Digital transformation strategies for hospitality - Insights
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Digital transformation strategies for hospitality

digital transformationAfter almost two years of COVID-19, the hospitality industry has undergone an unprecedented uptake in digital technologies. The digital revolution is moving forward, and hospitality operators are well aware that they need to get on board.

According to the 2021 Skift Digital Transformation Report, the Asia-Pacific region is leading the way when it comes to digital transformation in the hospitality and travel industry. Hit first by the pandemic, Asia-Pacific businesses had to become early adopters in order to survive. A significant 44% of executives in the region will be improving analytics capabilities in the next year, 30% say they are already ahead of the curve, and 60% are keeping pace.

In another recent survey, 93% of hospitality businesses said they are planning to increase digital investment in the next few years.

How to make digital adoption work

The question for these businesses right now is how to make digital adoption work for their business.

Sexy new technologies like robot concierges might get a lot of press, but piecemeal adoption of glamorous technologies without a strategic approach won’t deliver real benefits. Digital transformation is about more than using new tools to do the same old thing; it requires business models that position a company in the digital economy.

Many operators are still learning on their feet when it comes to the broad range of new digital technologies out there. Like any big transformation, digital transformations do run a risk of not succeeding. For these reasons, it’s important to choose the right technologies and right strategy for a specific business.

The benefits of a successful digital transformation strategy are broad and significant, and can make a huge impact on a hospitality company’s profitability. Some of these include:

  • More efficient resource management and allocation
  • Digitisation and streamlining of business operations
  • Reaching new audiences
  • Employee empowerment
  • Data-driven management and better insight into customer behaviors
  • Delivery of improved customer experiences
  • Creation of new digital products and services
  • Easier collaboration across departments
  • Leaner operations, greater agility and a drive towards innovation

Below, we will look at some examples of how a strategic approach paired with the right digital technologies can bring some real benefits to a hotel or hospitality business.

What the experts have to say about what makes for a successful digital transformation strategy

“Achieving digital transformation isn’t driven by mastery of the technologies, but by the ability to articulate the value of digital technologies to an organisation’s future.” – (Excerpt from the Deloitte Digital Enablement Report, 2019)

Consultancies Accenture, Deloitte, McKinsey have all been at the forefront of research into digital transformation strategies for business over the last few years. Based on their studies of what works and what doesn’t, they have all written up their own recommended pathways to success. You can read in more detail about that here.

In their reports, these consultancies highlight a number of key pillars to the success of any digital transformation strategy.

Some of these factors include leadership, capability development, planning, changing organisational culture and training and empowering staff. As you can see, taking a whole-organisation approach to digital adoption is essential to any large-scale successful digital transformation. For small businesses, an effective transformation is also about choosing the more economic and down-scaled versions of these tools and manageable strategies to establish your new positioning in a digital market.

Here are a few more useful resources:

MIT Sloan: The Nine Elements of Digital Transformation

Cognizant: A Framework for Digital Business Transformation

Altimeter: Six Stages of Digital Transformation

Ionology: A Step-By-Step Guide to Digital Transformation

Digital transformation strategies in action

We’ve taken a look at what makes for a successful digital transformation strategy in theory, but what about the reality experienced on the ground by operators in the hospitality industry?

Total digital transformation at Accor hotels

The Accor Group is one of the largest hospitality and tourism brands in Europe, with a market cap of US$12.1 billion and over 150,000 employees. Their digital transformation over the past few years provides a great example of how a big hotel brand can use technology to respond to the market disruption caused by a new digital player like Airbnb.

When Airbnb came on the scene, CEO Sébastien Bazin spearheaded a process to understand the success of their business model. Accor quickly realised that they would need to change from just being a real-estate based hotel brand, to a hospitality platform and service provider with a broad online presence. They would need to diversify, branch out and go digital. They adopted three strategies:

  1. Divest their real estate portfolio.
  2. Expand their partnerships and acquisitions in tech, invest in innovative brands.
  3. Extend their services outside of hospitality, to provide service to non-travellers.

Some of their acquisitions as part of this digital diversification strategy include: Nextdoor (a community sharing social network), Onefinestay (a luxury short term rentals platform), John Paul (a concierge services provider), and Gekko (an online hotel reservation platform).

They have also invested heavily in machine learning revenue management tools and a new mobile integrated booking and service system, in order to deliver a deeper level of customer engagement.

