When we hear the term Digital Transformation, it can be daunting and confronting. Yet another new term that can make us feel inadequate or that we are in some way falling behind. Digital Transformation is really a term that describes operational transformation. It means moving your business processes from manual or behind-the-scenes activities to technology-enabled processes for both staff and the customer. Ultimately, it’s all about how you operate your hospitality operations.
The Evolution of Hospitality Technology: Lessons Learned
I’ve had the good fortune to be deeply involved in several significant shifts in technology that changed the way of doing business in the hospitality industry. These include Fidelio, revenue management technology, enterprise customer relationship management, reservations systems, booking engines, ERP, mobile workforces, service management platforms, campus Wi-Fi, and cloud computing.
These tools brought about significant shifts in hospitality operations capability. Early adopters benefited, accepting challenges in the process. The experience taught me that the approach yielding long-term success was enterprise technology. Achieving this outcome was a challenge, often involving pitched battles amongst management teams and owners to stay true to a strategy of information consolidation and increasing interoperability through broad-based technology applications.
The Challenge of Unified Selling: Beyond Room Product
Despite the advances in technology, the piece that continues to elude the hospitality industry is a single or unified selling platform. This is a platform allowing inventory and pricing for all products and services to exist in a homogeneous environment.
To expand, envision a tool that supports the consolidation of rooms, meeting spaces, food and beverage, sporting operations, lifestyle, recreation, and wellness services. This capability extends to items such as transportation, business centers, workspaces, kiosks, and any other item offered within hotel operations, including specialty food products, wines, beauty products, retail, other consumables, and even third-party products and experiences. Everything.
The, ‘Do you want fries with that?’ model is operationally beyond the hospitality industry and hotel & resort companys.
The fundamental principle of distribution states: the further a product or inventory can be exposed, the greater the opportunity for consumption. If hospitality understands anything, it is this principle. Today’s hospitality industry is built on this practice, with the sale of room product becoming a major digital business for operators. Yet, major parts of the hospitality product are metaphorically “sitting on the shelf” due to a lack of ability to adopt these same principles across the business, hindering true hotel multi-product distribution.
In almost 100% of hotel operations globally, no single place exists for a staff member or guest to visualize the breadth of product a hotel or resort has to offer. Products and services are siloed into departments, business units, P&Ls, and levels of technical enablement. In many cases, inventory is not even digitalized. To compound matters, the selling process or sales talent in operational centers is not unified, and it’s questionable whether the team running a part of the operation possesses sales ability at all.
While the digitization of room inventory is well-established, with scientific processes applied to maximization of yield, even this inventory is not exposed to other operational departments at the local level.
The Missing Pieces: Digitalizing All Hospitality Products for Growth
Let’s explore your possibilities. Examining what is normally the second largest revenue stream, digitalization of meeting space lags well behind room product. The sales process is convoluted, with multiple barriers of entry for the customer. Inventory is housed in a secular department, often isolated to a specific individual. Even where some have presented meeting space for electronic consumption, it’s tied to the same difficult process of executing the sale.
Why is this important? It is the single major barrier to more effective consumption of industry products and services. Without a cohesive sales enablement platform revenue growth beyond the guestroom will continue to be a challenge.
Most hotels of a reasonable standard have a level of Food and Beverage product. Less have consolidated spaces on a digital platform internally, and fewer still have exposed this inventory to the customer. Determined by operational hours, the inquiring customer may need to wait to discuss specifics or organize larger bookings.
Although not applicable to all hotel models, lifestyle, recreation, wellness, and activity inventory play a major role in revenue streams and capital investment. The digitalization of this operation is not unlike the circumstances of Food and Beverage, often limited to individual departments or even manual reservation diaries. The classic ‘Do you want fries with that?’ model is operationally beyond the hospitality industry and hotel & resort companies today, severely impacting ancillary revenue hospitality efforts.
Reimagining Pricing, Revenue, and Customer Experience
Pricing is also vertically oriented and follows the level of technical sophistication by department. While revenue management is well-established for rooms, it’s less so for other aspects of the operation. Revenue management professionals are taking steps toward a horizontal view of the business, but technical smarts and information consolidation seriously inhibit efforts to truly evaluate the customer.
