I attended the 2017 edition of the ILTM Conference in Cannes. Over the course of the program, I sought out numerous hoteliers and hospitality experts to discover the latest themes and challenges facing the luxury hotel industry today.
One challenge that emerged from the conference was how hotel groups chose to approach increasing competitive pressures from online travel agents (Booking.com, Expedia, Kayak, etc.) and sharing-economy sites like AirBnB. I was curious to learn more about how different luxury hotel groups chose to approach these issues.
I was lucky to run into Filip Boyen, when he was CEO of Small Luxury Hotels of the World. Filip described how his group approached these key strategic and competitive challenges.
What are your most challenging issues today as CEO of Small Luxury Hotels?
Our challenging issues are online travel agents and Airbnb, but more so the online travel agents. I believe strongly that there is a place for everyone to operate, and I also believe there is no point fighting online travel agents. The point is to find your way around them and to stress to your clients and focus on what they do not do for the clients. For instance, online travel agents is all about market share and offering the cheapest price possible to the clients, but there is no personalization whatsoever. There’s no loyalty, there’s no quality aspect. Don’t forget that we inspect every hotel once a year; with the online travel agents, there is absolutely no quality control because all Booking.com is interested in is stealing market share from Expedia, and Expedia wants to steal it from Booking.com. The more hotels on their website, the better. Quality has gone out a long time ago. Those are the issues we have to concentrate on. As you may know, over the last 6 weeks, the market cap has dropped by 20%. The growth of online travel agents is stagnating for various reasons. One is the campaigns of the big brands like the Hilton, Marriott, and the Intercontinental, which have done campaigns and TV advertising to promote direct booking for the consumer. Book direct with the hotel, and your rate will be as good as those of online travel agents. It’s starting to work. It’s fantastic for us because they have done a great job and they have spent the money that I don’t have—millions and millions of dollars in advertising—and it’s starting to work. Online travel agents are under pressure.
When it comes to AirBnB, more and more cities are regulating the site now. They’re telling people that they can only have 1 or 2 apartments that they can rent out because a city needs to operate, and people who work in the city need to live there and they need to rent apartments. If they all go to AirBnB, how is that city going to work? They have to have insurance and proper fire safety standards. And now AirBnB is starting to raise their quality and saying to their hosts: “We want proper linens on the bed, we want proper amenities in the rooms, we want towels, we want proper cleaning”. And those owners are saying “Hold on a minute. AirBnB used to be a simple operation. Now I have to be a hotelier as well?” It’s not so simple.
What do you think about the increasing use of home technologies like Siri and Google Home that allow clients to book quickly and comfortably on the go?
That’s the same as Booking.com and Expedia. If you go on a quick business trip and you need a quick hotel at a certain budget, you can use Siri, etc. However, when you go on a serious holiday with your family and your children, and you want to make a difference and really enjoy your trip, you’re not going to book that online. If you’re going to buy a beautiful piece of jewelry for your wife, are you going to buy that online? I don’t think so. You’re going to take her to the shop, you’re going to want to feel it, smell it, see, it, fit it. It’s the same with travel. Once you start spending real money on travel, you’re going to want to speak to a real person who has the product knowledge, who knows the hotel, who knows the view from the room, and so on. It’s all about personalization.
That’s why when Booking.com and Expedia started, they were pretty arrogant and said to the travel trade, “Within 5 years’ time, you’re not going to exist anymore.” Today we get more booking from travel agents than ever before. Every year, it increases by 2-3%, and if you speak to Virtuoso, which is in the top 500 travel agents in the United States, their business has never been so good before. More and more, people want this personal contact. Time is a serious issue. People don’t have time, but they still want to trust somebody who organizes it all for them, and most importantly, they want somebody they can call when they have an issue. If you do a holiday on Booking.com and you have a problem, who’s going to fix it? But these travel advisors do fix your problem.
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Known for his international expertise on luxury hotels through his magazine, Laurent Delporte shares his vision and experiences in the world of hotels on his site DELPORTE Hospitality. He decodes the behind-the-scenes action in the sector: from food and beverage facilities, accommodations, architecture, to the quality of services. He offers interviews, advice, and articles as pragmatic resources that industry professionals and private individuals can refer to in their search for information.