1. HOTEL INDUSTRY. While oversupply condemns the Hospitality industry to maintain abnormally low prices in Spain, the development of the hotel sector is at growth level never seen before in Latin America. However, note that some Latin American countries are reaching their growth ceiling, more in the corporative sector that on the business one and more centered around large cities than in untapped tourist destinations. Consistent with our predictions for 2013, Lima and Bogota have been seeing growth in the corporate mid-class segment and the so called “boutique hotel industry.”
Chile is putting a stop (softly) to its economy, while domestic tourism grows with new personal and design hotels. Brazil continues, albeit more politely, its growth to give hospitality to the World Cup and Olympic hype for 2014 and 2016. Among Asian countries we announced last year that Sri Lanka would become a new tiger for tourism. Well, this year the government has announced public and private investments to triple hotel capacity from 2014 to 2016. China continues its growth with the aim to achieve in the next 10 years, 6.3 million beds and a volume of investment close to 100,000 million dollars. As much as they built in the past decade, China’s per capita ratio of hotel rooms (four per 1,000 people) is lower than in the U.S. (20 per 1,000 people).
2. CLASSIFICATION. The low cost design is becoming an investment with a great future. And not only in Spain or in the most affected countries by the financial crisis of six years ago. It’s becoming a global trend and is getting consolidated in those destinations especially desirable for the Millennium Generation. It operates mainly in big cities centers, where the price per square meter has reached prohibitive levels for youth and for many families with unemployed family members or SMEs under low season.
Along this segment, we’re also seeing the rise of non-touristic apartments, sometimes temporarily leased by their owners, marketed peer to peer on a large scale through social networks and internet portals such as Airbnb. This form of tourism is taking off around the world and its expansion will become even more apparent throughout 2014, driven by the hosting stock unsold or unoccupied. We even foretold the movement of the model to other tourism sub-sectors, such as the follow-on activities in the destinations. This will increase, therefore, the protest coming from the hotel industry lobby to the new competition. In the future, the trend will be directed towards the tax harmonization in both segments through a relaxation in tax rates and a reduction in the tax bureaucracy for SMEs.
3. THE PRODUCT. We continue to believe that the hotel product will tend to differentiate itself every time more, especially in saturated tourist destinations or of greater touristic scale. Theatres, interior landscaping, recovery of the fifth facade, enhancing the bathroom as a health and beauty element, the atrium as a meeting place with the city, etc. Some of these proposals are beginning to be sensed in hotel groups such as Sol-Melia and Palladium. Moreover, the evolution of hotel space will tend towards authenticity and identity. As an example, we detect the growing interest of certain establishments for personalizing the minibar with local products that are replacing generic brands devaluating the uniqueness of their business. Only through product may hotel accommodations dream on the loyalty of their customers, which are each day more unfaithful, channeled through major tourism technological intermediaries.
4. THE SERVICES. The low cost airlines sector was the first to detect that their true core business was transportation. Meanwhile, major airlines accentuated its decline convinced that passengers demanded, together with the transportation, the supply of a good service onboard. And that is why their customers would be willing to pay a high price per trip. The result is that low cost carriers now channel more than 60% of tourist arrivals to Spain.
The hotel industry remains aware on this subject, that of elucidate what is the core business of lodging and what price are guests willing to pay for it. Will luxury hotels be the only ones capable of ensuring, in exchange for a high price, the attention that elite guests expect? And even those services that are not even in their expectations. The other end will be set by new the generation of low cost hotels that will sacrifice many unneeded services at the discretion of their clientele and to the low price the latest is willing to accept. In the middle, will stand a bunch of establishments that will not sacrifice neither the one thing or the other, and whose only chance of survival will be the automation of all mechanical services, as well as those that do not require direct contact with the client, nor the practice of a liturgy to turn their stay into an unforgettable experience. The decision by Hilton and Holiday Inn (IHG) to suspend some of the room service in their hotels is the clue that should be tracked over the next few years.
5. THE MARKET. The movement of travelers around the world keeps growing, the fact that it has already exceeded the number of 1.000 million already points to 1.800 million in the next decade. China, for example, is preparing to send about 100 million leisure tourists in the international market every year. In emerging markets, this year we have noticed an increase in proximitytourism, just the way we imagined a year ago. The increase of urban vacation tourism versus corporate urban tourism is also confirmed.