Packages and add-on items are the current tool to increase the cross-selling of other products and services. However, these are often not linked to real-time inventory and do not allow tracking of demand and consumption in the manner of a guest room. As a result, options are generally limited, and price setting or price optimization across a basket of products and services is not efficient. Packages also add the complication of coordination across departments and systems. Many of us have worked in this environment.
Appreciating that consolidation of inventory for internal staff is difficult, it becomes an even greater challenge for the customer. How does a willing customer actively consume the full scope of hotel product in a timely and customer-oriented manner? The process often involves multiple transfers, re-gathering of customer information, and significant time lapse, leading to errors and frustration. Digitally, the process is not far removed for those operators exposing more than room inventory.
We have convinced ourselves that the selling process is ‘different’ for each product or service, therefore we need to ‘keep it separated’. But is this true? When we examine the range of products and services generally provided in hospitality, there is more in common than not: Dates, Space, Price, Booker. Whether a guestroom, meeting space, table, transport, golf lesson, tee time, or therapy, the requirements are common. This implies a need for a truly integrated hospitality sales platform.
Achieving Operational & Digital Transformation for Unified Selling
There is an opportunity to rethink the structure of the sales process in our industry. Rather than the incohesive division of inventory across an organization, a specialized sales force focused on the real-time conversion of across-business inventory has the potential to increase advanced sales and expose inventory that is currently left until guest arrival.
…we have convinced ourselves that the selling process is ‘different’ for each product or service. Therefore, we need to ‘keep it separated’. But is this true?
Underlying this, a hotel operations function focused on guest experience across all products. Such a team can concentrate on fulfillment, logistics, and incremental revenue offers during the guest stay. An across-business rate and pricing tool linked to real-time inventory would support revenue managers’ standardization of pricing structures, providing greater flexibility and visibility. Properties in markets with non-room product demand can also lead with other products such as recreation and dining.
While it may not be possible to consolidate all data and functionality today, it is possible to consolidate the hotel operations tools and people to deliver as cohesive an experience as possible, working with existing technology demarcations. Taking the next technical step, the customer-facing tools must aim to provide a comprehensive product and service offering.
Consider the retail industry: during an in-person or electronic sales experience, we can shop for a basket of products locally or globally. Retail staff can locate items across stores, cities, or countries. Websites show inventory of any product at specific locations. While hospitality often lags, other industries are making major transitions to assemble information into a cohesive booking experience. Significant energy is being applied in the tour and activities space, and F&B offerings have often been outsourced to platforms like OpenTable for electronic distribution. Even major third-party operators like Google and Expedia are making acquisitions to consolidate more travel product inventory – rooms, transport, dining, activities, and lifestyle options – to provide an across-stay booking experience.
The Imperative: Driving Revenue Growth Beyond the Guestroom
Why is this important? It is the single major barrier to more effective consumption of hospitality products and services. Without a cohesive sales enablement platform, revenue growth beyond the guestroom will continue to be a challenge. With the lack of technology deployed into the electronic distribution environment beyond the guestroom, it is highly probable that other hotel product and service will not see the light of day. In the meantime, competing local businesses with narrow product sets will move their offerings into an electronic age at the expense of the hotel operator.
As the industry highlights the ‘customer experience’, it follows that tools and processes need to be aligned to deliver the experience from the beginning of the sales cycle to the post-stay experience. While operators and brands compete for market share, an inability to match the cohesive booking experience will force the customer back to the marketplace, eroding marketing efforts and increasing booking costs. Operational topics like capture rate, minor operating department revenues, and product mix will be challenged without unified selling tools to increase sales of ancillary revenues.
In an increasingly sophisticated competitive marketplace, hospitality must step forward technically to compete. Steps have been made to combat room bookings. The next step is to look across the operation and assemble all products, leveraging the process of digital transformation. Get ‘it’ all together. The early bird will continue to catch a very long worm.
