The hospitality industry isn’t exactly known for its speed, particularly when it comes to embracing change and innovation. Increasingly, however, the industry doesn’t have a choice. The disruptive forces of evolving technology and changing consumer preferences are reshaping hospitality and could lead to an industry that functions in radically different ways within the next few years. Three key trends stand out: artificial intelligence-powered booking, the next generation of alternative accommodations, and innovative hotel consumption models will transform hospitality into an industry that meets its customers where they are, better serving their needs and lifestyles.
From 3,157 Hotel Results to 3, Brought to You by Your Friendly AI (Voice) Assistant
The way humans use the web overall is evolving: originally a repository of near overwhelming search results, it is quickly becoming a tool that provides ever-more personalized information. For example, smartphone users are less likely to use location qualifiers like “near me”, because “people know that the results will automatically be relevant to their location — thanks to their phone,” as Google reported this summer. And while Amazon and Netflix have long offered product recommendations with questionable relevance, the potential can be seen through tailored offerings such as Spotify’s Discover Weekly, which garnered 1.7B streams within the first five months of launch. Such products are all powered by artificial intelligence (AI), yet they only scratch the surface of what AI will soon be able to accomplish.
Imagine a world where you communicate with a conversational AI through any channel of choice to discuss a trip — from an Alexa-like hardware device to software on a computer or a digital watch. This dialogue could range from single-command trip-planning:
“Book flights and hotels for my meeting next week in LA”
To an ongoing and evolving conversation:
“I want to take vacation next spring. Maybe somewhere warm. Not too expensive. Using some of my loyalty points. Where can I go?”
The software would gather a user’s prior booking history as well as other relevant information, ranging from the reviews she’s left on hotel sites to the travel photos liked on Instagram, capturing the relative words and data points needed to establish accurate context for that traveler. Through the analysis of this information, as well as her stated preferences, AI could produce a short, highly customized list of search results. This would stand in stark contrast to what users often experience today on online booking engines, where they might encounter hundreds, if not thousands, of search results.
Analyzing this view of the future, we can see that AI’s extension to hotel booking will be particularly transformative in two ways. First, the transition from results to recommendations will permanently change how we book lodging. Building smart software that can accurately generate personalized recommendations will be critical to the success of hospitality players. Second, this trend will be only further demanded by the ever-increasing rise of voice. It’s simply impossible to have a long list of search results in an aural format; as consumers continue to transition to voice-powered search, travel provider solutions must transform along with it.
How do we know such a future is coming? Simple: society will demand it. Consumers are increasingly using their smartphones to book travel, with eMarketer predicting that mobile booking will account for 40 percent of all digital travel sales this year. Increasing mobile usage will intensify pressure to provide shorter, more personalized search results that are easier to peruse on small screens — that is, if a traveler is using a screen at all. By 2020, according to Gartner Research, 30 percent of web browsing sessions will be done without a screen, which makes a strong case for the future popularity for voice-powered searches. Many of today’s consumers are already on board with voice: 20 percent of mobile searches are now voice-powered, according to research by Kleiner Perkins’ Mary Meeker. It helps that AI’s natural-language processing improves every day: though many of today’s chatbots are still easy to stump and confuse, Microsoft recently reached a speech-recognition milestone, boasting just a 5.1 percent error rate for recognizing conversational speech. Some startups are already helping users cut through the clutter. Wayblazer, for instance, allows users to search based on conversational language, such as “I would like to stay on the beach in Spain.” The start-up’s AI-powered tech then delivers a shortlist of customized results. And we’re already in the (very early) stages of voice-driven hotel booking. This past summer, Kayak and Amazon unveiled a hotel-booking skill through Amazon’s Echo devices. Travel news site Skift concluded that though the new feature required “clunky” phrasing and may not provide enough information to convince some users to book, it could at least work for people with “simple, repeatable” travel needs.
Assuming technology evolves as we expect, there will still be another hurdle to seamless, personalized searches and booking: trust. Humans will have to trust that AI really will provide them with optimal recommendations. But at least one survey suggests that we’re on our way to doing so: Forbes reports that 55 percent of U.S. business travelers believe new technologies, mostly AI, will improve their future travel experiences.
Alternative Accommodations 2.0
Today, “alternative accommodations” are alternative no longer. The research firm Phocuswright reports that private accommodations offered on platforms like Airbnb and Homeaway are now “mainstream,” with roughly one in three U.S. travelers staying in private houses and apartments in 2015, up from one in 10 in 2011. As the private accommodations market matures, two distinct yet related phenomenon are on the horizon: the resurgence of brand power and the potential for decentralized, alternative accommodation.
While the value of brands are arguably on the decline in the traditional hotel industry, they still offer significant promise to the private accommodation market. Brands existed originally to provide (ideally) a guaranteed experience in the age of information scarcity. In the age of information overload, however, they now offer precious, time-saving benefits, essentially operating as a decision-making heuristic and experience promise.
When travelers browse hotel results, they are able to circumvent the time required for extensive research by selecting a familiar brand they know will meet certain standards, but this experience contrasts sharply with the search of private accommodations. With a branded guarantee, instead of navigating the fragmented space of countless individual Airbnbs, a traveler could quickly select a familiar brand that he knows will meet his expectations for cleanliness and amenities. The proportion of travelers staying in private accommodations could likely be significantly higher if they are able to book with relative ease, and quickly ascertain whether that home included the features they appreciate most about great hotels, such as meticulous housekeeping, wifi, or perhaps just mints on their pillows.
