Todd Benschneider, Nadia Kaminskaya, Sam Mohammad
University of South Florida
26 June 2017
Dr. James Stock
Over the past decade, technologies like smartphones and the internet have evolved rapidly. These advancements have ushered in new ways for consumers to buy from and communicate with businesses. AccorHotels, one of the most renowned hotel corporations in the world, is trying to find ways to keep up with the new demand for online presence and e-reputation. Olivier Arnoux, SVP Customer Experience and Satisfaction, has two weeks to present a plan for integrating a digital platform strategy into Accor’s brand image.
50 years ago, owning and running a hotel consisted of a completely different dynamic which relied on travel agents, connections, and customer feedback cards. Today, the hotel industry has evolved into its very own beast. Consumers are informed, you can book a hotel with a click of a button, and you can customize your experience as you like. Today AccorHotels has over 4,000 hotels, 570,000 rooms, and is located in 95 countries.
As the dynamics of the hotel world changed, so did the leadership. In 2013 AccorHotels appointed Sebastien Bazin as its fifth CEO in 8 years. With Bazin AccorHotels embarked on a new strategy that was asset-light in certain markets but at the same time actively buying new properties in emerging markets. The new strategy separated AccorHotels into two business units with separate balance sheets: HotelInvest and HotelServices. Accor’s hotels spanned all the major market segments – economy, midscale, and luxury/upscale. The major focus was on midscale which had a combined portfolio focus of 45%, economy was second with 39% , and luxury/upscale was 16% (Dubois). With all of the changes AccorHotels has tried its best to keep up, the analysis of their 50 years to today shows the extensive changes in the lodging industry.
AccorHotel’s 50 Year Perspective of the Lodging Industry
Imagine the business landscape of the lodging industry during Accor’s entry to the market in 1967, in contrast to the data rich industry of today. Across that 50 year divide, Accor has successfully adapted to countless changes in the ways that customers interacted with hotels and how those hotels generated profits. Nearly every aspect of the host to guest exchange has changed since 1967, customer preferences have evolved through many changes in value perception as well as the emotional processes which influence prospects to choose one hotel over another.
Convenience was a driving factor in the late 1960’s, but a convenient payment infrastructure remained absent for another 20 years. The lack of a remote payment system limited a hotel’s ability to collect reservation deposits. While credit cards were in use by 40% of U.S. households in 1967, their utilization for telephone reservations was restricted by the banking regulations of the day. Credit Card Companies required card imprints and physical signatures on those imprints, a process that limited a hotel’s ability to enforce cancellation fees (Durkin). The lack of a practical remote payment method created a “first-come, first-serve” market where fewer than 20% of hotel rooms were, on average, booked by reservation in years prior to 1970 . Since the internet would not arrive until three decades later, guest communications were handled by mail or a phone call from the customer’s home to the exact hotel branch. Centralized nationwide 1-800 reservations centers would not become widely used until the late 1980s (Bearne).
Mobile phones remained an additional two decades away from improving communication convenience for travelers, so hotel customers stopped along the travel route to make calls to the hotel from a payphone to cancel reservations if there was a change in their travel plans. Because of these logistical obstacles many hotels routinely rented rooms out from under those who held reservations once the recommended 6:30pm check-in had passed. The limited communication and payment options contributed to a hotel market that was driven by its location, billboards and highway visibility. In comparison, 45 years later the mobile phone tapped into the internet and instant access to price and vacancy were found with just a few finger swipes, no matter where the customer was located. In fact today many travelers double check advertised room rates and make modifications to their reservation “online” while they are waiting “in-line” to pick up their keys from the desk clerk (Benschneider).
1970’s: Sales Pressure Success and the Leverage of the Escalation of Commitment
From the 1960’s through the 1980’s, the typical traveler would choose a hotel after arrival to their destination, often stopping for pricing and room availability at several hotels prior to making a decision amongst those local competitors. In that period of the industry, location, brand reputation, lobby appeal and desk clerk’s salesmanship were the influential factors that differentiated local competitors. Interpersonal sales skills were greatly valued traits in desk clerks throughout the 70’s. In those years, desk-clerk sales practices for mid-level to luxury brands included a tour of the hotel and a visit to the room prior to the presentation of the exact rate quote for that room.. Sales bonuses were a standard employee incentive practice, paid in proportion to the desk clerk’s prospect to guest conversion ratios in addition to their average “room-price” booked. Consumer criticism about wide deviations paid between guests reflected the low bargaining power of hotel guests and prompted regulations requiring maximum rate cards to be posted on the inside of each room door (Bearne).
