European Hotel Industry Has High Hopes for 2017 Investments
A recent survey by Deloitte, a business advisory firm, reveals that hotel investors are eager to seek opportunities in the UL and Europe in the year to come.
Other key findings indicate that 62 percent of respondents anticipate that the biggest chunk of unbound investment into Europe will be from China, and Amsterdam ranks first over London as Europe’s most sought after hotel investment.
According to Deloitte’s survey of 100+ senior hospitality industry leaders, the dominant investors in the European hotel market look to be Chinese and North American investors in 2017.
The 2016’s M&A deal flow has been less stellar than that of 2015, 34 percent of hotel executives believe that good investment opportunities are to come, as they believe the European investment cycle to be 12-18 months from peaking. Almost 60 percent of those surveyed view disposals and consolidation as prominent investment themes in the year to come.
As far as concerns go, over half of the investors surveyed said that European geopolitical instability was their top concern, followed by deflation and decreased economic growth on the Continent. Yet, only a quarter of respondents were feeling shaky over the UK’s decision to leave the European Union. On the other hand, the European elections which will take place in 2017 created more concern (37%). One-third of respondents said that the budget segment of the market was the most appealing for investment in 2017, followed by the upscale and midscale segments.
Deloitte speculates that the subdued nature of 2016’s industry growth is likely due to political and economic uncertainty, as well as lack of product.
As far as attractive European investment destinations go, Amsterdam topped the list with 34 percent of the vote, beating out the usual contender London, who followed closely behind at 32 percent. Barcelona took third place, followed by Dublin, Berlin, and Madrid.
For the third year straight, industry leaders named Edinburgh the most appealing hotel investment destination in the UK outside of London, followed by Manchester and Birmingham. The Scottish capital is now believed to be as attractive to investors as the Rome or Lisbon.
In the Regional UK, trading increases as the area becomes more affordable and accessible to international travelers. Despite unease surrounding the Brexit vote, there has been a restored interest from foreign capital, based on the opportunity to capitalize on the depreciation of sterling.
Industry heads have also pin-pointed domestic investment as a key driver of upcoming regional deal flow, as well as anticipation of Asian capital dominating activity in 2017.
Despite the political and economic setbacks, industry leaders are optimistic; half expect Regional UK RevPAR to increase by 3-5% in 2017, 38 percent expect to see multiples of 10 times, and 20 percent surmise that pricing will be higher at 12 times or more.
Hotel Guests Are Becoming Better Accommodated With Mobile Check-In and Services Options
A recent study shows that hotel companies are collectively concentrating investments on technology in order to keep ahead.
STR (a data reporting service for the hotel industry) conducted a survey of about 8,000 hotels, and it shows that hotels are prioritizing technological development right now.
The American Hotel & Lodging Association Lodging Survey reveals the following:
- Across chain categories, central reservations systems are now almost universal
- The use of mobile apps for hotel servicing is on the rise (peaking at 35 percent industry-wide)
- 54 percent of hotels offer mobile check-in, the majority of those being upper-midscale to luxury hotels
- 98 percent of hotels have high speed, in-room internet access, making that option an industry norm
- A mere 9 percent of hotels actually charge for in-room internet service
- 88 percent of U.S. hotel rooms offer high-definition and/or flat-screen televisions
- Hotels seem to be using social media less for marketing now: in 2014, the use of social networking sites for marketing was at 93 percent. In 2016, that dropped to 87 percent.
These results go hand-in-hand with recent trends discovered in consumer desires by J.D. Power Rankings.
A recent study conducted by the Global Business Travel Association notes that use of hotel apps among business travelers is common and on the rise. They use these apps most commonly to check the status of reservations, manage rewards accounts, and book their rooms.
25 percent of business travelers used mobile check-in at their last stay, and indicated that increased keyless entry will lead to increased use of the mobile check-in option.
Free Wi-Fi is of paramount importance to the hotel guest. Almost exactly half of all hotel guests use their Wi-Fi for at least one hour per day. 16 percent received free Wi-Fi because at their last stay because they booked direct or used their loyalty program services; the majority of those surveyed said they were more likely to book directly in exchange for free Wi-Fi or internet access if that were to become an available option in the future.
These trends highlight the importance points for hoteliers to focus on now and in the future with regard to their marketing. Concentrated investments and attention toward developing mobile technology and internet availability are crucial to increasing and retaining high booking rates.
Ancillary Sales in the Travel Industry
Ancillary sales have become an important opportunity for travel companies to take in more revenue while at the same time improving customer interaction. It is oftentimes the case that companies who successfully sue ancillary sales also find strengths in data analysis, personalizing products, and generally improving experiences across multiple channels.
Ancillary sales are not static or immutable; the success of their purchases depends on offering the right products at the right time. Companies must understand what the customers want and expect, and must make purchasing these products easy and seamless.