Several companies today are, in fact, bringing standards to the private accommodations space. Sonder and Oasis Collections are two such startups in this space, albeit with different business models. Oasis Collections helps property owners rent out their units while also carefully reviewing each unit to ensure it meets the quality prerequisites. Then, they handle housekeeping to meet a standard of cleanliness in every unit listed, providing a range of hotel-esque services from a concierge offering to a full amenity collection. Sonder, on the other hand, leases entire apartments in the newest buildings in a city’s top neighborhoods, outfitting the units and then renting them out for short term stays. The company’s tagline sums the strategy up perfectly: “Local Living. Hotel Service.” Both brands distribute their listings through a variety of platforms, including Airbnb, leveraging existing scale to distribute their products. Airbnb itself is apparently catching on to the standard-of-quality trend. The platform is planning a pilot program, Bloomberg reports, that would offer premium short-term rentals. But the trend toward standards in private accommodations still has a long way to go. Branded private units represent a tiny fraction of all private accommodations and are available in limited locations. Oasis lists homes in under two dozen cities, while Sonder does business in just eight. Time will tell if they’re able to expand more broadly to compete with unbranded offerings on short-term rental sites.
Sonder is also on the leading edge of an additional hospitality trend: managing inventory to meet changing demands. Both Sonder and another startup, Wheelhouse, gather data on rentals to discern the popularity of various locations and types of accommodations. Their analysis empowers them to adjust inventory as necessary, listing units most likely to attract traveler interest. Of course, Sonder and Wheelhouse aren’t actual hotels, but the hotels of the future may take a page out of their book when it comes to responding to customers’ various and changing demands. The modern hotel may not be housed in any one particular building but rather exist as a decentralized network of homes and apartments that adapts and changes over time (in sharp contrast, clearly, to the 20-year+ brand / franchise / management contracts often seen today). Imagine a hotel that can be in the most desirable neighborhoods, even if that changes every year or so. A hotel that always boasts units in the newest building. A hotel that can change or add units whenever necessary. That selects and manipulates accommodation configurations based on dynamic customer data and traveler patterns (a two-bedroom, two-bath unit for the family tourist destination of Orlando; a five-bedroom house in Tahoe for groups of ski buddies; a studio for the New York City business travelers). And, all the while, this hotel, by virtue of being a single organization, would uphold the same standards expected of traditional lodging brands — cleanliness, comfortable furnishings, and concierge services, among others.
More and more, travelers are taking advantage of the opportunity to choose unique, trendy accommodations without sacrificing quality. The hotels of the future will recognize this and plan accordingly.
Goodnight to Overnight-Only Booking
Technology-powered innovation has made convenient, flexible consumption possible for everything from entertainment (streaming movies and music) to transportation (ride-hailing apps and urban bike-sharing programs). The hospitality industry, however, has been late to the game. The rigid, centuries-old check-in / check-out model may have served travelers well in the past, but today’s travel patterns are anything but rigid. Imagine the weary tourist who wants a place to relax before his next guided tour, or the nursing mother looking for a comfortable room in which to pump between appointments. And the group perhaps most put out by the traditional check-in model is business travelers and telecommuters. In the past, these mobile workers settled themselves in coffee shops during the day, straining to hear conference calls through the background chatter. Business travelers arriving on red-eye flights, meanwhile, had few places to relax or freshen up in the hours before an important meeting.
For hotels, the traditional model isn’t optimal either. Nearly 35 percent of U.S. hotel rooms remained vacant in 2016, but the vacancy rate is even higher when you consider how many rooms remain unoccupied throughout much of a 24-hour day. Measuring the asset utilization on a per hour basis suggests even higher unutilized inventory, begging the question of how much more revenue could hotels earn if they were able to book rooms during the hours they were otherwise empty. We can see these models developing at gateway cities and airports, as significant demand outside traditional hours presses the case. Ideally, every hotel will scuttle the old check-in model in favor of flexible consumption — enabling guests to check in and check out when they want. Hotels would maximize occupancy and revenue, while guests would relish the convenience of getting a room exactly when they need it and the efficiency of paying only for the time they spend there.
Thanks to startups, the hospitality industry is making good progress toward that future through the burgeoning “flexible real estate” space. Recharge, a JetBlue Technology Ventures portfolio company, has partnered with hotels in San Francisco and New York to allow travelers to use an app to book hotels by the minute at any time, day or night. Competitors like DayUse and HotelsByDay also allow guests to book hotels around the world during specific time periods of the day. Business travelers and mobile workers who need a desk or conference room, rather than a hotel room, are also finding more options. The startup Breather, for instance, allows professionals to rent offices by the hour or the day in several cities in the U.S. and Canada. For longer-term business needs, WeWork offers monthly rentals and a variety of workspace options, ranging from single desks to entire floors, in 20 countries. And the demand for these options will continue: by 2022, mobile workers will account for 42.5 percent of the global workforce, according to advisory firm Strategy Analytics. And as such businesses grow, more hotels are likely to partner with them, optimizing their inventory and giving more choices to would-be guests.
Artificial intelligence-powered booking, the next generation of alternative accommodations, and innovative hotel consumption models may still be several years away, but the trends that will power them are already building momentum. The hospitality industry is, finally, speeding toward a more innovative future. Travelers deserve nothing less.