The sunken time investment required to get a precise rate quote and hotel tour deterred those tired travelers from comparing more than two or three hotels. Much like the car buying process today, deliberate sales tactics stalled the customer at the front desk for as long as possible before quoting the nightly rate, if the customer balked at the rate, savvy desk clerks were trained to ask the prospect for memberships and organizations they might belong to, that might “entitle” them a “preferred rate”. If the customer interview revealed them to have “no qualifying memberships”, the clerk would further detain the guest by “paging a manager” to request an “unprecedented one-time rate discount”. Research of the period studied the buying behaviors and documented, that through the psychological “escalation of commitment principle”, that each minute a guest remained in the hotel past the 10 minute mark, the odds exponentially climbed that the guest would agree to the rate, succumbing to the inertia of the stop, rather than continuing down the road to compare rates at the next hotel. Oftentimes, the guest would relent to the convenience of location, renting from the third hotel even when they preferred the first. The stresses of driving back to find the first hotel again in an unfamiliar city without navigational guidance outweighed the benefit of renting a better room. The convenience appeal of renting from the current hotel rather than the next stop hotel on the guest’s comparison list allowed larger margins as the bargaining power of consumers was very limited in comparison to modern online price comparisons (Harrington).
Late 1970’s – Advances in Telecommunications Improve Bargaining Power of Consumers
Simple long distance telecommunications technology similar to fax transmission networks provided the infrastructure for the growth of travel agencies in the late 1970s. These agencies enabled reservation cancellation penalties by accepting the cash or check payment locally, while guaranteeing payment to the destination hotel through a commercial line of credit. The technology spawned the arrival of discount programs for travelers who prepaid. Travel agencies popularity also grew in popularity through the arrival of more affordable airline travel. A travel agency’s main products featured intricately designed “travel packages” which bundled specific hotel and airline combinations. Travel agency services dominated the long-distance travel and tended to direct the guests to those hotels which offered the largest agent commissions, regardless of brand recognition, location or lobby appeal (Bearne).
Airline travel was considered a luxury product at the time, a service with enough margin to provide handsome commissions back to the travel agents, allowing those successful travel agents to enjoy respectable earnings potential until the mid-1980s. The bundling of hotel reservations into airfare packages allowed airlines to circumvent the FAA regulated minimum airline rates which contained large profit margins to prevent price wars between airlines. Until airline deregulation in 1978, airlines routinely offered kickbacks to hotel chains in exchange for discounts on bundled room rates to package into their travel services, these discounts allowed airlines to circumvent the regulated minimum seat prices and undercut competitors to gain market share. In addition, the customer’s inexperience with air travel, reduced the percentage of customers willing to purchase their tickets in person through the airline kiosks at airports (Highly).
The expensive risks of booking incompatible connecting flights among competing airlines deterred even the most experienced travelers from self-booking air-inclusive travel plans. Most travelers chose to employ a professional travel agent, their expert guidance also provided a guaranteed delivery of the travel contract, as the agency, hotels and the airlines cooperated to insure the fulfillment of the itinerary. Those guarantees were influential at a time when a round trip cross country airline ticket cost nearly a month’s wages. In inflation adjusted dollars, the lowest possible price for a round trip, red-eye connecting flight from New York to Los Angeles was $1444 in 1974, where today that same ticket can be found as a direct, round trip flight for under $400. The bargaining power of the airline industry supplier’s in that period justified large travel agent commissions and airline subsidized hotel rates. With the guaranteed income from airlines and travel agencies, hotels were less dependent on the street level consumer that arrived seeking lower room rates and competitive hotel amenities. The efficiencies of a demand influenced hotel industry were diffused by the travel agents influence on demand (Thompson).
1980’s: Credit Card and Airline Deregulations Increase Customer Bargaining Power
A loosening of credit card regulations arrived in the 1980’s that allowed hotels to take payment in full or charge enforceable cancellation fees over the telephone. Those remote electronic payments in combination with the prior airline deregulations of 1978 enabled customers to book their own airfares by phone, bypassing the travel agents who previously held a captive market in airline ticket sales. These changes allowed travelers to cherry pick their precise wants on each day of their trip rather than accepting a plain vanilla bowl of prepackaged hotel offerings, the changes in payment infrastructure resulted in the improved bargaining power of hotel customers (Durkin).
Hotels began to produce color catalogs listing their locations in a state by state directory with actual photos, contact information, local maps and advertised nightly rates. This fresh recipe provided a consistent and convenient platform for travelers to prepay their reservations for added discounts. The publication of room rates in directories allowed consumers additional bargaining power through the quick comparisons of dozens of hotels near their destination, a factor that allowed hotels with less desirable locations to compete with those flagship hotels in downtown areas. Travelers began to frequent hotels that were located between their destinations rather than at their eventual location to lower the overall expense of their trips. Subsequent hotels were built on the inexpensive real estate along rural stretches of interstate highways. These rural hotels were not only less expensive, but also offered ample parking and relief from the stresses of comparison shopping hotels on the busy downtown streets of unfamiliar cities (Benschneider).
