Watchers of the hotel industry have understood hoteliers to have two major modern foes: online travel agencies, whose commissions now stand at 15 to 25 percent, and Airbnb, which stands to steal market share. But at the NYU International Hospitality Conference in New York City last week, the head executive for the largest hotel company in the world said, instead, the industry's real threat lies outside today's lodging players.
"We are in an absolute war for who owns the customers," Marriott International president and CEO Arne Sorenson said during a panel discussion with fellow hotel executives from AccorHotels, Hilton and MGM Hotels & Resorts. "I think less about Airbnb, actually, than I do about Google and Facebook and all of these other digital empires who own all of us."
These digital players, Sorenson said, have a profile for every individual in the hotel industry's customer base and are asking, "How do we use that in order to make sure that we are monetizing as much of that relationship as we possibly can?" He added: "Make no bones about it. They want to own our customers."
Sorenson's remarks come as major digital players like Google, Amazon and Facebook beef up their travel verticals. Google improved mobile booking capabilities for Google Flights and hotel searches, as well as its Google Trips planning platform. And Google's integrated web of products, such as Gmail and Google Calendar, has created an ecosystem that follows travelers pre-, during and post-trip.
Amazon is subtly making its way into the lodging ecosystem as hotel companies like Marriott International and Best Western Hotels & Resorts pilot the Amazon Echo Dot as an in-room voice assistant. Amazon also looks poised to disrupt the travel industry, according to a March 2018 report from Morgan Stanley. Analyst Brian Nowak, who authored the report, believes the investment required by Amazon to enter the travel space wouldn't be large compared to other verticals. If Amazon could build an online hotel business just half the size of Expedia and with Booking.com's level of ad spend, Nowak wrote, it would add $600 million to its annual operating profit.
Facebook, too, seems to be placing irons in the travel fire. Last year, it hired Expedia veteran Nikhilesh Ponde to lead global strategy for its travel vertical. The company also launched an ad product called trip considerations that allows travel advertisers to use Facebook's native platform, Instagram and Facebook Audience Network to try to hook in users who have decided to take a trip but have yet to decide where.
Accor chairman and CEO Sebastien Bazin agreed with Sorenson. "I probably spend less than 5 percent of my time worrying about Marriott and Hilton and InterCon; I'm spending at least 50 percent of my time trying to understand the [digital] ecosystem and who owns the customer."
Bazin evaluates the current competitive landscape by comparing the amount the largest hotel companies spent to achieve their current combined market cap versus the amount that digital players that didn't exist 20 years ago spend. The latter, he said, turn out to be more agile and more capital light and asset light than the hotel companies and have achieved approximately the same market cap.
"We all do business with [digital platforms]. We do partnerships with them. They've got data which is relevant to us. They can bring customers to us," Sorenson said. "But we've got to figure out: When do we partner and when do we really try and build our own ecosystem that gives us this sort of power we need to have a real return?"
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Hoteliers' Plan to Fight Back
Sorenson said the No. 1 thing to keep in mind when evaluating both digital disruptors and internal strategies is the value that's created for the consumer. "Why are we all members of Amazon Prime? Because it's the simplest way to buy in the world. It shows up instantly. It costs nothing. They know our preferences. Sometimes they get them sort of off, but they deliver real convenience to us," Sorenson said. "Why do we use Google for search? Because they're a spectacular search engine. Right? They know everything about us."
What's the great value creator for hotels? According to the executives, it's loyalty. That may come as no great surprise to those who have observed hotel companies like Marriott, Hilton, Hyatt Hotels Corp., Wyndham Hotels & Resorts and InterContinental Hotels Group bulk up their loyalty programs with new benefits.
Recent initiatives targeted at loyalty members—discounted direct-booking rates, free Wi-Fi, greater cancellation flexibility, digital check-in, mobile room keys and curated local experiences—have helped hotel companies increase enrollment numbers in loyalty programs significantly. Hilton, as an example, grew its loyalty program enrollment by 18 percent year over year in 2017, adding 11 million members for a total of 71 million members.
With increased loyalty comes better data—the type of data that may give hoteliers an edge over other players when it comes to serving hotel guests. "Google, Amazon, Airbnb has never, ever met the guest," Bazin said. "They have all the information on you and on me. They know me by heart. They've never met me." Hotel company employees, though, can interact with guests. "That moment we interface gives us very different data information, which is much more experiential and emotional. [Digital players] cannot meet the client, and they don't want to meet the client. We just have to take advantage of that moment [of interface with guests]."
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But What About Airbnb?
Hilton president and CEO Christopher Nassetta said it used to be that hotel executives couldn't go into a meeting without Airbnb being brought up "once, twice, maybe even three times." Now, that's less the case. Nassetta posited it's because the playing field has leveled out, thanks to stricter regulations from states and municipalities around the globe and because "it's fundamentally a different business."
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Accor and Marriott also have entered the business. Accor acquired Onefinestay, TravelKeys and Squarebreak, and Marriott launched its own home rental pilot in London in April. Meanwhile, Airbnb earlier this year launched new property categories, similar to the brands or tiers used by hotel companies, as well as loyalty programs for hosts and for guests.
"I think [Airbnb], too, are looking at, How do we make sure we develop relationships with consumers?'" Sorenson said. "I think they spend a huge portion of their revenue on Google and other places to drive customers to their site. They've got the same question about, 'How do we build loyalty with our customers? How do we find all new customers?' And I think in many respects, their challenges are like our challenges."
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