While the number of Western travelers is becoming stable or stops falling rapidly, tourism from emerging markets is rising. What seems to be a newer phenomenon is the tendency for young people to expand their business one or two more days to have a mini-vacation. This is a result of the decline in paid vacation days already felt in the western world. Regarding tourism marketing, product differentiation will result in one micro segmentation of the demand also provided by the Big Data analytics technology. This innovation will be used by many hotels as drainage retention strategy that is expected from the direct channel to the online distribution.
6. THE CLIENT. The journey continues in the culture change process. Thanks to the internet, the way in which travelers inform themselves about destinations, choose their hotels and plan their travel in general is very different from only a decade earlier. In front of the old brochures and newspaper reports, beyond their digital transformation on websites and booking and travel apps on mobile devices, what will really trigger the decision to travel will be proposals that are 100% emotional. If the hotel is a factory of experience, the process of choosing it will have to be fully experiential.
This requirement becomes very relevant in the case of new customers, the generation that will soon manage the tourism industry: the millennials. Among their transforming characteristics of the current tourism situation we can understand that they are not faithful, they are less devoted to current brands than the previous generation, they behave with lots of personal demands and before the details on the service they are rather more skeptical; therefore recognize and reward more all the gestures that take them out of their natural skepticism.
In 2014 we will start to see clear signs of evolution in facilities and services by the major hotel chains. We’ve already had some glimpses this season with the explosion of the Ace Hotels group, which are displacingchains like Marriott and Starwood in urban preferences in the configuration of a “social lobby” more adapted to these new generations. Regarding that, we’ll see Marriott reacting with its brand project associated with Ikea, Moxy Hotels. And probably the entrepreneur Ian Schrager will continue to give a lot to talk about with new proposals for theaterhotels.
At the same time we will witness the emergence and consolidation of a new category of hotels facing what can be called the invisible travelers, young and not so young people that do not require any type of information, since from the Internet they get to know the hotel more than their own managers, and require the utmost diligence on the check-in. InterContinental (IHG) has already arranged for it two hotels in London without reception, equipped with recording machines in the lobby and a productive service able to customize the treatment according to the preferences of its 71 million customers, even before its arrival. In addition, this international group plans to implement through 2014 registration via mobiles in their Crowne Plaza hotels. For its part, the U.S. luxury chain Hyatt has already used check-in and check-out desks at the Grand Hyatt Hotel in New York.
7. PRICES. We were right when we predicted last year that the Spanish ADR would begin toward the end of 2013 a shy climb that, pending on the latest data served by the INE, begins to be valued in the pronouncements of the hotel employers. The upward curve of an extreme softness has its support on the good data of the Spanish economy, which will emerge from recession in early 2014. Nevertheless, we can expect significant price rises. Profitability will continue to target the optimization of costs. We know that every dollar of savings is an increase of 16 euros in asset valuation. In mature European destinations, meanwhile, rates are sustained. And, with the same words we used in 2013, we emphasize today that if the European and the U.S. economies rebound in late 2013, the increase in tourism demand in 2014 will positivelyimpact on prices.
8. DISTRIBUTION. The Big Data analysis took off in 2013 as an essential tool in online business. We now anticipate the embrace of big business to this analytic in all spheres of political, economic and sociological behaviors. This technology will increase the gap between digital and analog channels. In the tourism field, the trend of online travel agencies (OTA) will further increase the booking fee in order to capitalize on its growing investments in Big Data. While, most hoteliers continue engaged in the difficult task of deciphering key technologies that will enable them the conquest (impossible) of the direct channel.
The simultaneous management of various sales channels, far from being a competitive advantage, results in additional resources to revenue management and a corporate culture not always prepared to deal with the technological changes of the necessary immediacy. Often the cost of customer acquisition through direct channel is higher than the one that originates through the intermediated channel. Therefore, hotel distribution is increasingly moving away from the tourist channels and embraces the purely technological channels. As we asked ourselves in 2013, Will 2014 be the year of the Google Travel System?
