TECHNOLOGY
room sales . The same goes for wellness offerings and other ancillary opportunities . AI will be a large contributor to the evolution of revenue management and pricing decisions , allowing hoteliers to not just sell the right product at the right time for the right price but to the right person . TRevPAR is the new RevPAR , if AI has anything to say about .
➎ “ Some online search engines could move more directly into selling rather than advertising lodging opportunities , and the race for market share between the OTAs and the world ’ s largest brands is likely to continue .”
TRANSLATION : Competition is heating up . For years there was speculation that giants like Meta , Amazon and Google would get into the business of selling travel , but , up to now , that has not come to fruition . It ’ s curious why not given the spell these companies have over consumers and everyday life . Pitting them against the likes of established OTAs would make for some amazing competition and either be ruinous , or , at the very least , disadvantageous , for companies like Expedia and Booking . com . In its current iteration , searching for a hotel on Google presents options for booking it , from Expedia to Priceline , Booking . com to Hotels . com , who are all typically at the top of the options because they pay an inordinate amount of money to show up first ; to the hotel direct , typically lower in the presentation . Imagine a world where searching for a hotel on Google allowed the user to then book it through Google ’ s booking engine . The ramifications would be awesome . As CBRE astutely points out : “ These companies are high-margin , high cash flow and asset-light . Between them , they read your email , know where you live and when you go on vacation , what types of places you researched and chose not to go , when your anniversary is , when your kids were born , who your friends are and even what you ate last night . AI will enhance their ability to make targeted offers that suggest the right place at the right time and at the right price .”
➏ “ We expect the hotel brands to command higher franchise fees and the OTAs to push for higher commissions in the future . The same is true of thirdparty managers , where consolidation is likely to continue , and the benefits of scale will remain a key component of the value proposition for hotel owners in manager selection .”
TRANSLATION : In the end , it ’ s owners holding the bag . Further consolidation means less optionality , which means higher prices likely . Larger deals , like Choice Hotels ’ failed bid to acquire Wyndham Hotels & Resorts , are put under immense scrutiny , but it ’ s the smaller deals that skate through unimpeded . However , they add up , and over time , as there are fewer brands , fewer managers , costs for owners will go up . Perhaps , to combat this , there will be a counteraction of consolidation among hotel owners . We ’ ve already seen this in KSL Capital ’ s $ 1.4-billion acquisition of Hersha Hospitality Trust last year . The potential parry by the ownership community to stave off higher pricing could commence at a more rapid pace .
➐ “ The divide between properties with many amenities and those with very few is likely to deepen . Properties in the middle — those with small wellness facilities or limited paid food and beverage — are more likely to continue scaling back amenities .”
TRANSLATION : There will be a large division between spartan hotels and bounteous ones . It makes sense : Hotels that can ’ t compete on facilities should scale back and offer a more fiscal package . It ’ s partly why the hotel industry has seen a rather large move by the brands in the economy to midscale extended-stay space .
➑ “ Given today ’ s cost of capital and pressured Gross Operating Profits ( GOPs ), we expect owners to wait at least another upcycle before they consider making these investments in earnest . In the initial phases , owners will replace less expensive service labor with higher-cost technical and maintenance labor and replace operating costs with depreciation expense .”
TRANSLATION : We are still some time away from a full-on , full-scale of AI invasion . The lowering of interest rates , which some believe could happen sooner rather than later , could change or expedite these decisions . Owners are keenly aware and focused on expenses that continuously drag on margins . Until there is further clarity , spending , if any , will be on brand-mandated PIPs and other CapEx improvements that were pandemic deferred .
80 hotelsmag . com September 2024