1990’s: Mobile Phones and the Popularity of the Travel Clubs
The early 1990’s brought the arrival of the mobile phone in addition to an increased consumer confidence in paying by credit card over the phone. These market changes fueled the introductions of travel clubs which provided catalogs that featured detailed state maps which soon replaced conventional travel atlas’ maps. These travel club catalogs highlighted their participating hotel partners and those hotel locations within both state and local maps. The catalogs contained new driving-directional details which lent themselves well to attracting mobile travelers looking for the least-expensive hotel nearest a particular exit of a highway. Travel club popularity grew quickly, pioneered by Citi-group subsidiary, Citi-Travel, which was the 1990’s incarnation of Priceline.com, the club functioned like a wholesale club, leveraging the bargaining power of millions of members to pressure hotel’s into deeper discounts. Travel clubs featured the participating hotel’s names and addresses as well as their discounted member rates, amenities and distances to major attractions. The 1990’s catalog approach to hotel marketing brought changes to hotel construction and location in order to create offerings that most importantly “looked good on paper”(Bearne).
In order to utilize the travel club system, members normally paid fees from $100-$250 per year in 2017 dollar equivalent. In order to buy at the “member rate”, customers were required to call a central 800 phone number to request reservations, even if they were already standing in the hotel lobby. This captive reservation system ensured that the travel clubs would be paid their commission on the booking. The club’s hotel catalog was arranged by city and sorted by rates from low-high, a factor that strongly incentivized hotels to shave their margins thinner to capture a larger percentage of the members passing through their city. Travel clubs pre-negotiated rates resolved the variable hotel rate shell game that travelers found distasteful. To combat the leverage of travel clubs, hotels introduced rewards clubs and credit cards that required customers to book their trip direct to the hotel rather than through a travel club. Room rates for “rewards club members” and were similar to the discounts of the travel clubs but pressured the customer to use their company rooms throughout a trip. The publication of those discounted rates laid the foundation for ever increasing bargaining power of customers, in a formula that would later evolve into the travel booking websites of today (Bearne).
Today’s Lodging Market
In the current U.S. lodging market, hotels are enjoying the highest occupancy rates since 1984, with an average occupancy rate of 66% for 2016 (Edelson). Accor and most other chains have reduced on their reliance on Online Travel Agents (OTA) such as Expedia or Travelocity which still provide about a third of their bookings while currently a quarter of the average hotel industry bookings come through the corporate hotel websites, roughly 10% of bookings are made by inbound phone calls and the balance are a variable and wide mix of rewards clubs, organization referrals and repeat customer walk ins (Edelson). Accorhotels will need to plot their course into the 2020’s, allocating resources to hold or grow their market share utilizing search engine optimization and organic social media brand recognition We will answer the questions on how Accorhotels can enhance their “Online Travel Agent” relationships, harvest brand value through social media and integrate loyalty rewards clubs. In addition, we can demonstrate how the supplementation of conventional strategies such as charitable contributions and alternating waves of well-designed television, billboard and print advertising can increase in effectiveness when leveraged across online platforms.
Today, brand recognition for a company is heavily dependent on search engine rankings with those most searched brands returning the highest in search engine results. Search engine optimization, the ability for a company to climb higher in the search engine results, for as an example “Best hotel in Tampa?” is dependent on web traffic that refers to “Hilton, Tampa” or “Accor Tampa”. If web mentions of “Best Hotel” are most often correlated with AccorHotels Tampa than “Hilton Tampa” than the Accor results will show up nearer the top of the page in a search. For a company to fully optimize its search engine rankings, it must depend on consumer posted references of its brand name which have greater influence on rankings than those from corporate public relations websites (Perrin).
In the internet marketing world, a company that utilized its name brand in most of its products such as “Disney” will have a search engine advantage over an equal sized company that has diversified its brands into independently named products; for example Coca-Cola=Coke, Sprite, Mello-Yello, Barq’s,Seagrams, Nestea, Dasani ect… In an internet optimized world, a hypothetical soft-drink company would be best served to use the word “Coke” in all its offerings and advertising such as Coke-Lemon, Coke-Root Beer, Coke Tea ect to leverage its brand strength in web searches. Today, cost-effective marketing campaigns include the parent brand along with the subsidiary brand name mention in the post titles to pull in larger share of search results. Search engine keyword selections dictate how search engine steer web traffic down the path to the desired content and repeated use of those keywords train search engines to direct similar searches to the intended online content (Campbell).
AccorHotel is one of the largest international hotel chains in the world. The company’s biggest competitors include Starwood, Marriott, Hilton, InterCon, and Wyndham (Exhibit 2). The hotel industry is highly concentrated worldwide. Almost every hotel offers the fulfilling of the same need – a temporary room in which to stay. Because hotels corporations offer near-identical services at similar prices, differentiation in features and minor details is vital. There are two ways to differentiate and obtain a competitive advantage: either vertically or horizontally (Becerra, Santalo, & Silva, 2013).
Vertical differentiation occurs when a company’s product or service is objectively better than the competition’s. For example, Ferrari makes cars of much higher quality than Toyota, so they can charge significantly more. Since hotel rooms are so similar, vertical differentiation is likely not an attainable strategy for AccorHotel to differentiate from its biggest competitors.