The Accor smartphone app allows customers to browse their stay options, including over 6,000 branded and independent locations. Guests can select between mainstream, chic, luxury or budget options. In addition, the smartphone offers a ‘Moodmatch’ selection tool based on machine learning of preferences, connects guests with a digital valet who assists throughout, and provides a city guide in eight different languages.

The Accor digital transformation is widely viewed as a huge success, with the company outperforming competitors and heading into a growth period as a direct result.

Restaurant self-service kiosks and contactless ordering

A whole host of contactless technologies were adopted by restaurants during the pandemic, initially as a safety measure and now as part of a broader digital transformation strategy. Research from 2020 shows that the quick adoption of new technologies by some restaurants during the pandemic helped them to survive during the downturn.

In addition to introducing contactless menus, a number of restaurants adopted branded apps, loyalty programs and self-serve kiosks during the past year, including McDonald’s, Chili’s, Subway and Panera.

These self-service digital technologies can serve a broad number of functions that go above and beyond keeping customers safe from COVID, including:

  • Improved and convenient guest experience
  • Offering upgrades or rewards programs
  • Collection of demand and supply data in real time for supply chain responsiveness
  • Deeper personalisation of service
  • Improved monitoring and compliance with safety regulations

Machine learning, revenue management and small hotels

Revenue management has been a hot topic in the industry during the pandemic, due to the booking cancellations that operators have had to manage. Fortunately, the last few years have also seen the development of a highly sophisticated range of machine learning revenue management systems.

More recently, a number of new machine learning and AI based systems have emerged that allow small hotel businesses to adopt digital transformation in this crucial business area. AI and machine learning based tools, such as Roomprice Genie and Aiosell, provide an external, automated revenue management service that is accessible and affordable for small players.

Hilton and Marriott developing personalised experiences with smart rooms and IOT

In 2018, Hilton began a rollout of connected, smart room technology in a select group among its thousands of locations worldwide. Not to be left behind, Marriott has been similarly exploring the possibilities of smart rooms connected to the Internet of Things (IOT) and Amazon Alexa.

In 2021 Marriott announced a new partnership with tech companies Samsung and Legrand to further explore the possibilities of IoT smart rooms, building on the experiments they have been running in their innovation lab for several years.

These two companies are at the forefront of IoT, smart-room innovation in the hospitality sector. Guests in a smart room can use an app or voice commanded digital concierge to control their experience, such as adjusting their room’s lighting, heating, or ordering room service.

The shift toward smart rooms represents a new direction in overall service delivery; away from a uniform experience of ‘take the room you get,’ and toward machine-learning driven, personalised customer service experiences. While this technology has still yet to be rolled out on a massive scale, many of the lessons from this personalized business model are already being adopted by the two hotel giants.

Delivery apps, ghost kitchens and mobile app driven business models

Use of food delivery apps exploded over the last two years, and online food delivery is set to become a US$200 billion industry by 2025. Industry reports now suggest Australians are spending three times more on online food delivery than they did before the pandemic.

With the continued lockdowns of the past few years hitting restaurateurs hard, many businesses began to realise they could save on rent and staffing costs if they get rid of the dining experience altogether.

Ghost kitchens are restaurant brands that only sell directly from a commercial kitchen to a customer at home via delivery app, and they have been popping up in major cities all around the world.

Ghost kitchens might be one extreme response, but all small restaurants now have to develop a low-cost digital transformation strategy in order to brand themselves online and appeal directly to users of specific apps and mobile services.

Restaurants in 2021 are adopting whole-business digital branding and marketing strategies in order to be SEO friendly on Google, attract five-star reviews and positive feedback on UberEats, Yelp, Zomato or Urbanspoon, or reach customers on Instagram, Facebook or Twitter.

On the plus side, employing a digital strategy to become an app-friendly restaurant is low cost, accessible for small businesses, and can potentially bring in significant rewards.

At present, many hospitality companies are still under utilising the full potential of machine learning, IoT connected, data-driven strategies.

However there are some early adopters who, as the 2021 Skift report shows, are already ahead of the curve. Hospitality businesses that are lagging in adoption should take note; businesses need to operate where customers are, and customers are increasingly mobile and digital. On the plus side, affordable digital tools are growing in availability and it’s becoming easier even for small businesses to implement their own successful digital transformation strategies.

About the author

Kirsten Browne is the Program Director – Hospitality, Tourism, Events and Culinary Management at Torrens University.

 

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