But mere knowledge of this data analysis is not enough; success of sales comes with gathering that knowledge and taking action with it.
Travelers these days simply want more out of their experience. Fusion conducted a 2015 Omnibus study which found that only 37 percent of customers surveyed found the products available to them to be relevant to their trip. However, 61 percent of the customers were open to the idea of purchasing additional items to improve their flight experience. This points to the disparity between what travelers want and what they are actually being offered.
Travel companies are now starting to shift toward models and practices which better suit these trends and findings. A new commonly shared goal among travel industry executives is to improve retail methods and improve the merchandising of the ancillary products they offer. It was recently found that 91 percent of airline executives listed these meeting these goals as their main objective for the next two years.
Doing so will benefit everyone involved; it was increase ancillary sales, as well as give customers a travel experience which is better, more valuable and adds more to their experience overall.
Travel companies can now start coming out quickly with more relevant, personalized ancillary items to offer. They are beginning to incorporate a customer focused merchandising approach which uses a combination of products, centralized data, strategist teams, and multi-channel merchandising platforms to successfully market and sell their ancillary products.
Once travel companies start offering the right products at the appropriate times, on the right channels and in a personalized manner, they will see their sales grow. This is particularly important for low-cost carriers (LCCs), as ancillary sales make up a significant portion of their revenue.
For a good look at the state of ancillary sales, check out www.Fusion.com
New OTA Model Aims to Innovate Cruise Bookings
A new cruise-centric OTA hopes to shake up the cruise industry with a new business model in early 2017.
CruisingStore.com, based out of Miami, will be an OTA which offers customers customized information in numerous digital formats in order to facilitate independent booking. The goal is to remove travel agents from the equation whenever possible.
The startup seeks to grant consumers booking independence in the cruise industry, which has fallen somewhat behind in the technology game. The company will use a combination of agents and independent contractors on a robust website to help guide customers through their purchase options. ICs will not have sales roles; rather, they will have innovative product expert functionality.
Key partners are involved in the planning and execution; Deloitte Consulting and Revelex. Revelex will be an equity partner, and will provide the booking engine. Deloitte Consulting will use big data to reveal patterns, trends, buying habits and preferences among customers, and holds financial interest in the startup.
CruisingStore.com will depend heavily on Deloitte, as well as another partner, Needle. Needle will provide online chat services among retailers, as well as some cruise customers.
Deloitte will prove crucial to the development of this model by providing an algorithm for use. When CruisingStore.com quizzes shoppers, they will use this algorithm to push relevant answers via pictures, videos, texts, and other resources. Needle will also use this algorithm to chat with shoppers, or direct them to product specialists (or direct them to relevant content).
The Money Factor
CruisingStore.com’s success will come by not putting people in traditional sales roles, therefore greatly reducing costs.
When shoppers submit their credit card information, the cruise lines will then receive that information and will handle post-booking fulfillment. The startup seeks to facilitate direct communication between the customer and supplier by sharing shopper information with the suppliers. This will effectively eliminate upsell revenue, commission overrides, and co-op marketing funds which are provided to other agencies.
On top of that, there will be a loyalty program which gives customers cash-type rewards like Visa gift cards, and it will be point-based. This would be used to create promotions, which is something the current system lacks.
The targeted audience for this startup’s development is Millennials and people new to cruising. The innovation will appeal to Millennials’ preferences for quick, convenient, tech-driven booking; by meeting those standards, it will in effect also reach new customers.
Room 77 Acquired by Travel Startup Lola
Lola CEO and Co-founder Paul English said in a post about the deal, “We intend to maintain Room 77 as a best-in-class hotel search tool for do-it-yourself travelers…Besides the technology, I anticipate the platform will also provide strategic insights for helping Lola deliver the best hotel deals through the best channel for our customers.”
Room 77 has experienced some significant ups and downs in its development through recent years.
Originally, the platform set out to be a direct-to-consumer type, and its selling point was that it allowed (or tried to allow) shoppers to see floor plans and even see individual rooms before booking.
Unfortunately, many hotels did not get on board and cooperate. So that didn’t work in Room 77’s favor.
In 2013, Room 77 received $30 million in funding from investors like Expedia, and made Drew Patterson their CEO.
In 2014, Google licensed booking technology from Room 77 in order to “remake its search experience for hotels to look more like travel sites such as Priceline & Expedia.” Unfortunately, that plan fell short (likely due to the fact that Google wasn’t getting much more than it already had before).
After the deal, Room 77 continued to develop technology, seeking patents for it. The brand is known for creating patented technology used for hotel metasearch purposes. The infrastructure of that metasearch supports:
- Hotel matching
- Speeding up/working around slow hotel IT database connections
- Property ranking
- Computer-generated views from hotel rooms
- Database structuring for hotel attributes
Specifics on the Lola/Room 77 deal are currently unknown.