Horizontal differentiation is valuable for gaining market share in industries like that of the hotels. This is attained through offering minor features or distinctions not offered by the majority of competitors (Piana, 2003). Using cars as an example again, Ferrari and Lamborghini offer similar products: high quality sports cars. However, Ferrari generally has always been deeply involved in Formula One racing – a detail that potentially captures more market share.
In the hotel industry, customers are influenced by location, room price, service, quality, reputation, security, and cleanliness (Becerra, Santalo, & Silva, 2013). It would make sense for AccorHotel to differentiate more horizontally because the possibilities are virtually endless as to the features and distinctions of a hotel room that can be offered, both physically and digitally.
Prior to the evolution of digital technologies, hotels found success differentiating horizontally by including pools, gym rooms, and breakfast. Eventually, demand for these extras became mainstream, so other methods of differentiation ensued. Major hotel chains began strategically forming collaborations with airlines, cruises, restaurants, and travel agencies for deals that were mutually beneficial for both the customers and partnering businesses.
No other hotel chain in the world operated more hotels than Wyndham, with over 7,800 facilities around the world (Exhibit 3). They dominated the economy/budget segment of the hotel industry, making them direct competition to Accor in that sector. Both Wyndham and Accor were the biggest players in the low-cost hotel room sector, where the number of rooms offered targeting economy class were 64% and 47% respectively of their portfolios. Wyndham and Accor were the only two major hotel chains to successfully operate in all three segments – economy, midscale, and luxury.
Wyndham found differentiation by entering the resort and timeshare field. They launched Wyndham Vacation Ownership in 2004, attracting independent timeshare and hotel developers to participate in franchise and affiliation opportunities (“History of Wyndham Resorts”, 2017). Wyndham would later rebrand into Club Wyndham, the umbrella brand from three primary groups: Wyndham Vacation Resorts, WorldMark by Wyndham, and Wyndham Resorts Asia Pacific).
Although one of the biggest hotel chains in the world, Starwood operated fewer hotels and rooms than other major competitors. They were the only major international hotel chain in which 100% of their rooms were of the luxury/upscale segment, where AccorHotel was only 16% (Exhibit 4).
Starwood was the first hotel chain to differentiate themselves through collaboration with the airline industry. In 2013, they teamed up with Delta Airlines to offer a unique reward point system called Crossover Rewards. The new point system would allow customers to use accumulated points interchangeably to redeem rewards with either Delta Airlines or Starwood. The new reward system was a major success, winning the Industry Impact award and changing the way the industry rewarded customers. Five months after Starwood was awarded for success with their Crossover Rewards system, some competitors followed suit.
Similar to Starwood, Marriott hotels mainly centered on luxury/upscale class. Only 15% of their hotels were not luxury. The three biggest players controlling the upscale hotel segment were Marriott, Starwood, and Hilton – Hilton being the largest. Marriott bought Starwood in 2015 for $12.2 billion, surpassing Hilton in the number of luxury hotel facilities and rooms worldwide.
Marriott discovered a successful differentiation strategy through founding a travel agent training program called Hotel Excellence! (HE!) in 1999. HE! would educate travel agents on the general hotel industry and Marriott’s portfolio, offering special certification and discounts through using Marriott hotels. This strategy aimed at influencing customer decisions at an important point of their inquiry process, knowing that customers relied heavily on travel agents for availability information, price listings, deals and discounts (Dubois, 2016).
Hilton hotels mainly target the upscale hotel segment, where 99% of their rooms were of the luxury/upscale type. Hilton, Doubletree, Embassy Suites, Hampton Inn, Hampton Inn & Suites, and several other subsidiaries. They were the first major hotel chain to incorporate the use of balanced scorecards, a concept developed in the early 1990’s that helped Hilton manage its performance of value to customers and stakeholders (Huckstein & Duboff, 1999). The scorecards pointed out a gap between franchised and company-owned properties in meeting basic customer needs of a clean, quiet, comfortable room. A new customer-focused strategy was formed, helping the company continuously evaluate their commitment to customer demands, priorities, and expectations. This approach led to a clear vision for Hilton employees to follow, empowering team members with a sense of pride in creating value for customers.
Intercon owned hotel brands like Holiday Inn, Candlewood Suites, and Crowne Plaza. They are the only major hotel company to focus most of their targeting on the midscale segment was InterCon. Over 2/3 of their 744,364 rooms were midscale-focused, more than any other competitor. They wanted to serve the ‘everyday heroes’ of society, like firemen, sports coaches, and teachers. The InterCon strategy was directed at making guests stay comfortable, starting at the entrance. They decluttered lobbies and implemented peaceful sounds and scents for guests upon arrival (Rooney, 2009). Inside guest rooms, bedding and bathroom amenities were of the highest quality for the average mid-scale hotel room.
One of the biggest disruptions to the hotel industry was the launch of Airbnb in 2008. Its founders, Brian Chesky and Joe Gebbia, were roommates that rented out an air mattress of their San Francisco apartment during a local conference in which all nearby hotels were sold out. After recognizing its potential, they create an online platform that allowed travelers to link up with locals. They expanded the idea and have exploded in growth ever since (Exhibit 5). In 2015, the company received a total of $25.5 billion in funding, surpassing the market cap of hotel chains like Marriot, Starwood, and Wyndham (Dubois, 2016).
