Mid-year 2018: Brands, OTAs, Marriott, Blockchain, Robotics and Sustainability

Online travel agencies (OTAs) outspend brands by a wide margin and continue to steal market share from brands. As Marriott is becoming more of a global brand with 30 brands and a home-sharing company in their portfolio, we see a new war developing.  Airbnb, a behemoth home-sharing company, is regularly getting beat up by cities who are adding regulations quickly. They will become an OTA by 2020 and begin to compete with Expedia and Booking rather than Marriott, Hilton, and the hotel community. After all, they only charge three percent for their services and could get 10 as an OTA!

At the Lodging Industry Investment Council meeting, we heard STR talk about measurement of operating profits versus revenues. Labor growth has seen leaps and bounds in certain markets. STR has a new report that compares revenue growth to GOP growth by major market. Look for more measurement tools from STR and others going forward.

Augmented reality (AR) technology is coming to eight Marriott International properties and creates a 360-degree, virtual reality (VR) views of properties in the Marriott Caribbean & Latin America Resorts collection. Previously, VR required wearing cumbersome goggles, but now Apple’s new ARKit technology brings it to your iPhone.

The way that AR works is simple: after downloading an app, users aim their phones at a flat surface.  A door appears that they walk through and transports them to a resort. The system can be downloaded through the “Portal to Paradise” app in the Apple store or its website. The eight properties currently available include Marriott Resorts in Aruba, Cancun Resort, Puerto Vallarta Resort & Spa, Los Cabos Grand Cayman and St. Kitts.

Blockchain

While we are still in the very early days of blockchain adoption in hotels, there are some promising areas of blockchain application for the hospitality industry, including loyalty programs, distribution and more. Blockchain, a digital chain made up of blocks of information, registers transactions between individuals and ensures security by validating the information of both individuals taking part. Every time a transaction is made in the blockchain, that information is encrypted, stored in a “block” and permanently added onto the end of the chain.

Transactions made in the blockchain are fast and its simplification of the transaction process is enticing as it could eliminate “middle men” like OTAs. OTA commissions are a cost that hotels have had to endure for two decades, but with blockchain, things could change quickly. Those that don’t own hotel rooms, flights or other commodities bought and sold on their sites could suffer.

Removing these middle men in the booking process would generate a significant impact on the market, making hotels more profitable to own. Disney, already known for their innovation, began building a private blockchain called “Dragonchain.” While they made the protocol open-source in 2016, developers will build platforms that securely use blockchain applications. For a great primer on blockchain, read the summer issue of Hospitality Upgrade. Watch for this during the same period of time that Airbnb goes OTA – lots of changes to come!

Sustainable Tourism

Finally, the United Nations designated 2017 as the International Year of Sustainable Tourism for Development. Taleb Rifai, Secretary-General of the UN World Tourism Organization said, “this is a unique opportunity to advance the contribution of the tourism sector to the three pillars of sustainability – economic, social and environmental while raising awareness of the true dimensions of a sector which is often undervalued.” Many companies are benefiting from established ecotourism practices. We can see a higher demand from leisure travelers who want to reduce their carbon footprint as well as travelers who are more mindful of the local communities and industries impacted by tourism.

As an example of sustainability, Hilton Worldwide announced a new program this year that would follow the Paris Climate Agreement by cutting its environmental footprint in half and double its social impact investments by 2030. Numerous studies indicate that millennials want employers to be socially responsible. Hilton’s plan includes sourcing from local and minority-owned suppliers, empowering women and young people, banning plastic straws and water bottles, and not sending any soap at all to landfills. These efforts have been applauded by the World Tourism Organization. Other organizations committed to sustainability include Royal Caribbean International eliminating plastic pollution by 2020 and the California Sustainable Winegrowing Association who developed best practices over 15 years ago.

Look for our annual trends in the industry that will come out December 1, 2018! This has merely been a mid-year trends report. Enjoy summer!

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