Amazon Is a Threat to Online Travel Agencies, Not Hotels – …
At a time when many in the travel and hospitality industry are pondering the possibility of Amazon re-entering the travel space, as well as the inevitability of booking a hotel room by using your voice, one hospitality CEO sees the tech and e-commerce giant as yet another distribution opportunity, rather than a potential threat.
“They don’t publicly seem to have an opinion or desire to move into [travel],” said Keith Barr, CEO of InterContinental Hotels Group. “And if they were, the threat wouldn’t be to hotels. The threat would be to OTAs [online travel agencies].”
“The question for us is what would our relationship look like with Amazon?” Barr continued. “Because we are always essentially going to own the stay. We always own the brand, we always own the customer experience.”
In Barr’s view, Amazon’s potential re-entry into travel boils down to a simple theme: “How do different intermediaries battle it out over time to be the intermediary of choice?”
Barr spoke to Skift after the company released generally positive second-quarter earnings. His comments are a stark contrast to statements made in June by Marriott International CEO Arne Sorenson, who described hotel and travel brands as being entrenched in “an absolute war for who owns the customer” with technology companies that include Google, Amazon, Facebook, and others. Sorenson added, “It’s a long-term war, and ‘long term’ in digital space might be a few years.”
As for the possibility of Google and Facebook adding more travel products of their own, Barr said, “I don’t personally see them moving into other aspects of [travel]. It would be difficult for them to go further in and get into it.” He said both are “pretty well entrenched in the digital marketing ecosystem” of travel, and that for IHG, the company’s biggest concern is: “How do we have a long-term healthy relationship with them?”
On Voice Search, Hotel Bookings, and Smart Hotel Rooms
When it comes to voice search and booking of hotel rooms, Barr said he thinks it may have its limits.
“I’m not convinced that voice search in the hotel space is inevitable and as prolific as people are saying,” he said. “When you look at current search behaviors in the digital space, a lot of it is very visceral and tangible. It’s looking at pictures and reviews. It’s a lot that goes on there. I think you have to integrate voice with another media for customers to understand what they are buying.”
For example, would consumers be willing to leave it all up to Alexa or Siri to help them plan their entire family vacation, Barr asked, without wanting to do their own research?
Barr also used the example of ordering groceries using his voice. “I already know specifically what I want, because it’s really a commodity,” he explained. “But hotels aren’t commodities.”
In fact, Barr suspects that while voice may be growing in usage over time, there’s also the possibility of some blowback to it.
“I think there will be this piece where voice gets prevalent,” he said. “But how are you determining what I see and hear? Is it the most relevant or is it the most profitable for you, search engine? Which one is it? What drives it? You could see some backlash over time. Consumers might not want to move into this Orwellian world of ‘I have no choice.’ I do think human nature will push back on it.”
Although Barr is skeptical about widespread adoption of voice search for hotel booking, it’s clear he and IHG are not as skeptical of the potential for voice-controlled guest rooms.
Last month, IHG announced the start of a pilot in China in partnership with Beijing-based technology giant Baidu that will result in 100 different voice-controlled rooms at two InterContinental hotel properties in Beijing and Guangzhou.
Barr described Baidu’s DuerOS voice technology platform as, essentially, “the Chinese Alexa.” He said the Baidu smart speaker is directly integrated into each of the pilot rooms and is “probably more advanced than any of the U.S.-based [smart room] pilots going on right now.”
This particular product, however, will remain in China, and Barr said IHG is eager to see how customers interact with it to see if this is something IHG will bring to other properties around the world.
New Guest Reservations System Hints at the Future of Selling Hotel Rooms
Technology nonetheless remains a major focus for Barr and for IHG, and another major project the company is close to completing is the implementation of its new cloud-based guest reservations system, called IHG Concerto, built in partnership with Amadeus.
During the company’s second-quarter earnings call with investors, Barr noted that more than half of all of IHG’s 5,400 hotels are running on the new system, and in December, the company plans to “showcase” it to investors and analysts.
A big part of that presentation will no doubt focus on one particular feature of the system, often referred to as attribute-based selling or attribute-based booking.
It’s a concept that basically allows hotels to sell a stay based around specific attributes that a customer may want, such as a king-size bed or a particular view, that goes beyond the concept of specific room types.
“It’s really to try to get away from the one-size-fits-all concept where everybody gets the same results,” Iain Saxton, Amadeus senior vice president and head of the Amadeus Hospitality Platform, told Skift. “Everyone gets the same results today and it’s difficult for hotels to deliver personalization. The reason room types exist is because hotels want to monetize unique features of a room. With attribute-based booking, the hotel is asking the consumer what is important to him/her and equally, it allows the hotel to monetize it.”
For example, at the moment, IHG is currently testing out attribute-based selling based on a single attribute: bed type. Consumers are presented with three different choices: one bed, two beds, or a standard room, meaning whatever is available at check-in.
Presumably, the computer optimization of a hotel’s inventory helps the hotel better identify and sell specific combinations of multiple attributes to guests so that, as Saxton explained, “Every room in the hotel could be completely different and you offer the features that are important to people.”
Perhaps a similar analogy to how attribute-based selling works is how upselling works in the airline industry: If a guest knows for certain that she wants a king bed with a balcony away from the elevator, for instance, and is willing to pay a slightly higher rate to have a room with those specific attributes, that could mean more revenue for the hotel. Not only that, but it also helps hotels better manage their inventory and could possibly incentivize guests to book direct to choose the specific room details they want during their stay.
“The core of it was always attribute-based booking,” Barr said. “It’s looking at how you package it up through more targeted offers.” Barr said IHG will reveal more details about the new reservations system, as well as this particular feature, in December.
Earnings for the Second Quarter
IHG had a solid second quarter by one key industry measure. Revenue per available room (RevPAR), widely used to measure growth in the hotel industry, was up 3.7 percent for all of IHG’s portfolio worldwide, an increase from last quarter’s 3.5 percent and 1.5 percent growth in the second quarter of 2017.
The company did not break out revenue and profit for the quarter, but gave a glimpse of its performance for the first half. Group revenue increased 7.6 percent to $2.1 billion, while profit before tax dropped 15 percent to $303 million due to reorganization cost and other items.
IHG also saw a record number of hotel signings in the first six months, with a total of 46,000 signings and 262,000 hotel rooms in its pipeline.
Photo Credit: IHG CEO Keith Barr spoke at Skift Global Forum in New York in September 2017. Barr thinks there could be a potential consumer backlash to voice search and booking of hotel rooms in the future. Skift