Airbnb offers a completely different experience for travels than a traditional hotel. Customers are accommodated with choices from a plethora of residential location to stay for the night. Not only are many offerings cheaper than hotels, but the experience is inherently different. Unlike hotels, travelers establish a one-on-one relationship with their host to feel more like a local than a tourist. Not only is the experience a major differentiator for Airbnb, but the listings are much more unique, where customers a can stay in RVs, Boats, and even castles (Exhibit 6)
Technology Disruption #1: Internet Pricing Search Engines
The internet arrived in the late 1990’s to spawn a disruptive revolution in customer bargaining power with the arrival of Priceline.com, which unlike a Citi-Travel club, was a free service paid for by its hotel partners rather than club members and its live streamed pricing and room availability information allowed online shoppers to even pick specific rooms from a hotel chart for a better view or preferred location near the pool (Bearnes). However until early 2000’s most customers remained cautious about typing their credit card and personal information into the unfamiliar digital void and instead typically called operators at Priceline to pay for their reservations. Priceline and its imitators were able to publish live discounted pricing and real-time availability from custom built itineraries of airfare, hotel and rental cars rather than prepackaged bundles of the travel agencies of the 70’s and rolled those a-la-carte selections into those familiar guaranteed terms that made the travel agencies of the 70’s popular (Highly).
Today, internet shopping is the go-to for Millennials, Generation Z, and even Generation X and Baby Boomers. The advancement of sites such as Expedia.com, Booking.com, Agoda, KAYAK, TripAdvisor, and Google Bookings has completely changed the way consumers plan trips and book hotels. 148.3 million consumer make travel bookings online, ⅔ of these consumers booked their stay online. The reason for this shift is not only convenience, but also reduced costs. For example, you can book a hotel on Expedia.com that can be almost half the price of booking from an agent.
Technology Disruption #2 – Social Media
As the 21st century progressed, social media and customer ratings began to steer customers away from hotels that featured misleading pictures, an area of customer dissatisfaction that emerged with advancements in online marketing. Customer ratings and reviews revolutionized the customer service factor of the travel industry, not only was the shell game of front desk pricing removed; but, overly flattering hotel pictures and descriptions were exposed to those who were considering a booking. Since customers continued to gain confidence in the online security of their banking information, online purchases exploded and luxuries such as the travel industry grew into the most searched categories of search engine activity (Teicher).
Today potential customers put greater trust in the feedback from strangers than they afford the public relations campaigns of business owners. Online review sites have magnified the bargaining power of customers and held entire brand names accountable for the wrongs weakest personnel links. In the social media age, hotel manager’s performance bonuses are directly tied to the metrics of their online customer ratings. Modern desk clerks are no longer recruited for their sales closing ratios and average booking price, instead they are measured by a newly discovered tangible: “customer enthusiasm” which generates high ratings on customer review sites through the gratuitous use of smiles, welcoming body language and energetic verbal skills. Studies revealed that the first ten minutes of a guest’s arrival had become the most critical in generating positive guest ratings throughout the rest of their stay. Every step of the arrival process was refined, from the street signage that guided the guest to the unloading zone through the design of the doorknob that opened the door to their room every detail of the arrival experience was reevaluated (Hognas).
Social media review scores provided a previously unmeasurable insight into every detail of the customer’s experience, which typically features positive feedback from the guests. IN the past previous attempts to solicit feedback through email and guest card surveys had typically gathered only negative experiences, which only increased the management’s awareness of what customers did not like, where social media was able to articulate and advertise what each hotel’s strengths were in customer appeal. The barriers to entry of new hotel chains and single location boutique hotels were dramatically lowered through social media and brand reputation became less important as customers spent less time browsing the online catalog of hotels from a single brand and instead turned to a google search of hotels near a certain address. Existing hotel chains that had large sunken costs in marketing departments, brand research and advertising contracts found themselves burdened by the high carrying costs of their own operational infrastructure (Mckinsey.com).
By 2006 family owned bed and breakfasts were able to surpass nearby chain hotels in web traffic and search engine rankings by utilizing a few thousand dollars in servers and then staffing the hotel with pioneers of grassroots social media optimization which was enabled by the arrival of millennial born employees. This new generation of employee was able to reach the digitally influential millennial customers that were coming into their own period of buying power. The social media conscious young employees were often able to push their employer’s search engine rankings ahead of the established hotel chain competition through the simple amplification of their own personal Klout scores which was attached through affiliation to the hotel’s own social media efforts (Teicher).
The technological disruption of social media is a positive aspect for lodging businesses. Through social media, AccorHotels can connect with the consumers on a day to day basis, instantly. One of the most important technologies that should be utilized is Social Media Listening (SML) which allows for hotels to acquire information easily, brands can also reply to criticism or negative reviews quickly and efficiently to make sure that they do not become a problem and ruin the brands image. For example the Swiss-based Nestle brand developed an internal task force to monitor and respond to potential attacks, criticisms, and negative reviews. Another famous example is Wendy’s, who utilize social media as a brand building mechanism, they use Twitter, Facebook, and Instagram to reply to consumers directly, making them feel special and engaged.
