David Roche on digital developments in travel and hospitality
With a decade spent with Hotels.com and Expedia, David Roche holds great insight into the development of the travel and hospitality industry.
Under his leadership, Hotels.com grew to become the world’s second largest hotel booking site. As President of Expedia’s global hotel supply group he oversaw engagement with 250,000 hotel partners and $18bn in gross bookings. David Roche is currently Executive Chairman at GoHenry and Chairman at Guestline.
We interviewed David as part of our recent research into the impact of digital developments on the travel and hospitality industry:
DAVID, WHAT ARE THE KEY DIGITAL AND TECHNOLOGICAL DEVELOPMENTS THAT YOU THINK WILL HAVE THE GREATEST IMPACT ON THE TRAVEL AND HOSPITALITY INDUSTRY IN THE NEAR FUTURE?
The continuing growth of mobile platforms, or platforms delivered on mobile phones as a means of delivering services at the hotel – I think that’s going to be very significant. I think that will change the guest experience pretty fundamentally.
I think consumer expectations are rising about what is available from a technology point of view, for example, ample bandwidth over Wi-Fi. And hotels are mostly failing to keep up with that at the moment. There’s a big challenge for the independent sector in meeting those needs.
“I continue think that the transient market will be OTA-dominated; hotels will have to fight very hard to identify and hang on to non-transient customers.”
I continue to think that the transient market is going to be OTA-dominated. I think hotels will have to fight very hard to identify and hang on to non-transient customers for fear that they fall into the transient bucket, simply because it’s easier to find a booking tool that way, or they’re enticed by the loyalty schemes that one or two of the OTAs offer. So I think that is definitely a concern area for distribution. I see the OTAs consolidating their gain on the transient market.
I further see that the OTAs are bumping up against limits in the availability that they can extract from the hotels. And I think this is going to force the OTAs to do two things. Firstly, I think they are going to broaden their supply base so that they are not constrained by availability. Secondly, I think they’re going to use some form of carrot and stick approach with the hotel trade to persuade, cajole, and possibly even obligate, the hoteliers that they’re working with to give them more goods.
HOW MUCH OF AN IMPACT DO YOU THINK GOOGLE’S DIRECT BOOKING OFFERING IS GOING TO HAVE?
I genuinely don’t know. I do think that Google starts with a tremendous amount of traffic. At the same time I think that, for the present moment, and for a number of years ahead, I believe that consumers do not see Google as a highly qualified seller or broker of travel. Especially where the travel line in question is fairly high-touch, as hotels are, in contrast to airplane tickets, which I consider to be commodities.
WITH THE DEVELOPMENT OF THE SHARING ECONOMY, HOW DO YOU THINK AIRBNB WILL AFFECT THE PERFORMANCE OF EXISTING HOTEL BRANDS IN THE NEAR FUTURE?
I think that Airbnb has affected the hotel trade in a number of different ways. I think that it is affecting, and will continue to affect, the hotel trade by widening the availability of rooms, for people who need rooms but not that much service. It is going to act as a brake on RevPAR in the hotel trade, because supply and demand will balance in a different place from where they have balanced up until now.
“Airbnb will act as a brake on RevPAR in the hotel trade, because supply and demand will balance in a different place.”
The second thing is that I suspect Airbnb will have two opposite reactions for larger hotels that typically offer family products. Some will further develop their family offerings, larger rooms and family suites and so forth, so as to be more competitive with the Airbnbs in that family segment. And others will just get out of that altogether. They will just redevelop those rooms as single or double occupancy rooms.
ARE THERE ANY OTHER WAYS THAT YOU THINK INCUMBENT HOTEL BRANDS WILL NEED TO ADAPT AND CHANGE IN ORDER TO COMPETE WITH AIRBNB?
In general hotels will need to adapt by making a virtue of their services that are available on site. And doing things that Airbnb can’t do, such is bundling those into the price. No Airbnb that I know of can offer bed and breakfast. Nor can they offer bed, breakfast and spa. So I think that hoteliers will react that way.
Chains have an opportunity to make a virtue of the standardisation of the service that they offer. For the business segment it’s very important to know that you can go to a hotel where you’ll be able to plug in, print a document and find a cab outside the hotel in the morning. And that’s just not available with Airbnb. So I think that marketing campaigns to those segments need to sharpen up to remind customers of those timesaving benefits.
WHAT ARE THE KEY CAPABILITIES YOU THINK CONSUMER-FACING TRAVEL AND HOSPITALITY BUSINESSES NEED TO DEVELOP IN ORDER TO COMPETE?
There is an emerging need for the independent sector to broaden its base of distribution as wide as it can so that it can adapt to market conditions, especially the cost of distribution, which is obviously quite variable across the channels. So that means being able to manage a wider group of channels.
The smaller end of the trade that often has roles that are doubled up in a hotel – for example, where front of house is also revenue management. These businesses will benefit from mobile-enabled software. Many of the software services, such as PMS and distribution systems, need to be mobile enabled so that you don’t need to be bound to the desktop. You need to be able to make changes to the pricing of your room stock or distribution policy from anywhere. This is less of a concern for the larger properties and the international properties that may have dedicated revenue management staff and a certain amount of automation in their systems.
I think that there’s going to be increasing focus on CRM so that hotels are able to remember more than a guest’s name, including various attributes of the guest’s preferences which can be taken into account in pricing, at the moment of arrival, departure and during the stay.
HOW DO YOU THINK SENIOR LEADERS CAN ENSURE THE SUCCESS OF PROJECTS WHERE THEY’RE WORKING TO MOVE TO A MORE DIGITALLY INTEGRATED BUSINESS?
It really depends on where you’re starting from. I’m very inclined to think that hoteliers should stay abreast of the changes that are taking place in the digital market, even if they are not immediately about to make a change to their policy or products. So that means attending conferences or reading blogs and sites and so-forth. I think the first thing is to be aware. Then I think that they should consult reasonably widely with hoteliers whose business needs and capabilities are somewhat close to their own.
“There is no point in taking the well-meant advice from a neighbouring hotel or a supplier of services where either the needs are different or the native digital environment is different.”
I think there is no point in taking the well-meant advice from a neighbouring hotel or from a supplier of services where either the needs are different or the native digital environment is different. You need to look yourself in the mirror and say, ‘that’s the animal I am’. If I’m not very sophisticated in my capabilities at the moment then really what I need to do is to get some advice and you can ensure yourself by going ‘best of breed’ on these things, or you can potentially hire a digital service to assist with this and the integration of these services.
The second thing you should do is, whatever it is you are installing, and especially where you’re changing workflows in the hotel, don’t skimp on the training. Make sure staff are fully trained on these systems, and the company that is providing this to you has a credible service component. Make sure then when things go wrong there is always someone at the end of the line, always someone who can fly to the rescue and fix things. Otherwise you’re going to face very significant issues with your guests.
I think that the service aspect is of particular importance because it is not in the nature of many digital businesses to provide that. Digital businesses who take their cue from people like Amazon tend to push anybody and everybody into self-service. This suits some of the components of the hotel industry, as it suits some consumers, but it does not suit others. So, although it sounds almost retrograde to say this when considering the latest new software tools, that some sort of old-fashioned service should be a key component.