The hospitality industry; rich in orthodoxies
Performance driven by passion is what makes hospitality industry flourish. As a hospitality consultant you come across much more than just buildings, the beauty of the industry are the people. Employees and guests from all over the world, each with their own view on quality, on life and on experiences.
In 2016 I published the book ‘A Hotelier’s mind, setting strategy for the future’. This is part 4 out of 5 in total, where I will share fragments out of the book. I wish to share to inspire.
Innovation is described as turning an idea or invention into a service or product that can be sold or that will lead to sales. Innovation can be expensive, and outsourcing is often a great plan, as objectiveness is key to success. Idea generation however, is readily available, with the hotel teams being an incredible source for potential innovation. Your hotel team, your operational team, often has ideas through listening to guests, issues that keep arising or opportunities that they also find from external resources or simply experience. When interviewing, we very often come across amazing ones, for innovation or simply to solve issues or deal with challenges. My company Mocinno International, is all about driving change, creating niche, developing marginal excellence and with it the solution can often be found right within the team.
I want to share with you a part of the interview by colleague Juliana Cavalcanti De Andrea, fashion designer for hotel uniforms, with Pedro Do Carmo Costa, Director and co-founder of Exago, which you can find in the book.
Hotel innovation under scrutiny
Your quote on the future of Hotel Innovation:
‘Someone, somewhere is inventing the idea to dramatically disrupt the hotel industry. So before that someone does it, think about how YOU can change the rules of the game. It’s your game after all.’
1. Please tell us about the objectives of your company, Exago?
Answer: At Exago, we believe that organizations have significant untapped potential within themselves – in their people. Working with companies across sectors and continents, we’ve learned that the answers to most strategic or common day-to-day business challenges already exist somewhere in your organization. Leadership only has to create the environment in which these answers can surface and be implemented. Exago helps companies embed this innovation culture and capability. We develop solutions based on software and services that allow large companies to engage their collective intelligence in solving critical business and strategic challenges.
2. You have had a number of clients within the Service and Hospitality industry. What were the biggest surprise and moments in your view?
Answer: This is an industry rich in orthodoxies. Looking at the highest level business model and comparing it with other industries, nothing seems to have changed substantially in the hospitality industry over the last hundred years. Due to the sector’s conservative and capital-intensive nature, most modifications have been incremental and mainly adoptions of the inevitable. The pace of change in the hospitality industry is much slower and less dramatic than the world or consumers’ pace.
I am also surprised by the fact that, some of the biggest changes in the
industry have been led by people from outside this sector, particularly
in more recent years. These includes, social networks allowing for
genuine hotel-guest interactions and online booking engines and travel
intermediaries that pressure hotels to develop more aggressive discount
pricing. Other key transformations are couch surfing, peer-to-peer on
Airbnb and new accommodation options that have forced the creation of
innovative services to conquer an increasingly demanding clientele.
3. What type of innovation is available for Hotels, and what are the basic
needs to collect data?
Answer: Several types of innovation exist for which we can construct various definitions, for example, technology innovation and process, product and service improvement. I would rather use a simpler framework, one that defines two types: incremental and disruptive innovation. Incremental innovation is about the everyday changes that we explore
and implement. It’s about becoming 1% better every month, every year. It’s not only about the top line but also efficiency. Hotels are good at this, improving facilities, making processes more efficient, adopting new technologies and systems. This is pretty much a rat race in the sense that, we can’t stop doing it. Stopping is downgrading. And those who cumulatively deliver a higher hit rate for incremental change can actually differentiate themselves from the rest and grow faster in margins and revenue. Disruptive innovation is about reinventing our business model. It’s fundamentally changing one or more of our business model’s dimensions: whom we serve, what benefits we provide, how we deliver those benefits
and how we sustain that differentiation. Great examples of disruptive innovation are everywhere – Amazon, EasyJet and Apple. Or take Uber’s fresh, an example of the ridesharing service now operating in over 200 cities worldwide, which has been lowering taxi fares, creating turmoil in that once stagnant business and generating the need for taxi companies to reform and quickly explore new paths and services.
4. From capturing ideas to actual implementation, lots of steps need to
be taken. Where can you see the biggest opportunities within hospitality?