2009 – Technology Disruption #3 – Airbnb
EBay introduced a pioneering business model in 1998 that reduced the risks of buying items from unfamiliar sellers in the mysterious, digital void of internet commerce. EBay’s unique escrow partner PayPal guaranteed refunds if seller failed to deliver on the transaction. User ratings allowed both buyers and sellers to rate each other on each transaction and attach those scores to the buyers own public reputation. 11 years later Uber launched a ride sharing system on top of eBay’s escrow payment and peer rating model. Uber’s success is forecasted to become the revolutionary disruption that will reshape the foundations of the 21st century auto industry. However Uber would have not been able to gain the needed foothold in transportation-for-hire sector, if it had not been for the deregulation of the taxi industry. Today the hotel industry is waging a regulatory battle against the likes of the Uber-esque lodging start-up, Airbnb, to protect their industry from following in the footsteps of the declining taxi industry. The popularity of Uber with millennials has led its customers and investors to expect great success from the business model of Airbnb, a lodging broker that enables hosts to rent rooms in their homes, guesthouses or offer their entire dwelling for short term vacation rentals (Yu, 2017).
Hotel Industry analysts are struggling to determine if AirBnB has added 3% to the total lodging market or taken a 3% share away from existing hotel operators. Regardless of the impact on the distribution of market shares, AirBnB has surprised analysts by increasing in value despite generating operating losses over its nine years in business. In fact today the total market value for AirBnB is 30% greater than that of Accorhotels, despite the 40 year age difference. However, the valuation of Airbnb may be misleading since the startup’s capital value is based mostly on speculative stock value, where over 40% of Accor’s market value is based on its ownership of sellable capital infrastructure such as hotels, office buildings and furnishings (Stone). The most unique aspect of Airbnb’s market appeal was the discovery that customer demand for alternative lodging options was not being driven by a demand for lower rates, in fact AirBnB hosts charge average nightly rates 25% higher than those charged by hotels. However, that figure also may prove to be misleading because much of the price premium reflected in the Airbnb rates could be attributed to the higher percentage of “whole-house” vacation rentals that drive up Airbnb’s average nightly rates, these house rentals are difficult to compare since they would equate to three or four hotel rooms. The arrival of peer to peer lodging sales and the infrastructure that overcame the safety risks that had previously deterred the rental practice may become the biggest disruption that the hotel industry has encountered. Since May of 2016 over 20% of U.S. travelers have used Airbnb at least once for their lodging needs (McDermott).
In the first quarter of 2017 Airbnb generated an operating profit for the first time since its launch in 2008. Despite the inadequacies of its revenue generation, Airbnb surpassed the then 47 year old Accor’s market value only six years after it opened and today Airbnb is valued at nearly three times the market capitalization of Accorhotels. While Airbnb may only hold 3% of the market share, the capital efficiency of its infrastructure could soon harvest the lion’s share of lodging industry’s profits. The true measure of success remains to be seen as the privately held Airbnb’s true market value will remain unknown until it goes public, but its potential influence to reshape both the housing and lodging markets will have the potential to make history as one of the greatest digital disruptions in history (Ting).
Airbnb is one of the greatest threats to the lodging industry, and it has become the go to for young HENRYs (High Earners, Not Rich Yet) , entrepreneurs, college students, and young couples. The CEO Bazin was quoted as saying “I would have loved to participate in Airbnb.” Airbnb provides any experience you desire that can be authentic, welcoming, and engaging. The hardest aspect for hotels is to keep up with the trend. For example AccorHotels has a luxury hotel in China, that is in a garden and was part of the Emperor’s castle. Authenticity and uniqueness is what draws consumers in today.
- Content and the customer journey.
- Steps of the customer journey.
- The customer experience begins with educational content, a prospect realizes that they have a problem to solve and have turned to the internet to search for solutions. “How To Videos” are a great tool in creating brand and product awareness. For example Accor could create a youtube series of short videos that highlight how to have unique travel experiences in each of the cities that it services. Content should genuine and avoid excessive brand trumpeting. Additional video series could feature travel tips such as how to fold clothes in a suitcase to avoid wrinkling or life hacks on best ways to how to hail a cab or save time utilizing street vendor dining during your vacation. The second step in the customer journey is the customer’s readiness for the explanation pitch. These are storytelling examples utilizing a case of a customer and how your hotel overcomes their specific travel inconveniences. Here is where customers want to hear how your service works and defines what you can do for them. This is where you would post blog or video on the range of travel services that are included with a nights stay at an Accor hotel. An example would be how the free morning breakfast is made from superior all fresh ingredients or how the fleet of hotel shuttles at each property are happy to drive you to dinner or pick you up at a bar as a free alternative to Uber. Each video should wrap up with a call to action and clear brand trumpeting. An example of this would be: “You will never need to call a cab if you stay at an Accor hotel, because Accor cares about customer convenience!”. The third step in the customer experience requires added confidence to choose your solution over alternatives. Here is the opportunity for endorsements and testimonials. Highlighting positive reviews and awards in the corners of the rate and room content pages is a good example of this strategy’s application. The fourth step of the customer experience is to be sure to express your gratitude for their patronage. In addition to the standard emailed “thank you for your stay”and survey, by utilizing SML’s you can locate the customer’s posts and add an enthusiastic reply to a positive tweet, rating or geo-check in the guest made on social media. Supporting posts of others demonstrates that the organization is genuinely happy for the customer and proud to have been a participant in creating the best experience for that guest. The fifth step is continued engagement with customers after their stay is completed. This can be accomplished by emailing the customer links about new features or locations for them to try.
