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FEMBA14 Travel

Analysis of Lodging Industry
by

Matthew Kaufman

on 9 May 2014

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Transcript of FEMBA14 Travel

Products and services segmentation

Financial of the lodging industry
Bed/Breakfast and Hostels
Cost structure

Current revenue and outlook

Hotel / Motel Industry
Boutique Hotel Industry
Takeaways from the financial of the Lodging industry
Trends:
The lodging industry is expected to grow 1.3% to 6.5% annually among the three different segments
Boutique hotels is expected to have the highest growth in revenue of 6.5%, while the bed/breakfast and hostel is expected to have the lowest growth in revenue of 1.3%.
Profitability is expected to increase from 7% to 17%
Take-Aways
Hotel/Motel Industry
: Domestic and international travel will recover, boosting demand for hotels
Bed/Breakfast & Hostels
: Number of travelers and full-time operators are expected to increase
Boutique Hotels
: Boutique Hotels will continue to recover, as consumers travel more frequently

Strengths
Threats
Opportunities
Cost structure

Current revenue and outlook

Cost structure

Current revenue and outlook

Weaknesses
Large International and Domestic Hotel Corporations
Marriot, Hilton, and IHG
Other Incumbents include:
Slow revenue growth at 2-3%

Highly sensitive to political and macroeconomic factors
Consumer spending and travel in emerging economies expected to rise
Domestic trips expected to increase in the US

Increasingly mobile and connected world allows for direct marketing and instant feedback from consumers
Volatility of consumer confidence which drives travel spending
Disruptive and incumbent encroaching sharing economy business model (Ex: Airbnb)
INCUMBENTS
Five Force Analysis
BED & BREAKFAST
HOSTELS
CRUISES
RENTAL PROPERTIES
SWOT
WHAT IS IT?

Virtual communities for creating, sharing and exchanging information
Based on user-generated content
How is it being used?

Sharing personal experiences and reviews
New avenue for cheap advertising with more focused reach
Growing number of online bookings generated from Social Media
Growing trust in online recommendations

WHAT ARE THE CHALLENGES?
Staying in the know
Being consistent
A clear and measurable strategy
Know how to “manage” social media
Demonstrating ROI
Integrating social media into business processes
Buyer Power (Moderate)
HOW WILL IT CHANGE IN THE FUTURE?
Adjusting and learning how to harnessing the power of social media and user-generated content
Creating content to keep the growing social media audience engaged and wanting to come back for more.
Showcasing what kind of experience the lodging company can offer

Increases
Negligible switching costs
High sensitivity to price
Services are not necessary to most customers
New online options Airbnb and Craigslist
Reduces
Lots of customers
Impact of losing one customer is non-significant
Loyalty schemes
Limited options in certain locales
Supplier Power (Moderate)
Increases
Quality of human capital matters, so suppliers may be selective
IT infrastructure is essential to business operations
Switching real estate properties is costly
Reduces
Advances in technologies have reduced the amount of required human interaction
Providers can operate their own real estate businesses
Large lack of synergies across lodging providers
Threat of New Entrants (Moderate)
Increases
Low customer switching costs
Globalization through emerging markets (Russia, India, China, etc.) extends the level of opportunities
Access to a wide selection of suppliers
Positive growth in travel industry
Reduces
Low fixed costs for incumbents
ISO accreditation and stringent regulations (food safety, IT security, etc.)
Difficulties with purchasing, leasing, and managing real estate
Threat of Substitutes (Moderate)
WHAT DOES THIS ALL MEAN TO THE LODGING INDUSTRY??
Increases
Cost to switch may be low (camping or staying with family or friends)
Some customers may prefer a different lodging experience
Reduces
Switching costs could be high (recreational vehicles)
Maintaining a high level of service is expensive
Luxury customers prefer certain amenities
MORE USE
OF SOCIAL MEDIA
Degree of Rivalry (High)
Increases
Switching costs are low to vacation travelers
Large number of competitors and substitutes
Reduces
Large incumbents have strong brands
Industry is segmented with lodging options that provide varied customer value propositions

92% of consumers trust earned media, such as word of mouth and recommendations from friends and family, above all other forms of advertising
70% of consumers say online reviews are the second most trusted form of advertising
Trip advisor, yelp, Facebook and other social media applications are becoming bigger players in delivering information to users that they can trust
Trustworthiness of social media reviews is increasing year over year.



