Category: Revenue Management

‘I was there’ will sustain

Main Photo: A ‘socially distanced’ Sylvan Lake (courtesy @papercandie – https://twitter.com/papercandie)

COVID-19 has been a humbling experience for tourism and hospitality owners around the world. Every design, financial and strategic consideration in the airline, hotel, sports, travel agency and restaurant industry (amongst many others) relies on the increasing wanderlust of people seeking to be the first to experience a life-changing moment in person. The post-2009 tourism boom has finally ended – and it took a pandemic to do it.

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RevPAR was slipping but COVID-19 killed things off for good

The (someday) post-Covid world will leave a lengthy shadow of fear. Many will point to these last five months as the time period that shifted mindsets from ‘I was there’ to ‘I saw it online and that’s enough for me thanks’.

I disagree. If anything, softness in the market has been developing for years.

While tourism has grown around the world, boosted by the low cost of air travel, the content marketing and digital media industries have already consumed a significant amount of investment and consumer dollars. The content marketing business will reach $107 billion dollars in 2026, built largely from people that consume entertainment electronically from home and attendance at sporting events have decreased – and continue to decrease – significantly. Tastes are beginning to change, sports (and the value of sports teams) have become increasingly expensive for the average fan (driven largely by the ego-induced bubble of the value of sports teams). The vast majority of teams, musicians, and plays are nearly completely reliant on ticket sales, especially where television revenues have struggled to keep up.

So: Is ‘I was there’ culture gone for good?

Doubt it. There are three reasons that makes me bullish:

Social distancing exhaustion is illustrative

People clearly are not interested in staying indoors – and risking health to get outside

As frustrating and alarming as the photos of people abandoning social distancing to crowd a beach or a hiking path, it’s illustrative of how the inability to achieve ‘I was there’ has reminded people of its importance. Most people, simply put, need to be around other people. An in person shared experience still activates the senses in a manner that we can’t seem to simulate without human contact. Zoom fatigue is killing us and building trust between workplaces or within a business is a constant struggle. We can maintain existing relationships digitally but promotion, trust and sales are still extremely reliant on person-to-person communication.

Near-total reliance on tourism is widespread around the world – and increasing

Thousands of businesses, teams and nations are too heavily reliant on tourism to allow it to fail. Though many airlines have consolidated or closed completely during the pandemic those that remain will see benefit in their ability to capitalize on pent up travel demand around the world. Hotels – with significantly stricter and more reliable cleaning programs than short-term vacation rentals – will benefit from increased consumer trust. Sports teams will continue to work tirelessly to integrate the digital experience into the in-person one. Entertainers don’t have much of a choice; there’s little revenue in streaming music sales, concerts remain the most profitable way to earn money. All these stakeholders will be incredibly aggressive in dragging consumers back and it is working. Even cruise ships have convinced people to get onboard (with predictable consequences) – if anything that should be evidence enough.

Content marketing unsurprisingly needs unique content

Online content marketing requires content – and even this generates clicks

Most importantly, however, in my mind? The most digital of businesses – online content marketing – is reliant on new content and the differentiation necessary to ‘stand out’. As the space gets busier this will require a larger investment in travel, clothing and camera work to be noticed. Flaunting wealth, even in the strangest ways, will still be used to create the envy, fame and popularity that brings the sponsorships and payments to ‘influence’ that makes those stars money. Outside of talent, of course, tourism, travel, and entertainment are still the simplest method for experiential content development.

The tourism industry’s focus needs to be melding the digital and in-person experiences to create reliance on both. I imagine restaurants interactive VR guests that you can interact with at your tables or virtual cocktail creation with the ability to precisely refine ingredients to your whims. Our business will change in creative ways that we have to embrace.

People will still value ‘being there’. If we are to survive, however, we need to embrace technology and ‘level up’ our investment in interactive experiences.

The next wave in hospitality

Investment in the hospitality business is booming. We continue to see constant transaction activity across the United States. The industry has chosen its darlings – the select service upscale brand collection – and they continue to form most of the pipeline of new rooms on market.

These years have been exciting. Good for business. But as the same hotels transact over-and-over-and-over again, the ceiling is inevitable. The next evolution of hospitality is overdue. The market is wondering ‘what’s next?’

The past 10 years’ economic cycle has risen tides for thousands across the country, and social media has (depressingly) created FOMO in all generations. It’s not just snowflake-entitled-lazy-avocado toasters seeking adventure on mom-and-dad’s money, it’s mom-and-dad spending their own savings with a hope to experience the world they provided their children before they die. The wealth gap is increasing yet all Americans – liberals and conservatives alike – are seeking the exact same thing.