- Steps of the customer journey.
- Which types of content efficiently improve each of the different stages of customer experience such as triggering brand awareness or changing customer perceptions?
- Short sharable how-to videos are an effective device to introduce the company for brand awareness without the hard sale approach of an advertisement.
- Once a customer is aware of the brand, descriptive videos or meme style posts on company facebook page are another type of content exposure to trumpet the competitive advantages of the Accor hotel chains over its competitors. Many companies post action pictures of happy guests and smiling employees with their day to day messages.
- Ratings and endorsements further guide the customer along the path to the confidence they need to choose Accor over the competition. A system to encourage satisfied and influential customers to post positive reviews will advance Accor’s own marketing efforts with little to no cost to the bottom line.
- Follow up emails that feature upcoming events, discounts or informative links to lifehack videos can maintain the relationship after the stay is over.
- How to leverage content?
- For Accorhotels to become “customer-centric” across digital platforms it must first quantify a real-time, single-view of each customer as an individual entity. This can be achieved by isolating the user’s email, phone number, social media profile. By identifying and cataloging an individual user, that person’s online presence and posted feedback can allow Accor insight to how that user and corresponding demographic interacts with, not only Accor, but other people and businesses. Web content posted by that individual can provide insight on how that person might be expected to interact with Accor’s business offerings and allow the firm to adapt its offerings to best serve the largest majority of like-minded consumers. Big Data analyst Vamsi Chemitiganti captured the customer-centric vision of today when he said “The only way to attain Digital success is to understand your customers at a micro level while making strategic decisions on your offerings to the market. Big Data has become the catalyst in this massive disruption as it can help business in any vertical solve their need to understand their customers better. It aids this by providing foundational platform for amazing products.” To launch the data collection process we recommend that Accor hire the experienced big data software firm Eleks to design a database to harvest customer data and provide guidance on how to interpret and integrate the data into the Accor business model.
- The online content should first be intuitively responsive to customer posted content gathered by “Social Media Listening Software” that will be designed into Elek’s data analytics product. We recommend that Accor reduce its conventional advertising department by three people to be reallocated to the communication of the Accor corporate vision with the recommended social media marketing firm “Friendemic”. We propose that Friendemic in conjunction with your existing brand managers handle the launch of the multi-platform social media campaign, where the Accor brand can be molded into a carefully groomed online presence by a social media firm with seven years of experience managing campaigns for companies such as Fiat and the Habberstat Group.
- Social media is a major influencer of customer decision making. According Andrew Perrin of the to the Pew Research Center (2015), most adults use at least one form of social media – and the trend is growing (Exhibit 7); usage grew from only 7% in 2005, to 65% in 2015. Advertising on social media can be an effective way of reaching customers, even before they begin their own independent research. Because Accor does not specialize in creating digital content, it is recommended that they hire in-house employees that are expert in creating social media content that can capture interest. Centralizing the flow of online traffic can be helpful in uniformity, as well as evaluating which personnel and techniques work best. Hiring employees to manage this component can ensure that a consistent image is projected, as opposed to leaving all decisions to a 3rd party social media company to do so. In addition to existing conventional media efforts, we are recommending a strong investment in social media content generation such as youtube, Facebook, Twitter, instagram and WordPress. The content should include travel blogs, destination photos, employee photos, stories and fun, informative one minute videos. The staff should also closely monitor yelp, tripadvisor, google reviews and other ratings sites to gather feedback on areas for improvement.
- Youtube is the primary platform to post videos longer than 15 seconds, while Facebook would be the platform to post a mix of links, company news, photos of Accor’s hotels, destinations and happy guests. Twitter is the channel to post very brief news updates and funny stories of less than 140 characters while on the other end of the spectrum WordPress would be the ideal platform to post commentary on the industry or the company history. Review websites like TripAdvisor influence customer decision-making early, so getting guests to leave reviews during or after their stay is critical. According to Dubois’ article (2016), “95% of customers check reviews and research about destinations and rooms”. One way Accor can get more guests to leave reviews is by incentivizing them with discounts on their next visit. For example, upon completion of an online review, customers can receive a promo code to receive 15% off their next visit when booked directly from the company website. In addition, each Accor employee should be encouraged to create LinkedIn profiles that are linked to the main Accor profile, Friendemic consultants should assist and train employees on ideal LinkedIn career content. The more employees who list Accor as their employer, the higher the social media ranking that Accor will reach, especially true for employees who themselves have high Klout scores.
