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Amazon made news this week when it announced the debut of Alexa for Hospitality, a business unit entirely devoted to the placement and usage of Amazon’s Echo smart speaker devices in hospitality settings that range from hotels to vacation rentals, and everything in between.
The launch of Alexa for Hospitality was a clear signal from Amazon to the hotel business — and the travel industry at large — of the company’s strategies for getting more deeply invested in the travel space. Today, at least for Amazon, it’s via smart devices. Tomorrow, it might involve voice search, or perhaps, the debut of Amazon’s own online travel agency platform?
Prior to Amazon’s announcement on Tuesday, Skift spoke with various hotel executives at the NYU International Hospitality Industry Investment conference in early June to ask them for their thoughts on tech giants such as Amazon and Google, and what they said might surprise you.
While some of these executives welcomed these players, others expressed hesitation, or doubts about working with them. All, however, noted that they’re keeping a close watch on what companies like Amazon and Google are doing.
The Importance of Voice Search
When Choice Hotels debuted its new central reservations system for its franchisees earlier this year, the company designed it to specifically accommodate voice search, and it built it “native to the Amazon Cloud,” Choice Hotels CEO Pat Pacious said.
“The relationship with Amazon, I think, is going to be a real positive one,” Pacious said. “Because they’re not just our cloud provider; they’re also considering us to be what they call a ‘lighthouse’ customer. There are really only two other travel businesses, Expedia and Airbnb, that are sitting on the Amazon Cloud. So, we’ve already started working with them around some of the things we might do with them on the consumer front.”
Pacious had noted, as far back as August, that Choice has been testing the usage of booking a hotel room via Amazon’s Alexa artificial intelligence system and in June he confirmed, “Our team has kind of figured out how to book a hotel room with Alexa.” Now, the company is navigating how to bring that to market.
Voice search, in Pacious’ view, will be yet another important distribution channel for hotels and that’s why Choice made sure its new central reservations platform could accommodate it. Now, however, he wonders: “How do [consumers] find our inventory through that mechanism? That has yet to be determined.”
When asked how hotels might ensure that Alexa knows to suggest their hotels over others, Pacious speculated that loyalty and personalization will play a part.
“I think probably the way it’ll happen is first through the loyalty program,” Pacious said. “Perhaps you constantly come to the Cambria in Times Square, so you’re just coming back for your two-night stay every couple of weeks. And you’ll just tell Alexa, ‘Hey, book me this type of room at the Cambria in Times Square.'”
While hotel companies and Amazon haven’t quite gotten to that point just yet in terms of personalizing voice search for bookings, Pacious said he’s looking at what other companies are doing similarly to make transactions more seamless.
“Think about Domino’s Pizza today,” he said. “They have your profile, you can send them the pizza emoji, and your specific pizza comes to you. I think that’s where it will start, but longer term as the technology, particularly the artificial intelligence gets better, it’ll get to know you better and it’ll get to know what the product choices are that matter to you.”
He added, “But it has to start with the consumer saying, ‘You know what, I’m not interested in a luxury hotel. I’m interested in a midscale hotel like Quality Inn and this is what I’m looking for in this market.'”
Choice, for one, is paying close attention to its ability to personalize its guests’ experiences. As consumers increasingly use the Choice Hotels mobile app to book rooms, or even order food via Delivery.com, the company is going to collect data that machine learning can interpret to offer more personalization.
“Personalization is something the industry has been talking about for years, but unable to execute,” Pacious said.” A lot of it is the fact that the back engine, or back-office data analytics engine just isn’t there. But if you can master that, which we feel we’re going to do with this data analytics platform, it’s really going to allow us differentiate ourselves in the consumer mind.”
And as for how much more active Amazon becomes in the travel business, Pacious said he’s keeping an eye on them, but not quite sure yet what actions Amazon might take.
“You know, [Amazon] has sort of been in and then out and then in and then out [of the travel business],” Pacious said, referring to the now defunct Amazon Destinations. “I don’t know. It’s hard for me to put myself in their shoes. The part of Amazon we’re working with is the Amazon web services business. It’s different from the consumer Amazon Prime side of the house. But we look at them as a world-class technology platform. Will their other businesses get into the travel space? I don’t know.”
The Distribution Landscape Is Evolving
Like Pacious, Red Lion Hotels Corporation CEO Greg Mount thinks that the next big story in hospitality will relate to “how hotel rooms are going to be sold” and that the “disrupters are about to get disrupted.”
“I think you’re seeing the OTAs [online travel agencies] starting to look at their business models, and the Googles and others are starting to look at how they deploy theirs,” Mount said. “I think the distribution strategies are changing and evolving every day. You don’t have to be Marriott to get good shelf space on the Internet to sell a hotel room. I think that’s changing the landscape, and changing the impact that brands have.”
