Ever felt tempted by one of those $25 set menus in fancy restaurants? The price is great for the quality, and the menu seems perfect except you have a nut allergy.
Ordering these dishes à la carte will, very likely, cost you twice or three times the money, so you settle for the menu but throw away the honey nut cake. Sound familiar? Well, you’re not alone.
This is, pretty much, how hotel rooms are sold today: They are created arbitrarily by hoteliers, rather than shaped by each traveler’s unique needs. Hospitality is one of the most innovative industries around, with disruptive companies such as Google and Airbnb redefining the rules of the market every day.
Yet, the industry's attitude towards room distribution has barely changed over the years.
Zooming in, the current guest journey is, essentially, made of three moments:
- Travelers pick a location and select booking dates
- They apply filters (such as room type, non-refundable rates or breakfast included) based on their particular preferences on online travel agencies or metasearch engines
- Finally, they book the hotel that best fits these needs
The problem with this model is that it leaves little control with end users, especially at the top of their journeys.
Booking a hotel online is a passive, top-down process. But is there another option?
Attribute-based selling in hospitality
Marriott's best-kept secret may be its new Enhanced Reservation System. The group’s CEO, Arne Sorenson, revealed a few clues about a system during its earnings call for the fourth quarter of 2018, saying guests would be able to select rooms based on room characteristics.
This pretty vague comment refers to what is known in the industry as the attribute-selling model (ABS). Thanks to this model, travelers won’t be limited by arbitrary choice taken by hotel owners, general managers or revenue managers, but they will be able to create their experience by choosing between hundreds of different attributes.
ABS is a bubble-up process: The more attributes travelers add (such as “room amenity type,” “rate plan type” and “meal plan type”), the narrower the results. The system will, finally, scan the entire hotel database, returning with only the best results, fixing the “filter bubble” problem we’re experiencing more and more in the industry.
Up until now, ABS systems in hospitality have been surfaced only sporadically, as in the powered-by-Amadeus InterContinental Hotels Group reservation system, but, thanks to the contributions of associations such as OpenTravel Alliance and HEDNA, it will likely not be too long before mainstream adoption.
One of the people interviewed for this article (who preferred to stay anonymous) told me that “this is going to be at least a five- to 10-year journey, but we will eventually get there.”
Even though the InterContinental system is limited so far, it opened the way for the distribution to come: It is rumored that DerbySoft may be working closely with IHG, and IDeaS is creating the first CS2.0 Revenue Management System.
Of course, we are at the very beginning of the technology adoption lifecycle, with a minority of innovators and early adopters and a majority of skeptical laggards, but the process has started and, according to a recent article by Shiji Group, “the hospitality industry shift seems inevitable.”
Feeding the travel assistants
ABS, moreover, is the ideal environment in which artificial intelligence can flourish. In order to have some real effect on the guest journey, in fact, AI needs to have access to way more attributes than the room type/rate plan we are feeding assistants with today.
With the current filter model, data is, at best, scarce. Peter Norvig, Google's research cirector, once stated that Google does not “have better algorithms”; rather, it just has “more data," and this should be the approach to follow.
With virtually unlimited attributes available, an ABS-model-based industry could (finally) properly feed predictive models, instead of relying on low-quality, superficial and arbitrary data.
Will ABS put direct selling back in the game?
ABS models could make the core notion of room type completely obsolete, and it will be interesting to see how OTAs will react to a mainstream introduction of attribute-based systems. If the model becomes the standard in our industry, they will have to adapt.
But during this transition period, hotels will have a distinct product advantage, as they will be able to offer build-your-own-room shopping experiences, whilst third-party distributors will have to stick (even though momentarily) with the old filter-based model.
Do we really want to book attributes rather than rooms?
On the other hand, customer adoption might not go hand in hand with technology. Are we sure guests are ready for this interactive, proactive, tailor-made experience?
Personalization is an overused term in our industry, a buzzword, and it is not uncommon for companies to gather toward everything glittering when it comes to UX. We may have the technology to make attribute-based systems scalable, but would travelers actually like this kind of freedom during the booking process?
ABS adoption is going to be, unavoidably, a multiyear process, and not only because of the technological implications, but because of the behavioral ones as well.
Conclusion: Rethinking distribution
IDeaS chief evangelist Klaus Kohlmayr says:
"In the future, we will see the unbundling of the room product into attributes and experiences, and the increased integration of customer data to create more relevant and personalized offers, in real time."
He has a point: The central problem with the current booking system is that the final price is almost never the scientific sum of each room attribute’s intrinsic value but, at best, a guess, an approximation, biased by volatile metrics such as overall occupation rate, comp set and pickup speed.
Moreover, results solely based on RT/RP give hotels little to no understanding of what their guests really want. A new, predictive, AI-based revenue management approach will rise, considering no longer the usual, limited variables (availability, pickup, comp set, seasonality, events, etc.) but assigning a value and price to each attribute.
As HospitalityPulse Inc founder and CEO Pierre Boettner said in a video on the topic:
"Guests don't think in terms of categories but in terms of room features. (They) come to the hotel with an expectation of something they booked.”
And this is where ABS comes in handy, as it not only charms guests with "promises and expectations” but it delivers the Real Thing.
So, remember the set menu paradox? Thanks to ABS, not only will we not have to stick with the set menu, but also the chef will know about our nut allergy before we even sit down at the table.