- How to become a content-driven organization?
- In addition to creating digital content, monitoring what guests are talking about can be pivotal to Accor’s brand. Technology companies like HootSuite and Social Sprout provide software that allows the monitoring of a company’s entire social media presence. The software can immediately alert the hired campaign managers of customer posts, allowing for timely responses to any complaints that arise. Accor managers can regularly check the aggregate data to better understand what they are doing right, and to fix what customers say they are doing wrong. This is a fast, reliable way for Accor to become customer-centric.
Through a combinations of the analytics software designed by Eleks to monitor Accor’s online traffic and the outbound social media pictures and stories from the Friendemic we plan to quantify gains in online presence through a dashboard of standardized social media metrics. One primary measure of online influence is taken from an organization’s Klout score, a metric which measures web traffic interactions with Accor’s corporate home page and select social media sites: Facebook, LinkedIn,Twitter, Instagram, WordPress, youtube and google+ platforms. In addition we recommend the use of social media tools “Wildfire Monitor”, “Mention” and “Trackur” to compare the trends and performance of competitors Marriott, Hilton and Wyndham in “Wildlife Monitor” and Klout scoring metrics against the social media performance of Accor’s campaign content.
- The most important guiding principles of a corporate online presence is above all else, do no harm to the anyones perception of the organization, avoid controversial topics and when confronted by a hostile critic, to immediately respond by posting the customer satisfaction help number encouraging that critic to call with the promise that a manager will be happy to help resolve the issue for them. To build brand value it is important that the company post positive and supportive messages of affirmation to others in the online community even congratulating its competitors for acts of altruism. To be effective it is critical that posts are interesting, entertaining and image rich original content rather than simply sharing or retweeting the posts of others, pictures and videos are especially effective at generating content. Most importantly create a posting protocol that requires a marketing manager with social media training approve all content prior to posting.
- Marketing or Public Relations employees can post company news and should quickly respond to customer comments on the corporate pages. However, we recommend leaving the foundation content to the professionals and suggest hiring Cox Media to film short and fun informational videos featuring real employees from Accor to demonstrate travel tips, lifehacks and offer local recommendations for fun tourism experiences in the areas around Accor’s various locations. We also recommend leaving the timing and mix of postings to the professionals at Friendemic until the Accor marketing professionals master the concepts through feedback metrics.We recommend bringing in both Cox Media and Friendemic on annual vendor agreements while also seeking out a third Social Media Management firm at the six month mark to audit the work of all three online content partners: Cox, Friendemic and Eleks.
- We recommend that no hard and fast rules be applied to differentiation between each level until the social media partners have initially rolled out a universal marketing campaign. One year from now Accor will be able to compare the responses to the social media campaign and tweak the content mix for each of the brands. However we do recommend that the Accor parent brand name be included in all content in addition to the subsidiary brand names to leverage the web traffic from all the brands into a single larger and more influential entity.
- The success of the social media campaign will be partly dependent on the “buy-in” depth and organizational changes of the Accor staff. Incentive bonus’ for each property’s online ratings and Klout scores should be added to employee’s current compensation plan. Since effective social media marketing can reduce Accor’s dependence on the more expensive advertising in conventional media platforms such as television, print and radio could social media performance bonuses would be a justified through the added payroll expense. There are several recommendations that could help with Olivier’s task. The customer journey taken to reserving hotel rooms typically begin with some research. To get Accor employees on-board with the new digital transformation, an online review system can be sent to guest with a section to rate customer service by employees. This was previously accomplished through client feedback cards which grew into a computerized platform consistent with the digital movement and simplifies tracking. In addition to identifying low customer service score locations, employees of high customer services rating can be rewarded with praises or raises.
- We strongly recommend that employee’s current pay level not be docked for poor social media performance, as negative backlash from the perceived punishment will hinder the enthusiasm needed to drive cultural changes. We recommend that Accor fully integrate social media feedback metrics into their ROA calculations and post each property’s social media influence and customer ratings in common employee areas. Additional bonuses should be awarded properties with the highest scores as compared to other Accor locations to create teamwork and peer pressure within each property to adapt the new directive. We believe that no reasonable business argument could made in favor of remaining absent from social media marketing investments and that Accor should plan to reduce its conventional marketing budget to reallocate it in small incremental fractions into social media development and analysis.
|Online Travel Agents (OTA)||Booking.com, Agoda, Expedia|
|Aggregators-Metasearch sites||Trivago, Tripadvisor, KAYAK|
|Review Sites||Tripadvisor, Dianping|
|Travel Blogs and Forums||Lonely Planet|
|Social Media Sites||Facebook, Twitter, Instagram|
|Alternative Lodging Platforms||Airbnb, Homestay|
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