What’s also changing, Mount said, is the relationship that consumers have with brands, and hotel brands have to account for the loyalty their guests already have with companies like Amazon and Google.
“We’ve been hearing and seeing 60 plus percent of folks that participate in these larger loyalty programs are not there for the points anymore,” Mount said. “When you couple into that Amazon and Google and others that are going to enter this space with a lot of force and a lot of data, they’re going to have a meaningful impact on that. I think to be successful in distribution, you’re going to have to understand the interplay between all of these things, and how they will work together or work against you.”
As for what Amazon and Google have in store for travel, Mount said he thinks they will take similar approaches.
“Google, over the last 10 years, has given everyone a free Gmail account,” he explained. “When you sign up for that Gmail account, you’re basically signing away that they can aggregate all of the data on you based on your activity on that Gmail account. Which means now, when you go over to the Google Assistant and say, ‘Hey Google, I want a room at XYZ city around this rate in this location,’ it’s not going to come back like the OTAs and TripAdvisor and give you 100 different hotels. It’s going to give you two or three based on its preferences that it knows about you. If you’re not one of those two or three recommendations, you’re in real trouble.”
Brands that don’t understand the importance of being one of those two to three recommendations in voice search, whether via Google or Amazon, will have a “difficult” time in the future.
Trepidation About the Internet of Things
For now, at least, SH Group, the company behind the Baccarat and 1 Hotels brands from Starwood Capital Group, is looking to Google as a top channel for distribution, at least when it comes to search. However, SH Group president Arash Azarbarzin is wary of placing smart speaker technology in guest rooms.
“We are doing some tests,” Azarbarzin said. “It’s just that those things scare me a little bit sometimes. I mean, I just don’t know what they’re listening to, what they’re doing.”
He said that a pilot at his previous company, lifestyle hotel group SBE, found that 50 percent of guests would just unplug the devices entirely, whereas the other 50 percent “enjoyed it.”
Azarbarzin’s concerns about privacy with regard to these devices isn’t without merit. Recently, an Amazon Echo user in Portland, Oregon, found out that a personal conversation she and her husband had at home was recorded by her device and randomly sent to a person on her contacts list. There are very serious privacy issues related to these devices, especially for business travelers who want to keep any phone conversations or meetings they have confidential.
Like Hilton, however, he said that SH Group is more focused on allowing guests to control their room not necessarily via voice, but using an app on their smartphones.
Maintaining the Customer Relationship
Dream Hotel Group CEO Jay Stein said he’s been giving a lot of thought over the past year to the idea of “who owns the guest” in the face of increasing involvement from companies like Google and Amazon in the travel space, and that’s why his company has been investing so heavily in customer relationship management technology to “use information and data on our guests in smarter ways than we have in the past.”
“In the past, companies would say, ‘Make sure you visit our third-floor restaurant during your stay,’ or something like that, and I don’t think that’s really meaningful to too many people,” Stein explained. “But I think to be able to message to our guests things like, ‘We’ve got a certain number of tickets to this great art exhibition when you’re in town over these three days, so let us know if you’d like us to reserve these for you,’ especially if we know it’s a client who loves to go to art shows, that has so much more meaning.”
“And the competition, whether it’s Google or Facebook or the OTAs, they can’t do that,” Stein said. “They don’t know that guest that way, and they’re not staying in their hotels. They’re staying in my hotel, so I think these are things that we’re at the very beginning now, and challenging my team to look at more creative ways of doing that, understanding this information, and being able to use it with our new technology in ways to be more meaningful and hopefully own that guest and have them come direct to us.”
While Stein said he views Google and Amazon as “brilliant” at what they do, and that they will most certainly “think of smart ways of how to make money off our industry,” he still believes hotels have an upper hand and that the online travel agencies will have to adjust to a new distribution reality.
“The hotel industry has been around for thousands of years, but we need to be able to stay competitive,” Stein said. “And maybe by them [Google and Amazon] coming in and them figuring out a way to make money, we’ll eliminate some of the other ways that we’re paying now for business that we won’t need to pay.”
He added, “I think it may have some impact on the OTA business, and I think they’ve had a great long run, and I think their business may be changing and may become — I don’t want to say obsolete, because they’re brilliant in what they do and they have spent a ton of money. They’re not going to give it up so fast, but you’d be surprised how quick things change, and there may be an opportunity for other companies to make money and for our costs to go down.”
And that, Stein suggested, could lead to hotels partnering even more with the online travel agencies, and echoing Mount, the disrupters would wind up being disrupted.