For many a hotel brand and management companies, "aggregators" are appearing more like "alligators" eating into their business slowly but surely. It will not surprise me anymore to read that one of these upstarts is in control of a larger room inventory than the largest hotel chain operating in India. AirBnB has already proved that point at a global level.
A hotel owner with small to mid size property in the budget segment now has a reason to smile. Hotel brands would not touch his property because it did not meet its standards, or not manage it because the fees earned were not worth the effort. For a while, a hotel owner got away with leasing out his property. But, with new hotel brand operators having learnt their lesson from the mounting losses due to the wild rents offered, a hotel owner was increasingly facing a situation of a no guarantee management contract or manage yourself option. Aggregation has changed the playing field. A fixed number of rooms are now contracted on a fixed rent basis. Hotel owner is assured of a minimum occupancy off-take albeit at a lower rate, and the aggregator assured of control over a managed, curated room with very little upfront investment. Unlike a plain vanilla hotel booking company, where inventory can be pulled back by the hotel in the peak, the aggregator resorts to surge pricing knowing well that inventory is under control. It is as close to a win-win for both sides. Will the model sustain itself? I will keep my view to myself for making the mistake of shooting myself in the foot. I am already limping from a few shots earlier. By the way the rumors on the street are already talking about default by investors in keeping their commitments based on the notional evaporation of valuations being suffered on account of the current global melt.
If aggregation has disrupted the way a hotel would be branded or managed,I see a kind of disruption in the way a hotel would be designed in the near future. I am not afraid of causing injury to myself with a few predictions here:
Malls have tried to incorporate hotels within their own ecosystem but have had very little success. Either the hotel space allocated was too large or too small. Most revenue and non revenue public areas and service spaces were ill located to make any commercial sense. This will change. A hotel would be the most suited occupant in a Commercial Mall today. With e-commerce taking a larger and larger bite into the shopping sphere, most malls would either have to convert a large part of its floor space into a kind of off-line warehouse for the online stores.
Therefore, baring the anchors and premium outlets on the lower floors, all other shops would be replaced by outsourced restaurants, bars, function room operators, spas,recreational, entertainment and other such facilities expected in a hotel. Huh! so what? That's exactly how a hotel is built today. The difference being that the hotel lobby would completely disappear.
In the future each floor or section (as design permits) may be controlled by a different aggregator; and there may be five to six or more aggregators represented in the same complex. It would well be possible that the equivalent of a hostel, budget and mid market offering would share the same floor or complex. Hence, the check in process may too be relegated to specific floors or sections. A guest would be GPS guided to elevators and floor. There would be no need for a key card as the smartphone would act as the key and settlement wallet. One would be welcomed by name thanks to advanced facial recognition and the entire ID verification process would be robotic where bio metric details would be matched with the details on guest ID and same sent to the police data base along with the pictures. A hotel guest ID card would be generated to allow guest access to the designated room and also to ensure that no one else (not checked in) walks in.
Apart from luxury and possibly resort brands, the mid market and budget brands of today may also go the aggregation way to survive. The cookie cutter model will become increasingly a balloon model that will adopt itself to the location constraints and demands. The big brands actually have the infrastructure and money might in place at the moment to do so. The peril of not doing so maybe obliteration of the brand itself. One may say what happens to management then if brands become aggregators? I think that function would actually be performed by a third party Asset and Facilities Manager (AFM) rather than a hotel management company. It happens at airports and hotels will adopt this too. The aggregator contracts would probably end with the fixed plus variable formula with the AFM as well as the hotel owner. Why would such an operation be successful? It has a lot to do with developments in hotel technology.
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| Picture credit: http://www.jovoto.com/blog/2011/11/design-the-hotel-room-of-the-future/ |
All the rooms will be identical in terms of hardware as most aggregators would be hardware in-specific anyway. The soft furnishings would be provided by and tailored to the aggregator's brand. The housekeeping and maintenance function will be centralized across all floors and go mostly robotic too. The robots will not only clean the rooms but will also check the room inventory -thanks to the RFID tags, and check if all in room equipment is in good working order. The robot's human buddy will be assigned tasks that require minimum intelligence to ensure speed and efficiency. In addition to cleaning the rooms, robots will also assess room security and check if a guest has stored hazardous or prohibited items.
A guest can expect wifi, TV, room service, in-room bar, laundry and valet service as well. Why not? A guest would expect full service and will certainly get it. You guessed it - robotic on a pay per use basis. Yes, guests will get used to this concept in time like they have in airlines. Well, the sensitivity of human touch may be lost but then robots can take all the insults, abuses, and human insensitivity without being irritated or agitated. Think of it, no robot will object to saying "You are right. I am an idiot. I am sorry. It will not happen again" unemotionally to an aggrieved guest. (At least, until Artificial Intelligence creates a human clone). Booting a robot (using the foot) will seal the guest in the hotel and the recorded evidence will ensure that guest lands up in jail for destruction of property.
Guest complaints will be handled by interactive voice response unit that will auto recognize the input language. Extreme cases will be channeled to a human who will speak in a language the guest cannot understand despite having made the language selection.
Finally, what will happen to those guests who book rooms for the act of procreation without intending any creation? If Ashley Madison is something to go by, I think not having too many prying humans around will be good for business. And then, hotels would have lesser problems dealing with cases of staff molesting guests or vice-versa. Cases of mechaphilia are pretty rare I suppose.
Then of course, the billion dollar question that a potential hotel developer is asking - "Why should I put an agonizing 3 years of sweat and blood in building a facility with an investment cost upwards of Rs 5 million a key on land and building at an expected WACC of 18%+ where I have to take a risk of servicing my banker, then my investor and at the end of day not see an IRR of greater than 5% on my own capital, if at all I don't loose my property? I rather put in Rs 50 million of my own and build a billion dollar app."
Well the "Acche Din" (Happy days)may be far and few, but for now Indian hospitality has rebooted Fonzie's song to "Appy Days are Here Again". Where is my gun? I may as well shoot myself in the ....
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