2015 will be the year in which urban hotels will be able to start to recuperate the pricing levels lost over these last four or five years
The hotel sector is facing 2015 with optimism as it foresees that the recovery of the national market will allow business owners, especially those in the urban segment, to return to the price levels from before the crisis. But the year also comes with some threats that the business owner can turn into opportunities, like the famous P2P, the unstoppable trend of mobile bookings, or the emergence on the market of great players like Amazon. Javier Silvestre, general manager at Idiso, reveals some key points in this interview with Hosteltur.
Everything seems to indicate recovery, but what markets are noticing it the most?
It’s clear that the recovery process started during 2014, with a 3.3% increase of average occupancy in Spanish hotels. The record of foreign visitors has contributed as well and set the basis for growth for this year. Also, the most worrying hotel segment, the Spanish urban hotels mainly in cities like Madrid as well as other secondary cities, started to show clear signs of growth during the end of 2014 and January 2015 (an excellent month, with better results than the previous year which was already a good term, so this is a good sign) that will consolidate throughout the year. This will allow hoteliers to increase their prices, unfinished business for us.
Is 2015 going to be the year when prices can finally be raised?
I am sure it will as this has already happened in vacational hotels in destinations such as the Baleares, Las Canarias, or the Costa del Sol, as these worked really well during 2014 and were able to undertake a price rise. Vacational hotels will continue to work well, but 2015 will be the year in which urban hotels will be able to start to recuperate the pricing levels lost over these last four or five years, even in secondary cities, because when there is joy it is generalized, not just in one specific city. Even though each one in their proportion, which will help them all defend the price a lot better. In general the European markets, whether French, Italian or German have improved a lot, now the national market is the one that really needs to improve. So this rise in occupation is now being given a good push, which will allow for the rise in prices. I am very optimistic.
Continuing with your optimism, what options are at the disposal of hoteliers who want to compete with the raising offer of P2P?
P2P or collaborative economy is a reality that cannot be stopped, we must be aware of it. However much legislation is imposed short term, I think that as long as a person pays their taxes and is insured, they can do what they like with their own property. It will be impossible to stem the tide, just like when the Internet started. It is something that is there: we must assume that this is a new consumer with a specific behaviour and, as always, what the hotelier must do is analyse what higher proposal they can offer so that this new consumer chooses their establishment. This higher value proposal includes personalization, experiences and services. We must think about the client more than the product, defining the product according to the client’s needs, and then exceed expectations with a quality offer.
The hotelier cannot just compete with price, because at the end of the day the price is no more than the client’s met expectations. We must know how to create those expectations and meet them or exceed then, which is what defines the price. If that’s the case, the client doesn’t mind paying more, they don’t mind coming back. But that is what they expect; they don’t expect to stay in accommodation where they are dealt with more or less ok, with a room and a bathroom. This is not enough. That’s why they choose something cheaper. That’s the theme. But P2P is just another competitor, with its positive and negative aspects, that will attract a specific demand profile, with which hoteliers must compete using all their arsenal, which is impressive, to fight for this segment of the market. Each one has their niche, but the hotelier with their know-how, capacities, installations and knowledge has many more weapons to hand, if they know how to use them, to come out victorious in this battle. But they must use them. It is no good to just sit back crying and not make any changes: I am facing a different reality, so I will have to do new, different things, to be able to compete. It is unstoppable and unavoidable, so lets come to terms with it and act accordingly.
Another revolution that has come to stay is bookings using mobile devices. Are the Spanish hoteliers prepared to answer this growing trend?
Mobile devices are a reality. According to all statistics, the development of bookings via mobile devices in Europe from 2013 to 2015 went from 10% to 20%, while in the USA, that is always ahead of the market, it went from 15% to 28%. Within the use of mobiles, what is also increasing is the action to call. Proof of this is that 70% of bookings that begin on a mobile platform end in a phone call managed by a Contact Center, so the infrastructure of telephone assistance for the client is becoming more and more important. If it was already important, because many bookings that begin on the web end on the phone when the client needs to establish human proximity or clarify doubts, this is multiplied three fold when it comes to mobiles. And Spanish hoteliers should be prepared because they have options in this regard, either directly or though one of the services we offer at Idiso, which is an element that clearly sets us apart from our competitors, and one of our most successful services: the 24 hour call centre, which is available in seven languages, providing continual response to clients on their private line, answering as the hotel or chain. The opportunities are there, it all depends on if they can make the most of them.
What could the emergence of Amazon and other giants mean to the market?
Lately there has been massive movement in the sector, mainly from large companies with great financial and marketing capacity, such as Apple, Google or Amazon, the latter has just started up, even though quietly for now in six cities of the USA, as another OTA. Amazon is making a clear attempt to make the most of their marketing, their CRM and their client relation capacity. Client knowledge is not in vain, together with product consistency and service quality it is one of the three main stays that hotel companies should base their investments on. Amazon has a lot of that client knowledge, and honestly, it uses it well, being among the first to do so. It already has the client base, which at the end of the day is the same, and just as they offer them books and other products, they can offer them hotels as the massive online store it is. I think it is a reasonable gamble, with commissions that are similar to those of other players, around 15%. But it’s not the only one. If we look East, Alibaba, which is a lot stronger and has even more capacity, is launching Alitrip, which will have a huge impact. This sector in the next few years is facing total concentration, even if only for cost efficiency, in which great existing brands such as Booking and Expedia, among others, will stand out, alongside all these new players. Therefore, the hotelier cannot let this all happen and just do nothing. They will have to keep fighting to maintain the direct links with the market open, and when it comes to facing the client, make sure that they have a certain presence.
Does the emergence of these giants into the sector leave space for the smaller players?
There’s always space. The thing is one has to search for it. Before the Internet came along it was a lot harder and more expensive to access the direct client, especially from faraway markets. Today, the Internet is a massive global shop that allows hotels and chains to have that access. This explains the smaller penetration of OTAs in countries such as the USA, where most hotels belong to large chains. In Europe, on the other hand, the larger percentage of establishments are small chains or independent hotels, which makes any strategy more difficult as it involves large investments that small chains cannot afford. So we will have to recognize what the Americans confirmed a long time ago; we need to head towards concentration to at least have a stronger brand presence, under an umbrella with more capacity. The independent hotel, when associating with a powerful brand, has it a lot easier as there are so many more weapons available for their fight.
Do you think this year will see the start of sales through social networks?
I don’t think so, not yet. Consumers use social networks for what they use them for, and I don’t think it’s good to try and change behaviour. Maybe later on, but short term I’m set against it. In the short tem, social networks should carry on being what they are: a place for people to get to know you, to like you, to talk about you, or to help them reason, but not as a channel for direct sales because you are beginning to deceive the consumer who is not using a social network to buy. That’s what he uses other channels for where they decide when and how to do it. Maybe the sales don’t take place on the social network, but you have to act on them so that later they take place elsewhere.