The entire hospitality business – I count Airbnb in this as well – hasn’t been ready for the individualized emotional experience our guests expect at all points on their next journey. Hotel brands have responded by adding sub-brands and piles of select-service rooms, most of which loosely following the same hyper-current aesthetic, to try and prescribe these emotions for middle-class patrons. Different brands but still the same, homogenous look, feel and experience at all of them. Not the goal.

Airbnb has pushed to grow revenues too as the ceiling beckons, featuring ‘curating’ units to increase commissions on room sales while trying to convince customers that they are still focused on experience. It hasn’t worked. Room tax issues, expensive units, and the lack of security has hurt but, most importantly, the host-individual interaction that created the feeling of a personally guided ‘visiting the place the locals do’ trip Airbnb built their business on has been lost. Your Airbnb host is rarely an individual with a vacant house, but rather a professional with many guests to look after. Another upscale select-service hotel brand, basically. The magic that made Airbnb special is fading.

Both have missed the target. The affordability and appeal for an exploding demographic is missing.

The opportunity, to me? Economy and lower-midscale brands for the modern traveler.

The economy pipeline, outside of the Motel 6 monster, has been empty. Best Western ceded their territory by kicking economy properties to the curb. Super 8 (Wyndham) and Quality Inns (Choice) are dominant in their franchises but belittled by modern travelers as ‘not for them’. The task, if we choose to take it, is simple: create unique and affordable offerings.

Of all the fluff brands created in the past 10 years, IHG is the only one to commit to an economy/midscale brand. This is shocking to me. This segment can and will grow around the world. There’s demand for hostels for a reason. I can’t understand why the commitment has not been made. Millions of travelers seek affordable rooming and find nothing newer than 1980.

That’s the opportunity I see. First one of us to do it wins.

Exterior Corridor Hotels

Alim’s Unprompted, Unrequested and (potentially) Ill-considered Opinion on: Economy Brands (and why do people sh*t on them)

From time to time I want to use this platform to bitch, complain or otherwise moan. This is one of those times.

Writing the PIP primer – specifically the ‘your brand doesn’t hate you’ section (they don’t – read the post) – got me thinking about the obscure differentiators brands try to steal market share, which got me thinking about a brand that we know and sometimes love that culled a bunch of ‘mom and pop’ exterior corridor hotels in rural markets (and subsequently tried to bring them back without looking like they were trying to, failing, adding their brand to try and further entice hotels – as they should have done in the first place – back and still failing as far as any of us can tell).

People like to sh*t on economy brands. That brand did it. We’ve all done it. We all looked at Choice (confirm) buying Knights’ Inn and thinking a) we didn’t know that was still a thing, b) what pathway to growing that brand could there possibly be, and c) for real – they got real money for that? (with all due apologies to Knights’ Inn franchisees that might be reading this; I assume the 4-6 of you know you still exist).

But why?

Economy hotels are not sexy. Hotels with ‘managers’ quarters’ are (generally) not sexy (apologies to those that live on property). I get that. Yet those friends of ours (that friend of yours that is always complaining about how much work he/she does on property but you know is hungover every morning and starts work at 2 PM) continue to make the money that we turn down.

I think of brand-who-must-not-be-named Harley Davidson partnership here, for example. They took a hard look at the core customer – blue-collar, older demographic, transient road-tripping business – and the hotels they had at that time – highway hotels, exterior corridor, drive to your door rooms – and found the perfect partner for it. And then – inexplicably – gave those customers and properties up to Choice (Quality Inn), Wyndham (Super 8) and Motel 6.

We’re all missing something.

I understand that people don’t necessary want to live in the middle of New Mexico desert anymore (my apologies to New Mexicans – other vast empty spaces with giant grasshoppers and empty highway towns are also available). I know financing is hard to get. I know the customers are extremely hard on rooms. Totally get it.

However – when we measure customer loyalty we can’t ignore the typical extended-stay customer. I would argue that they are the most loyal. People get used to a particular place. For better or worse, those properties have a following all their own. Why say no?

SO – to all of you that are making money on your economy properties: kudos to you. To those of us that are not – it might be worth a second look. And to those of you that own Knights’ Inns – good luck to you hardy few. The grass is (hopefully) greener on the other side (if, indeed, you haven’t all become Rodeways, Travelodges or Quality Inns yet).

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