These days, new businesses are emerging everywhere, with business strategies based around connecting people with services through mobile applications. No big offices, no inventory, no staff. These types of companies — such as UBER, Airbnb etc — have accrued the kind of shareholder gains that often would take generations to build, in just a few short years.
A major thing happened in the last few months — and it will be a game changer: Criteo's latest mobile commerce report claims that a tipping point has been reached, with apps accounting for more travel related purchases than the mobile web.
For the quarter running from October to December, Criteo found that — for travel purchases made from a mobile device — 58 % were via an app. This is the first time apps have outperformed the mobile web.
Hospitality & travel is one of the most amazing industries in the world. There is passion, creativity and heart that few can match. But there are also few industries that face such great challenges because of the advent of new technology and fresh competition. How many would have predicted that Priceline — when it launched in the late 1990's during the dot-com bubble — would have a larger market cap than Marriott, Hyatt, Starwood, IHG and Accor combined (64 billion USD as of today). And who would have thought that a simple app named Airbnb would grow to become the biggest and most valuable hospitality brand in the world (worth 25,5 billion USD).
There is not a single hotelier that has not felt the effect of this new world order. The industry has moved to light balance sheets, creating a complex relationship between property owners, brands and other stakeholders. Questions are now being asked. Hotels pay a certain percentage of revenue to the brands, while still expected to attract guests independently of them. And they pay 15-25 % to the OTAs. This means that up to 30 % of operating income is lost before revenue can start coming in. It’s a scenario that has made many owners question the setup. Brands certainly do provide value, but at the end of the day the most efficient marketing tool and the most efficient channel for reaching the guests, is the mobile phone. We know it, and so do they.
As a matter of fact, last year the ten top hotel groups in the world spent a combined 1.5 billion USD on digital & mobile. However the result has been very disappointing, to say the least. Only a mere 3 % of hotel guests have downloaded any of their apps. And according to an official report published by AppAnnie, the actual usage number is closer to 1 %. To translate this into real numbers, it means that for each of the 40,789 hotels of the top ten hotel groups, the net spend was 36 774 €. Considering an engagement of 3 %, it means a cost of 12 258 € per 1 % penetration. If blowing those numbers up in order to reach all of the guest, the cost would be a staggering 1.2 million € per property per year. Of course this is not a scalable model, but there is a solution.
The goal of almost every application — and indeed of hotels and most businesses in general — is to engage with the customer. And mobile apps are one of the best channels to engage with guest before, during and after their stay. Within such a channel lies the possibility to create loyalty and recurring business. Push notifications and other means of interaction with the guest provide the ideal means of communication in a discreet but effective fashion. And integration with social media means that you can spread your name more efficiently than any marketing campaign. Because who are you greatest ambassadors? Guests sharing your content with friends and family on social media is the greatest marketing money can’t buy. But why hasn’t it taken off?
The ”top down” model that has been launched across the hospitality industry has essentially been a ”one size fits all” approach. One group app with sometimes thousands of hotels under the same umbrella. But this approach has simply not created any substantial engagement. The numbers prove it. The experience from a users’ perspective is too sterile and impersonal. Integrated booking engine, PMS & POS connection, NFC door keys and so on only mean so much if your guest is actually using the application.
Another big trend has been to put a tablet device in every room, letting the guest control room features such as lights, curtains, TV and room service. But it never took off. Most guests simply did not use them. On average a guest spent 7 minutes on the device per stay. Just learning a new interface — which normally takes more than 7 minutes — was just one of the factors that the in-room device solutions sometimes even became counter-productive. Add to this that users almost always prefer to use their own device — with which all of their favorite services are connected, such Netflix, Spotify, Facebook, Twitter and many more.
The clear emerging trend is BYOD (Bring Your Own Device). Virtually every guest has a mobile device of their own, and many times carry multiple devices with them. It brings none of the downsides of in-room devices. No outdated models to replace, no need to handle damaged devices, no need to perform software updates, no need to create and maintain sandboxed user environments. A large part of the cost and headache is eliminated, and the guest remains perfectly happy.
Go Find It has since the start been working with a ”bottom up” approach. We have proven over the last couple of years that we are able to deliver the engagement that the hotels want. Whereas the hotel group apps have reached around 3 % with the ”top down” approach, Go Find It has delivered up to 82 % guest engagement with the ”bottom up” philosophy. In real numbers this means that out of all the guest have passed through a property, we have created engagement with over two thirds of all of them.
What the above means is that if any of the top 10 hotel groups in the world would implemented this strategy, they would potentially create a marketplace of users larger than Airbnb (today 60M registered users, 20M active). For a group like Accor, as an example with 135M guests yearly, an 80 % guest penetration would mean 108 million users on one single mobile platform. Or Hyatt Hotels with 30M guests, even they would would reach 24M. The value of such a marketplace is easy to imagine…
One of the motivations behind the ”top down” approach has been the integration of loyalty programs. But the evidence suggests that the ”bottom up” model is much more effective when it comes to creating loyalty. After all, deep engagement and close communication is fundamental in creating loyalty in any kind of relationship. That’s why we believe that our approach will not only benefit the individual properties, but in the end also the brand on a global level. By harnessing the more intimate engagement that can be created on a local level you’ll be able to market the brand itself more effectively.
A mobile strategy for a hotel brand can no longer just be an application that caters to the group level. It is paramount that hotel groups and brands offer a more complete and engaging mobile platform to each property.
It is inevitable; the power of mobile is already here. It is not just a fad. Mobile is the key to capturing a unique opportunity that will most likely reshape the whole hospitality industry. It will be a key revenue driver for each property, and an opportunity for brands and hotel groups to get back what they have previously lost.
Go Find It has delivered mobile solutions for over 100 luxury hotel brands across 26 countries
The engagement rate is the single most important number when it comes to measuring success in digital strategies. Industry standard rates measure approximately 3% while Go Find It delivers a revolutionary 50-70%
Sign up for our newsletter