9. BOOKINGS. The phenomenon of late bookings, facilitated by the growing technological capacity of hotels and their intermediaries, has taken off in 2013. Which means the medium-term gradual increase in bookings for a single day. Better able than ever to divert flows and perform flexible proposals instantly and with a global reach, technology intermediaries are progressively replacing the space of traditional ones. Which is seen reflected in the stock results in recent months (Expedia, Priceline), with a rising price curve.
Using techniques of customer knowledge and market sentiment detection, the data will go to the user rather than the user being the one that should go in search of data. The average length of stay in the hotels will be further reduced in 2014. We’ll also observe how silently, the search engines will be in action with more than just a price comparison. It is likely that some of them become involved in a merger or purchase from retail giants. The latest moves in Kayak make us glimpse that trend. And always with the same question: encouraged by the more than 3,000 million dollars today managed through the OTAs in the business of tourist bookings, what is Google’s next step?
10. PRICE PARITY. The current process of concentration and leadership in large OTAs, reaffirmed by the huge investments required by the future of Big Data distribution is a salutary lesson for any price parity policy. It may be too early in 2014, but it won’t take long until this concept remains in the museum of tourism distribution. Booking now occupies a prominent position in the distribution map. It even managed to displace Expedia in its traditional stronghold, which is the North American market.
The decision to respect the parity rate depends on the level of dependence that each hotel has with its distribution network. And above all, the leading supplier in this segment, which will have the tendency to sell according to the privileges granted by each establishment. Relegated to the background by technological intermediaries, hotels will be obliged henceforth of taking more care of their product, releasing the products that were being absorbed so far for the sale by the direct channel. In the long term, certain establishments will dare to include on their websites comparative pricing modules owned by search engines, so even at the cost of sacrificing the direct channel. With it, they will increase the confidence of their customers and get a better understanding of the market, detecting better who’s who and what each one seeks.
11. COOPERATION NETWORKS. From the perspective of the hotel companies, the process of mergers and alliances between chains is delayed as predicted in 2013, most likely by looseness of financial institutions to take realty positions and the success of the consolidated destinations in attracting international flows at the expense of keeping low prices. We continue to believe that cooperation networks will begin to proliferate as an alternative to the hotelfusion, unifying management, product and marketing strategies in favor of higher level of independence. The collaboration between small businesses will be tactical rather than strategic, and occasional, with specific purposes and within the agreed expiration term.
12. TECHNOLOGY. The Big Data era has begun and in 2014 will attend its launch in city management, in road safety, in medicine, in some trade branches, and in an incipient but strong way, in tourism. People and things turned into sensors, throw an enormous amount of data on their movements, likes and dislikes, habits and everything about their existence, giving more information to tour operators for the hospitality industry to become, truly, in a hospitality industry.
The undisputed star, the smartphone will be the scepter of power. Being able to obtain accurate and immediate information of yourself and everyone. Power to generate bookings. Power to ensure the hazards of travel. Power to find the best prices. Power to really enjoy what you expect, of what no one really expects and even that which, although expected, provides a much greater degree of satisfaction than the expected. Mobile devices will allow companies to address their costumer more directly and them, to receive from companies the best conditions in their travels. In turn, the dominant technology will give a lesson to travelers waiting for a faster response time in their communications with the hotels. We still have to wait for a couple of years to see how the hotel receptionists recognize their customers through their Google Glass.
13. SOLOMO. This acrostic for socialization, location and mobility has been consolidated in the technological culture of travelers, each day more inclined to put their trips into orbit, and the prior decisions, to the mobile, social and technological applications. Erickson expects 50,000 million mobile devices in circulation in 2020. In 2013 there were already more mobile phones than static ones in America. In 2014, more than 50% of travel searches will be made through mobile devices.
This will further boost last minute bookings. The hotel lintel in Spain will promote this environment, helped by the fact that the hotelier gets rid of unsold inventory and the traveler benefits from better pricing. Functions from the so called smartphones will increase exponentially in the coming years. And maybe at the end of this decade, we’ll see them tiny, ductile, flexible and holographic. What matters in this device will be its content and relational skills. As predicted, during the year an increasing number of hotel reservations have been channeled through this new technology.