SOCIAL MEDIA REVIEWS MATTER!

Social media is helping users decide on where to visit and where to stay.
32% of US travelers and 22% of non-US travelers share their experiences on social media
52% use social media as a way to book their vacation/hotels
55% “like” Facebook pages for their vacation;
76% post vacation pictures
46% post reviews on hotels after their vacation
74% of social media users increase use on vacation.
Increased visibility in social media help demand of the travel industry as a whole.

MAKING TRAVELING EASIER!
CHANGE IN MARKETING TECHNIQUES

Increased spending on social media advertising
Corporations develop twitter handles, youtube channels, and other social media applications to deliver information quickly and efficiently
Use of social media helps influence brand reputation, increase brand awareness, increase website traffic, improve search engine.



INSURGENTS
Big data offers significant benefits
Better decision support
New products and services
Better customer relationships
Cheaper, fast data processing
Optimize revenue management
Customize travel distribution
Transforming corporate travel
Enhancing internal operations
Boost financial performance
Big data used to:
Challenges in realizing the potential of big data
Creating an integrated data source
Working in a hybrid technological environment
Overcoming data skills shortage
Maintaining competitive advantage
Maximize the big data opportunity
Research big data
Be strategic about big data
Don’t just explore big data – look at the changes need to make to business and operational processes
Start assembling big data skills
Work with partners
Mobile devices are increasingly being used to access information, services, and booking while on-the-go.

The Mobile Trend
By 2015, over 25% of US online travel sales will be booked via a mobile device, representing $40b in revenue.
Lodging infrastructure will be...
...built with mobile as center.
Payment Method
Acceptance of payments for booking, stays and ancillary charges using mobile digital currency and wallet services.
Amenities
Lodging Tools
Concierge and Room Services
Better relationships with guests
Brands will know more about guests allowing them provide a higher level of service, leading to increased brand loyalty
Mobile Check-in and out and room choosing.
Room Key and amenity entry access via mobile device.
Mobile room service and hospitality service ordering.
Direct interaction with lodging staff via mobile device.
Direct and personalized mobile marketing to current and potential guests.
In-Room Entertainment
: Mobile devices replace set top boxes and pay-per-view television and gaming ordering.

Environment Control
: Personalization and control of thermostats, lighting, temperature, etc. via mobile device. Includes storage of settings that are activated across lodging chains via mobile device ID.
Enhanced revenue management
Properties will better maximize cross-sales of complementary services
Lower Costs
Hotels will be able to lower customer service costs while improving customer experience
Perrie Jones
Matthew Kaufman
Kevin Kim
Scott Morita
Globalization
EDGE
Spring 2014
What is globalization?
A tendency of businesses to target and attract international customers
Results in international trade and cultural exchange
What are the benefits of globalization?
Improved accessibility to foreign markets
Strengthened global economy
Standardized technology platforms across the globe
Opportunities for new entrants in the hotel industry
What are the challenges with globalization?
Smaller scale insurgents are purchased by larger incumbents
Cross-cultural and language barriers
Over-development of hotels in regions that do not have appropriate resources
Growth is directly influenced by government and trade organizations
How globalization will change the future of hotels?
Travelers in emerging nations will continue to grow
Increase in international middle-class is positive for hotel revenues
Hotels will continue to expand locations in emerging nations
Significant oppportunity for language translation technology
Adjusting and learning how to harness the power of social media and user-generated content​

Creating content to keep the growing social media audience engaged and wanting to come back for more

Showcasing what kind of experience the lodging company can offer
How will it change the industry in the future?​
Emerging nations will provide opportunities for lodging expansion and a growing middle class will increase demand...
Hotels will need to adjust their amenities and services to support the international traveler...
Community of international travelers will expand and become ever more collaborative with increased reviews and ratings....
Globalization will change the hotel industry...
Capitalizing on the sharing economy by allowing residential owners to rent their properties for income. (Ex: HomeAway, Airbnb, etc.)
Allowing mobile users to book hotel deals on-the-go and at the last minute. (Ex: Hotel Tonight)
Full transcript