There’s a new opportunity opening up in travel that will change the balance of power in hospitality over the next decade…

NB: This is an article from Pace Revenue, one of our Expert Partners

Brian Cheskey, CEO and founder of Airbnb, recently talked about Covid-19 marking the dawn of a golden age of travel. The underlying trends he describes are impossible to dismiss.

  1. Workplaces are becoming more flexible – cultural shifts and competition for talent have produced permanent changes in remote work, hours and holidays.
  2. A greater blurring of boundaries between home, work and travel – but not only in terms of location but also the modality, frequency and duration of work.

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How will this impact travel? And what will customers be looking for in this new paradigm? Brian suggests that pure business travel will suffer but that the growth of other travel will more than make up for that shortfall. People will travel more flexibly, more frequently, to more diverse destinations, for longer durations and for more reasons.

How will huge asset-light, corporate brands adapt to a world where new customer expectations require simultaneous innovation across real estate, operations and technology?

At Pace Revenue we’ve been working closely with some of the companies that are already building the capabilities and infrastructure to serve this new demand. They operate differently to existing hospitality models and with a hugely increased risk and reward profile.

A few brands and companies stand out in this new category: SONDER, citizenM, Selina, The Student Hotel to name but a few. The scale of investments that have recently gone into these companies highlight the perceived size of the market they are addressing.

So, what are these companies doing differently? Let me share some of the areas in which they are disrupting the market – and indeed themselves – and why this type of disruption is necessary for any company which aspires to win in this golden age of travel.

This type of disruption is necessary for any company who aspires to win in this golden age of travel.

The Student Hotel is a case in point. We’ve been working closely with them over the last year and have had the privilege of seeing first hand how uniquely innovative they are in many areas.

1. You need vertical integration between property and operations.

The Student Hotel operates wholly owned purpose-built properties. With 6,500 rooms in operation and a planned 10,000 by 2024, this enables TSH to design a fluid yet consistent theme into their buildings. Of course, new-builds are not the only way to achieve the desired multipurpose configuration of properties, but close alignment and a joint direction on both the propco and opco sides of the business is necessary.

Changing customer demands and expectations in hospitality will require a re-think of the asset-light approach, and require addressing the lack of alignment between capital, operations and brands. It’s holding innovation back and customers will find that integrated offerings are superior.

TSH is enabled through design and technology to think of its real estate as “cubes” that can be dynamically repurposed for different uses depending on market conditions and enable optimal outcomes. This approach enabled TSH to achieve 70% occupancy through the pandemic.

2. You’re not buying technology, you are building partnerships.

I was at a technology partner conference recently, which was hosted by … The Student Hotel, and there was a lot to unpack there.

Firstly, TSH has a strategic manifesto for how they will engage with technology. At the top of the manifesto: “buy, not build”. They’ve taken to heart what all other industries know – focus on your core, especially if you’re a disruptor.

Secondly, they understand that disruption requires disruptive partners. So you will need to choose them carefully and treat them as strategic partners and not as “vendors”. Rest assured that you will not find your strategic partners by giving some old RFPs you’ve dug up to procurement.

Thirdly, TSH understands that you need to think of technology as an investment and not as a cost. On average, Ecommerce businesses invest 2% of their revenue into tech. In hospitality the investment is half of that.

Fourthly, there is an understanding (and this is almost the most impressive point) that your technology partners form an ecosystem and you need to nurture this ecosystem to achieve your goals. So there I was in Amsterdam brainstorming the TSH strategic roadmap together with MEWS, Lightspeed, Salesforce and internal TSH teams.

To emphasise the point – TSH are hosting these strategic conferences every quarter. It’s that pressing of an issue…

3. You have to focus on share-of-wallet and customer value

In a world where you are serving customers whose home/work/travel boundaries are blurred, it follows that you will need to serve them across multiple areas of their lives. If you can do this well and seamlessly you are looking at a much bigger potential share of their wallet.

But you need to change your perspective! You can no longer afford to use the balance sheet, the budgets or the product category revenues as your guide to performance. You need to find a way to think about the customer across their multiple interfaces with your services.

Customer Lifetime Value (CLV) has been around for a long time but in hospitality the majority of companies have been terrible at turning any insights into operational opportunities and executing on them. For example, CitizenM launched a membership service during the pandemic and are using CLV to respond effectively to a very challenging market.

4. You can’t disrupt without a disruptive team and culture

Take a look at the postings for Revenue Managers by SONDER. What do you see that’s unusual? There is no mention of a hospitality background…but there is a mention of SQL and Python. They are hiring for functional expertise, not domain experience.

You will find the same in all the disruptive companies I mentioned above. Have a look at their Linkedin profiles. You will see that they’re hiring from Ecommerce, Tech, Finance etc. It’s really hard to unlearn decades of experience and it’s even harder to learn curiosity and innovation. So they hire fresh, curious, minds who have already excelled in other industries.

5. You need data to be your compass and north-star.

The companies I’ve just mentioned share another trait – they are obsessed with data. Why? Because they are growing faster than most companies around them, they are offering more varied products to different audiences and they’re doing it with fewer people.

This makes for complexity. And the best way to deal with increasing complexity while maintaining organisational alignment is to let the numbers speak. I’ll give you a final example here – when TSH were looking for a new revenue platform to partner with they were already locked into an old existing contract…

Determined to learn from their mistakes they put the next candidate (Pace Revenue) through an extensive A/B test over 3 months where they evaluated the performance. Another approach would have been to give up and build their own bespoke solution. Or do a SWOT analysis, or an RFP, and just choose again. But that’s not how you make the right decision at speed under complex circumstances.

Read more articles from Pace Revenue