Answer: Most innovation processes follow some or all of the following steps: discovery –where you identify challenges or explore new insights that can unlock innovations; ideation – when you generate ideas around these insights or challenges; elaboration – where you put some meat on the bone (i.e. you iteratively turn ideas into proposals and ventures); experimentation – when you test the assumptions behind ventures to de-risk them and finally, scale – where you launch the new concepts to the market after adjusting them. I think hospitality can outrun other industries in two of these steps: discovery and experimentation. Discovery is about anticipation, unlocking insights about markets, customers and technologies – which lead you to great ideas and opportunity spaces. The insights around under-leveraged assets are what led to Uber’s opportunity space. Hospitality is a face-to-face business in which customer’s proximity is the ideal way to observe your audience and extract signals from them. Being so close to customers and being consumers ourselves (experiencing good and bad things), you should be able to extract insights
faster than anyone else.
Experimentation is about de-risking. When we strongly believe in a venture or business opportunity, we need to ask what the key assumptions behind this opportunity is. What are the things that might cause this to fail? They typically relate to the benefits we deliver, our ability to deliver them and lastly, the ways we can capture value (i.e. make money). Once identified, we have to test these assumptions before committing significant resources, through simple experiments that rapidly and cheaply confirm or deny the assumptions, assessing if the risk is manageable. Because of the nature of hotels as networks of connected physical assets, running experiments in stand-alone units is easier. Then, if tests show a venture will succeed, take it to the next phase. Not many industries have a configuration that allows this.
5. Clearly we can learn a lot from other industries. Which industries are facing similar challenges for innovation and what are these challenges?
Answer: Several industries are facing similar challenges, including guest profiling, cost reduction imperatives, price model rethinking, evolving customer needs and expectations (with more sophistication), increasing competition and the need to reinvent experiences. Some of these industries are not necessarily the usual suspects:
• The airline industry: As a whole, it has faced low costs competition and diminishing margins, learning to segment itself into low-cost, regular, Net Jets and luxury options – to create different value options for different targets. More directly related to the hospitality industry, the exclusive Four Seasons private jet experience takestravelers around the globe, with personalized itineraries, which is a bold example of what can be done to reinvent experiences.
• The real estate industry: Red Fin turned this highly inefficient sector upside down by creating ‘customer advocates’, making the entire process faster, easier and worry-free, with lower commissions and technology leverage. The company placed consumers’ needs at the centre of its business. In this way, Red Fin managed not only to change the real estate customers’ experience but also, to produce a cultural shift in the relationship between companies and customers.
• The music industry: Streaming platform Spotify sent strong shock waves and provoked intellectual property discussions throughout the music industry – at the same time, democratizing the market and leveraging many thousands of artists. But, the firm’s also notable for its flexible pricing and subscription model, offering
different levels of services to customers. All this proves that, the shift to digital network creation and to targeted and more personalized consumption models seems inevitable. Consumers now can voice their likes and dislikes. So the hospitality industry has to find channels to grow and consolidate this new relationship and create services that enable customizable guest experiences.
Above are just 5 of the questions of 10, that give clear indication that we can learn a great deal from other industries and that leadership has way to go to make the hospitality industry sexy again!
About the Author
Jeroen Gulickx is a well-traveled hospitality professional with two business degrees and extensive experience within the hotel-and-spa segment.
The main capabilities vary from streamlining cost and operational models to strategy yielding, business development, and marketing and digital marketing.
In 2006, he started Mocinno International, a hospitality consulting company that now has offices and representation in seven countries in Europe, USA, Middle East, Asia, and Russia. The team is focused on delivering incremental revenues for hotels and spas and also develops and strategizes hotel suppliers, using mainly the Six Sigma methodology.
Mocinno International works with a network of highly experienced, energetic, and innovative people based in key locations. The team also leads client or Mocinno-originated projects or concepts.
Jeroen shares his over 20 years of industry knowledge through his blog, and other social media, and speaks in travel, marketing, innovation, or strategy related forums.
‘A Hotelier’s Mind, Setting Strategy for the Future’
The book is available in most local online bookshops, or over 1000 bookstores all over the world.
Barnes & Noble
Art by Alexandra Sarantidi http://www.alexandradesign.net/
Mocinno International is a Hospitality Management Company