IHG CEO on tackling tech disruption in hospitality
A slowdown opens the door to disruption in hard-hit industries, but the CEO of one of the world’s largest hospitality companies says a company like his is doing more than any technology platform can replace.
Last week, the CEOs of Kayak and Sonder doubled down on the idea that a low-cost technology platform could disrupt hotel business at the property level. The idea is that technology can cut costs – who needs a staffed reception and all those other features of a traditional hotel? – and drive a more efficient business for hotel owners.
Kayak is already underway with branded hotels in partnership with Life House while Sonder, which recently went public, continues to grow its business which acts as a hybrid hotel and short-term rental platform. Reducing operating costs while maintaining widespread distribution may be music to the ears of hotel owners still struggling financially from the brunt of the pandemic.
This kind of knife-sharpening by tech vendors eyeing the hotel space is nothing new for IHG Hotels & Resorts CEO Keith Barr.
“It’s like when Oyo came out, and there was the question of what was going to happen with [online travel agencies], and I have to remind our board — and they get it — that distribution is part of the value proposition we bring,” Barr said in an interview with Skift this week at Americas Lodging Investment. Summit. “That’s not all, that’s why what we do is so complicated.”
Sonder’s model is that he rents out units he manages through a lease or revenue-sharing agreement with the owner of apartment buildings, and even actual hotels. Company executives have previously said Sonder can cut traditional hotel costs in half with its method of relying more on technology and less on physical staff and amenities that add overhead.
Kayak CEO Steve Hafner at Skift’s Megatrends event earlier this month specifically called out Sonder as well as other tech-dependent platforms, including the burgeoning hotel line. of the Kayak brand, as having the potential to disrupt the hotel business – especially coming out of a pandemic when owners are looking to cut costs.
If there’s panic in the conference room, Barr doesn’t show it. Instead, he touted what he finds traditional hospitality companies can offer hotel owners that tech outsiders can’t.
“We have a digital distribution technology platform, which Kayak will have. We also have a huge global sales organization that they don’t have. We have a large technical services organization that helps owners build and renovate their hotels. We have a huge [human resources] platform that provides training and skills development,” Barr said. “The only thing [tech disruptors are] resolution is part of it – not all of how we create value for owners and deliver experiences for customers.
But there are signs that hotel companies like IHG are still taking note of what could be a vulnerability in maintaining franchise deals.
Of course, traditional hospitality businesses have more bells and whistles than Kayak could currently bring to the operational table. But those features also come with higher costs which might be why a homeowner just wants to throw in the towel and try something a little more tech-savvy without all the headaches of complying with brand standards.
Barr noted that the company is investing more in its IHG Concerto technology platform to improve the digital experience in a hotel. The Owner Portal on Concerto provides real-time data on an individual property and offers suggestions on how to improve performance.
Mobile check-in and check-out and digital room keys may have been billed as a pandemic security measure, but they also eliminate a pain point in the guest experience and reduce operational costs.
“We always need to improve our game, so we need to continue to invest more and more in technology, reduce friction in the digital experience and find better ways to reduce costs for owners and our technology platforms,” said Barr. “We can’t sit still, but it’s damn hard to replace [the traditional hotel experience]that’s the advantage we have.
A Roaring Year 2022 (in the US and Europe)
There’s a growing sense of optimism for the months ahead at hotels, despite all the chatter from tech companies vying for business with traditional hotel companies — even if the optimistic chatter feels like a case of deja vu.
The last time hoteliers took a giant bite of optimism, the Omicron variant reared its head and sent occupancy rates nosediving and prompted some countries to lock down again. But hotel industry executives at this week’s ALIS conference in Los Angeles seemed significantly more optimistic about the potential for hotels to recover over the next year.
“If you remember back in March or April 2020, I said, ‘There’s a light at the end of the tunnel. I just can’t tell you how long this tunnel will be,'” Barr said. [now] you kind of feel like you can finally see that the light is right there.
The industry is still not bathed in light at the end of this proverbial tunnel. U.S. hotels still performed about 17% below pre-pandemic levels, according to STR. This is actually a good performance compared to China, where performance was down 50%, and Europe, where it was down 43%.
But Barr’s sentiment is also not a case of the hospitality industry being a Pollyanna.
The number of newly reported cases is declining in the US and UK, and some European countries are lifting restrictions previously put in place to combat Omicron. The signal for the variant of a rapid exit from many regions has leaders like Barr cautiously optimistic that, thanks to so many people now having natural immunity in addition to vaccine-induced immunity, some level of normalcy in the field of travel can return.
The additional approval of therapeutic agents to treat coronavirus on top of circulating vaccines has provided better treatment options since even when the Delta variant only broke out last summer. The coronavirus is likely to turn into an endemic disease — one that isn’t going away but has mostly regional outbreaks like the flu — as early as 2024, Pfizer executives said last month.
But ALIS chatter would lead some to believe that this endemic phase could occur within months in some parts of the world.
“It really feels like you’re probably starting spring break [and] from there, you’re probably going to see a phenomenal kind of [second and third quarter] in the United States, no doubt, and in Europe, and then probably in the Middle East as well,” Barr said. “When you get to Asia, you get a bit more mixed results because of vaccination levels. Then the big question is China.
China has gone from being a global leader in the recovery of the hotel industry to a giant question mark due to the country’s zero-case policy and strict lockdown measures that continue to hamper hotel performance. But Barr remains optimistic about reports that travel restrictions could be lifted at some point later in the year.
A new variant can always lurk around the corner, as recent history has repeatedly shown. But the growing sense that, with effective treatments in addition to vaccines increasingly readily available, the optimistic post-Omicron outlook may not be as naïve as when people pontificated about an imminent return to business travel. once the Delta variant slowed down last fall.
“Spring will come,” Barr said. “I think society and governments have decided that we have to coexist with Covid. Seeing that the effectiveness of the vaccine is pretty solid – you’re seeing people not getting as sick… it just gives you confidence that it’s going to come back to a level of normality.
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