14. FREE WI FI. Progress is unstoppable. Every day new hotels join the wave of free internet access. Which is not truly free, but incorporated into the rate the same as water, light, heating, air conditioning, cleaning the room or wear of the materials used during the stay. In 2014, the reluctant will be forced to take this requirement, under the threat of being left run out of customers. Complaints for this reason fill and social media reviews portals, with consequent damage to such establishments. Hilton has just gone public with the promise of free Wi-Fi in all rooms, having a fee only for high-speed connections.
15. SOCIAL MEDIA. Our expectations have been met. Throughout 2013 we detected a flood of tourism businesses in social networks. If Facebook took the cake before, now Twitter, and Instagram, are overflowing with new tenants and for internal management, LinkedIn. Everyone assumes now that not having a presence in them is practically to not exist. Or rely on intermediaries with market access. Some traditional businesses, like many hotel chains in Spain, maintain a shy presence in Twitter, but all remain listening.
In 2014 we believe that some initiatives will emerge through this network and WhatsApp, preferably, through which a virtual butler in each establishment shall be a connector between customers and other staff members. And of course, hoteliers will stay to listen to what happens on social networks to make improvements in their business. Thanks to the internet what is considered as “industrial espionage” has significantly varied, which is now more than ever free and legal. Social intelligence, market sentiment, and barometer occupancy will be concepts that will dominate the hospitality marketing in the coming years. According to a study by HawkingInternational, one in three hotels will implement the innovations that other competitors have communicated through social networks.
16. GASTRONOMY. As we announced, the star system of the great chefs who live their developments in the hotel support continues to boom. Another incipient star system, the one of food products brands suppliers, begins to form and play a prominent role in complicity with customers, who sees well represented their favorite brands in the place in which they live a tourist experience. Bartending stands as a great show that encourages stay, driven this year and throughout 2014 with the #DrySnowArties initiative of Tourism Hostels and their contract with Javier de las Muelas to develop this space in other establishments of the network.
17. DIGITAL PRINTING IN 3D. Reiterating what was said in the previous year. Although this technology is not popularized until the end of this decade, next year some functional prototypes will see the light already functional for remote playback designs adapted to the needs of hotels. Some hotels will be able to ‘print’ in acrylic polymers tables, chairs, plates, cutlery and various household utensils, high value design and customized for each establishment. In Spain, Cordoba chef Paco Morales takes time practicing digital printing techniques of food in collaboration with the Institute of Advanced Architecture of Catalonia and the company Solé Graells.
18. WINDOWSHOPING. While technology is not artificially reproduce the sensations perceived through the senses (virtual spaces, personal acoustic sensors, tactile vibrational smartphones, electronic olfactory sensors, nano taste buds and neuronal stimulants ), e-commerce will require the help of physical stores where to touch and test the goods. Amazon will invest in 2014 a huge sum to create stores and corners in traditional commercial spaces. Hotels, meanwhile , make an ideal space for displaying technological products and the representation of different advanced brands in the space of electronic distribution. If in 2013 we have seen the emergence of the Sol Wave brand, Meliá’s bet for the Twitter theming of its hotels, in 2014 we’ll meet similar initiatives of big chains. It will not be uncommon to see themed halls or rooms with the products of a technology brand (Apple?, Philips?, Microsoft?).
19. INTERNET OF THINGS. It will not be for 2014, but neither will have to wait for the next decade. Appliances such as minibar, TV and others will inform of consumption in each room and will automatically forward it to the check-out and the food and beverages company in order to proceed to replacement. Before that, the Internet take off that relates objects through sensors will be produced internally in the various episodes of management, such as warehouse and the order of arrival of supplies, the prices in the restaurant and bar, scuffs and amortization of material, etc.
It hasn’t yet be fulfilled the expectation of an iPhone 6 with NFC technology opening doors and paying the bill, but this technology is already looming in the U.S., where the Square payment system has become very popular, in which everyone can afford or collect the account using a small card reader. It is the pre-paid phase directly between two phones that from the technological point of view requires an identity protocol between the different systems on the market today.
Fernando Gallardo |