profitability have suffered as a result, and there is no offset in sight. Hotels have scrambled to mimic Airbnb, cut-out OTAs, offer new concierge apps, or operationalize themselves out of the longer-term decline, but none of these strategies have proven effective. The most obvious way for hotels to offset home sharing may be right under their nose: more corporate B2B sales. But are they doing enough to keep this market?
Much like changes to vacation traveler preferences, the modern business traveler is also on course for irreversible change. The rapid rise of WeWork and the co-working industry is a clear sign that both SME and large enterprise customers are reconsidering their space, indelibly impacting their business travel. The question is whether hotel brands are modernizing around this changing workforce, or if they are they ignoring the trend much like they ignored home sharing in the early days. One thing is clear, B2B revenue is now the tantamount concern for the hotel industry and it's the primary strategic advantage they have left. With WeWork gaining steam and usurping traditional corporate mobility, Airbnb for Business scaling with over 300,000 registered businesses, and competitors like Convene emerging around corporate meeting & event needs, it is important for hotel ownership groups to be honest with themselves about the landscape and come up with a solid plan.
"We'll do it Ourselves"
Smaller meetings and events are now the fastest growing segment in corporate travel. As workforce mobility has exploded, the need for face-to-face meeting has rapidly increased, and this has translated to billions in additional corporate spend around small gatherings of team members, clients, and influencers. Despite all the growth, small meeting spaces in hotels are going empty with a 20% generalized utilization rate. None of the major hotel brands have yet modernized their approach around meeting and events. Booking a meeting at a hotel is still an arcane, manual process, involving fragmented internet research, phone calls, voicemails, emails, and even long drawn out eRFP processes. There is no reliable content repository or customer reviews to empower customers around meetings and events. This is not only misaligned with how professionals buy today, it is also costing hotels on multiple sides. When a customer decides to hold an event elsewhere, the sleeping rooms, food and beverage spend, audio-visual equipment and ancillary revenue (think: drinks at the bar) all goes with it.
Hotels are slowly coming around to modernize. As of today, the "big 4" hotel groups have started drafting plans to create their own booking systems for meetings. All of these efforts have been built around avoiding the creation of another OTA industry for meetings & events. This OTA fear is immobilizing the brands and preventing them from exploring innovative ways to scale and modernize this business through collaboration and cutting-edge marketplaces. Instead, they are reverting back to a "we'll make everyone come to our own site" strategy for meetings & events.
Unfortunately, history and data are not on their side. Starwood attempted to provide this functionality through their meeting planner application on SPG Pro, and more recently, Kimpton attempted to offer this functionality with their KIMS product. Neither of these projects were successful in achieving customer adoption and scale. The reality is that meetings & events are complex and building an application to serve the needs of the planner takes a lot more innovation than simply duplicating the basics of a guest room booking platform. Building for the customer is not as easy as the brands would like to believe. And most importantly, a captive brand experience neglects the fact that the modern customer wants to comparison shop and leverage competitive offers (this is the reason they used outdated RFPs in the first place).
The Hotel Business Review articles are free to read on a weekly basis, but you must purchase a subscription to access
our library archives. We have more than 5000 best practice articles on hotel management and operations, so our
knowledge bank is an excellent investment! Subscribe today and access the articles in our archives.