You don’t have to be a racing fan to see the business connection. COVID-19 has clearly put the hospitality industry under the caution flag. The future ahead is still murky. A wide array of businesses, NGOs, scientists and government officials are working hard to clear the track.
We’re all looking for positive signs for the industry in 2021 and beyond. The pandemic is not only a tragic event, it’s a business disrupter like no other in our lifetime. But the hospitality industry has been disrupted before and has historically had a cyclical nature. Spending on business and leisure travel has always been an indicator for profit changes and overall economic health.
In the aftermath of past recessions and upheavals, we’ve seen significant technological innovation. Immediately following 9/11, travel in the U.S. and around the world was stymied until airlines, hotels and governments implemented systems and processes to make the public feel safe again. In its aftermath, low-cost carriers and low fares created a new class of leisure travel and the market expanded. We then saw explosive adoption of new technologies like Wi-Fi and high-definition TV (HDTV) in relatively short order.
The release of the iPhone followed closely behind the collapse of Lehman Brothers and the 2008-2009 “too big to fail'' real estate crisis. Subsequent advances in cellular devices and applications all happened during a time of financial instability and uncertainty. In short, innovation and economic cycles are not connected. Those who continue to invest and innovate are best prepared to weather the cycles.
Think Broadly
While the pandemic is still with us, we remain under a yellow flag. At the same time, significant advances in technology are occurring. Hoteliers know business travelers are well armed electronically to communicate on the road. By and large, they’re early adopters of new technology and have higher expectations than the broader consumer market. Other industry initiatives under way will also change the way staff and guests communicate and interact.
In addition to technology, look for business models and government regulations to have an impact. Here's a brief, short-term overview. Keep an eye out for future articles with more in-depth discussion on each.
Business Model & Government Regulations
- 5G Wireless. There’s been a lot of fanfare about 5G during its buildout. Because physical building characteristics and distances impede its services, 5G’s impact for hoteliers will be determined site by site, market by market. With higher deployment costs than prior cellular services, it’s unlikely carriers will provide coverage within hotels.
- Citizen Broadband Radio Spectrum [CBRS] also referred to as 3.5 Ghz, OnGo Wireless. This unregulated, private, long term evolution (LTE) wireless spectrum is now available from several equipment makers. Client devices including iPhones and Samsung Galaxy now support this spectrum.
- Guest demands and other mandates are resulting in a new generation of client devices, internet of things (IoT) applications and health, safety and staff alert systems. These are designed to communicate across a variety of wireless spectrums, including lower power wide area network (LPWAN), long range wide area network (LoRaWan) and ZigBee.
- Wi-Fi-6 client devices are now available, optimized to run on Wi-Fi-6 networks. The network infrastructure must be properly designed from top to bottom. This requires consideration of the entire network, not just access points, to alleviate bottlenecks and support richer, denser content and applications.
- The change in presidential administrations is expected to result in changes to FCC net neutrality rules. With so many content providers creating more streaming services (among them Peacock, Apple+, Amazon Prime, Disney+, Paramount and HBO) in addition to Netflix, demand on bandwidåth will only increase. With carriers under more pressure, potential exists for new and yet unknown business models and more changes for hotel operators.
- Hoteliers must view all new technology with an eye toward personal identifying information, network security, privacy, data collection and storage, MAC randomization and a wealth of third party vendors. All these factors play a role in creating a highly-curated, well-intentioned guest experience. Standalone networks no longer exist. Hoteliers must put serious thought into designing and operating the converged infrastructure of three main constituents:
- Operations technology for the building and services
- Information technology for associates and accounting
- Guest technology voice, video, internet and other services to guests
It’s the Business Model!
When it comes to competing technologies, the best option isn’t always the most accepted or widely adopted. In the late 19th century, Westinghouse and General Electric had competing electrical distribution technologies: alternating current (AC) versus direct current (DC), respectively. Each had advantages and disadvantages. Westinghouse won out by creating the transmission network we depend on today and marketing electricity as a service. This business model of offering a service without capital purchase by consumers became the original utility concept we see everywhere.
In the late 1970s and early ‘80s, JVC’s VHS and Sony’s Betamax battled for the home video market. Betamax had higher resolution, clearer picture quality and better audio. Sony wanted to license its proprietary technology to other makers and content providers. JVC created an open, royalty-free standard for VHS with competitors, like Panasonic, Sharp and Hitachi.
While the manufacturers were fighting over the consumer marketplace, major movie studios were reluctant to release movies in either format. Then adult video producers latched onto the royalty free VHS model and it became the standard. That’s a valuable lesson on how open standards and partnering, even among competitors, accelerates adoption and expands the marketplace for everyone.
A product reaches adoption when the broader audience accepts its value proposition and business model. Over the years, the hotel industry has adopted such models as revenue sharing, pay-per-view, pay for use and premium revenue models, carrier sponsored models, capital purchase and vendor sponsored. The most common today is ownership capital purchases.
Why Networks?
It’s time to evaluate the purpose of networks, what they deliver and who they serve. Who benefits? One of the main reasons revenue sharing failed as a business model in hotels is the companies that owned the network couldn’t market the service or benefit from its use (beyond repayment). Those hotels that could benefit from marketing and use of the service didn’t own or control the product. This created opposing goals and outcomes for vendor and customer.
The convergence of traditional IT, building operations technology and multiple communications platforms serves multiple constituencies within the hotel. Hotel operations and management benefit from these efficiencies and services. Brands and marketing departments benefit from more data analytics, guest information and focus on security and privacy, benefit. These groups are pursuing long-term goals with a focus on establishing a predictable standard for and lasting relationship with guests. Their interests also align with those of the guests, who expect quality service and value curated experiences and communications.
Owners and developers share these common goals for a profitable hotel. At the same time, the owner’s ROI horizon likely differs from that of the brand and management company. Owners have competing priorities for capital investment. And in the wake of COVID-19, they have little capital available for investment. While they want and need to support the management company and brands, they don’t benefit directly from investment in these required technologies.
We’ll have more in the coming months on technologies and where they make sense in the industry. Just as important as evaluating a technology is checking out its business model, which is what will foster adoption.
While under the yellow flag, take time to think about who benefits, who can create scale, who can negotiate, and which new constituents you can include in conversations to define business models that will put these really good ideas to work.
