2. The hospitality sector and the challenges related to technology
2.1. The different actors
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2. The hospitality sector and the challenges related to technology
2.1. The different actors
2.1.1. The hospitality groupsThe ranking in the number of hotel rooms lead by MKG in 2015, a leading consulting group in the hospitality sector, show that hospitality industry is led by four nationalities that are:
-the US with five hospitality groups in the top 10 -China with three hospitality groups in the top 10
-France and the UK counting each one hospitality groups
Figure 5: Top 10 ranking of hospitality actors worldwide Source: Les Echos Start
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Most of these leading hospitality groups position on the three markets: economic, mid-scale, upscale
& luxe with numerous brands and have a clear-cut positioning on each of them. This wide positioning enables hospitality groups to offer a big range of hotels and services in order to widen their potential clients on all the segments and to increase their global market shares.
For example, AccorHotels counts 27 brands in total and among them Sofitel and Pullman belong to the luxurious and upscale segment. But on this segment the positioning of these two brands is clearly different: Sofitel offers a very classic experience and wants to reflects the French “art de vivre” with very local touches whereas Pullman hotels are very standardized all over the world and want to seduce modern business travelers with very high tech amenities.
An important trend to notice in the hospitality sector is the increase of mergers & acquisitions. This increasing number of acquisitions is explained by the need for hospitality groups not only to be competitive with traditional players, like their peers, but also with the new alternative lodging possibilities such as Airbnb and reservation channels such as Booking.com enabled mainly by the digital services. By merging and acquiring other companies, traditional hospitality groups gain a stronger bargaining and negotiating power but also a stronger influence towards customers.
The biggest M&A in the hospitality industry happened in March 2016 when Marriott acquired Starwood for $12 billion. Marriott and Starwood have thus become by far the first hospitality group in the world in number of rooms.
Mergers & Acquisitions are now the key to develop and enter the Top 10 ranking. For instance, Jin Jiang acquired Le Louvre Hotel in 2015, which has made it enter the Top 10 ranking according to the MKG Hospitality ranking.
2.1.2. Event agencies
Two kinds of event agencies exist: meetings and events (M&E) organizers and venue finders.
The first one organizes the whole event upon demand on the final customer and provides some added value to the event through special services. Most of these complementary services participate to the value differentiation of the event agency with a very clear trend for digital.
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organize then the event by themselves or through the services of event organizers.Event agencies mainly targets professionals willing to organize meetings, incentives, conventions or events (MICE).
The MICE activity reached a global revenue of $8.2 bn in 2015 with a stable growth versus 2014.
Because of an instable economic situation worldwide, 56.3% of the companies are trying to control the expenses on event organizations. In order to decrease the costs companies have shorten the length and the frequency of the events, they organize it in a closer venue and lead stronger negotiations with event organizers.
The trends for 2016 are more optimistic as an American Express M&E survey forecasted that the budget by participant would increase by 3.3% in 2016 whereas it decreased by 3.8% in 2015. The MICE activity is expected to reinforce in 2016 with a growth focused on Europe with an increase in number of events and expenses for the first time since 2010.
Even if technology had a growing importance in the MICE sector, remote and virtual meetings will not replace traditional ones as only 25% of companies use them today especially to reduce the costs.
The leading actor in the MICE industry are:
-GL Events
-American Express Meetings & Events -Helmsbriscoe
-MCI
2.1.3. Travel agencies
Travel agencies are intermediaries between hospitality groups (or more rarely big independent hotels) and final customers on the leisure segment. They create packaged tour with hotels, air-tickets, on-site activities and target individuals or group traveling for leisure and seeking for organized holidays.
The major players are Expedia Inc. with $50.4 billion in annual travel sales in 2015, Priceline ($50.3 billion), American Express Global Business Travel ($30 billion), Carlson Wagonlit Travel ($24.2 billion) and BCD Travel ($23.8 billion).
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The travel agencies market is growing with more than 60% of travel agents who reported an increase in sales in 2015 vs 2014. This growth is mainly carried by the digitalization of the services, with travel agents using social media to interact with customers.
Some of those actors have decided to go 100% online, to become “pure players”, and are called online travel agencies OTA.
2.1.4. The new digital actors: Online travel agencies (OTA)
An online travel agency is a pure player distributor that enables hotels and hospitality groups to sell rooms through their platforms in exchange of commission mainly between 15 and 25% of the hotel room price.
The two largest Online Travel Agencies (OTA) are Expedia Group with the famous Booking.com platform, Hotels.com and Priceline.
In 2016, digital travel sales reached $180.6 billion in the United States and is forecasted to reach more than $213 billion in the US by 2020, which would represent a 17% growth in revenue.
According to the HOTREC (an association gathering 43 associations and syndicated in 26 European countries) Online Travel Agencies represented 43% of the hospitality market in 2016 and will represent more than 48% in 2018.
The online comparative platforms play an increasing role in the hospitality industry as they empower the customer with comparative tools that help him finding the best fare. This new ability of comparing the available offer on the market on the price criteria makes the customer more and more sensible to price. The most famous comparative platforms are Kayak.com, Liligo.com, Hotels.com and the leading one is Trivago.
Trivago is the leading global hotel search platform and its mission is to “be the traveler’s first and independent source of information for finding the ideal hotel at the lowest rate”. It counts 55 localized websites and apps across 33 countries. The strength of this platform is the various sources from which it combines the hotel content: more than 250 booking sites and its ability to display the findings on the search criteria of users, mostly related to price. This trend is mainly developed in Europe and America as it counts for about 86% of the revenue of Trivago (Market Realist source).
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The user can not book directly on the comparative platform and is redirected on the OTA’s website (Priceline, Expecia, Ctrip.com…).