Out of the big box: when flexible hotel inventory became obligatory
In a week where Accor became the latest to launch a hotel office, is there reason to hope that crisis driven products and services could outlast the pandemic? Pamela Whitby reports
For the past five years, Yannis Moati has been working hard to convince hoteliers that they need to think of their inventory in a different way. “I will be very honest but until recently it’s been a struggle,” admits the CEO and one of the founders of Hotelsbyday.com, which launched in 2015 as a provider of intraday hotel spaces.
However,in the past quarter, as the global pandemic has wreaked havoc on the hospitality industry, new hotel sign ups have accelerated by as much as 40%. According to Moati, pre-crisis the company was onboarding approximately five partners a week but now it’s five a day, taking the number of participating hotels, based mostly in North America, to 1,500. “Everybody has seen the light. Everybody now understands what we do,” he says.
Everybody has seen the light. Everybody now understands what we do
Yannis Moati, CEO, Hotelsbyday.com
This shift is not surprising. These are desperate times. In its latest figures The World Travel Organization says international tourist arrivals will plunge by 60 to 80% in 2020 and tourism spending is unlikely to return to pre-crisis levels until 2024. Hotels have been badly hit – this week Hilton, the world’s second biggest hotel operator, reported losses of nearly double what analysts were estimating.
As hotels face have faced one of the toughest six months ever, finding new ways to monetise their real estate has become an imperative. This week, the innovative French chain Accor became the latest to announce the launch of its ‘Hotel Office’ - a concept that allows people to ‘book their own hotel room for an uninterrupted, premium remote working experience’.
Home delivery services like Marriott on Wheels is another concept that has grown in popularity and is fuelling the growth of UberEats and Deliveroo. Beyond the work-from-a-hotel and home delivery services, others are looking to use their F&B space in socially distanced ways to provide unique experiences for, not just guests, but also the local community. Some hotel bars which, thanks to social distancing, can no longer pack in 80 people are now offering, for example, cocktail-making master classes a smaller number of people and promoting these on websites like Klook and GetyourGuide.
The above are some of the immediate ways that hotels are innovating to boost ancillary revenue but in some of the hardest hit places consultants McKinsey wonder if there is even scope to go further - to even pool revenues. “Instead of having all hotels operating at 20 to 40% occupancy, a subset of hotels could operate at a higher occupancy rate and share the revenue with the remainder,” is one recommendation of its latest report – Reimagining the $9-trillion global tourism industry – what will it take?
Upbeat and long term
Prasanna Veeraswamy was formerly with travel retail platform GoQuo and relocated to Singapore in January to head up product strategy for a new start-up venture in Asia Pacific. As a serial traveller who has been stranded in a hotel in the island state he admits that these are “strange times” but he remains upbeat. “The industry will eventually bounce back and the hotel sector particularly, in my opinion, is ripe for innovation that will outlast the pandemic and lead to permanent revenue benefits,” he says.
Moati could not agree more. “When overnight bookings start to recover in the coming decade, the hotels that have grasped the opportunities of this current crisis will be in an unbelievably strong position,” he says.
The hotel sector, in my opinion, is ripe for innovation that will outlast the pandemic and lead to permanent revenue benefits
Prasanna Veeraswamy, Head of Products, PELAGO
Today hotelsbyday.com, where sales were still down by 36% in July (it was 82% in April!) is currently only offering dayrooms and work lounges – for obvious reasons, its pool and gym service is currently closed. However, hotels have real estate with ready-made spaces and Moati believes that “with cool decor, cool vibes and fast Wifi, there is huge potential to disrupt many different verticals”. This could be anything from co-working companies like WeWork to gyms and parking providers.
As 60% of the company’s existing clientele live within a 20-mile radius of the hotels they use, he also believes the business model is also well placed to take advantage of the growth of domestic travel and local experiences. Pointing to AccorHotels, which a few years ago outlined its vision to convert hotels into hubs for the local community, he believes that the pandemic will only accelerate this trend.
Moati’s platform, and others like UK-based dayuse.co.uk, and dayrooms.com, is just another OTA taking a commission -15% in his case. But he says the majority of partners that were early adopters have stuck, and the company is currently in negotiations with a top-five hotel brand with over 5,000 properties.
Of course, many hotels will continue to push for direct bookings of their flexible inventory but the OTAs, warns Veeraswamy, will continue to play a role in discovery. “My journey is always going to start with search, with Google or an OTA. That situation for hotels won’t change with Covid, in fact it will get worse,” he says.
What has changed is that in a sector that has been ripe for innovation, the survival of hotels depends on using their assets to drive new revenue streams. As Moati has been saying since launching his platform five years ago, hotels have immense power over other service providers to become more flexible. Until now, perhaps, hotels were just too content with what they had, or too lazy or they did not have the vision. But if they want to survive this crisis, it really is time to think outside the big box.