How will the Uber-all economy impact travel in general, and hotels in particular?
You can read The Futures Company’s excellent presentation dealing with the “Uber-all economy” freely on their website. The principles portended by Uber and Uber-like start-ups are slowly changing people’s behaviours, and thus the way businesses address their needs.
Uber’s business model principles
Uber’s model can be boiled down to 3 things:
- Personal service
- Available on demand
- Priced by usage
1- Personal service > for one use to another
A cliché of the 1990s management books, the tertiarisation of the economy could now be qualified of infectious. Far from being just about the proliferation of services and the slowing growth of primary & secondary sectors, infectious tertiarisation slowly forces earth-based businesses & finished goods ventures to turn into service-based companies. At a rabid pace.
If what you are working with is not a service right now, it need to be converted into one. […] Service brands need to aggressively innovate to stay ahead of the broader conversion value.
In a nutshell, it is about finding new ways to use what’s already there, or finding a new use for idle/existing assets. In Uber’s case, someone’s car. In AirBnB’s, someone’s home.
In the travel industry, which is by-and-large already service-based, we need to heed this innovation advice. From Marriott’s offering you to make your own bed in exchange of food vouchers to AirAstana’s new Economy Sleeper lie-flat product making the most of the space available on empty flights, traditional actors already play this innovation game.
But is it enough with actors such as Vamo – multi-cities travel reinvented -, One Fine Stay – renting luxury apartment easily – ou Hotelied – discounts at great hotels depending on your online influence – aiming at changing the way we fly, stay or otherwise enjoy travel?
The sense of service is in the DNA of travel companies: from AirFrance, born from the daring pilots of the Aéropostale to InterContinental Hotels’s origins in PanAmerican Airlines, service has always been at the heart of what we do. Bold moves such as the adoption by British Airways of their coat of arms’ “To Fly. To Serve.” line as an official visual identity or Virgin America’s innovative security video help to revive this focus on service, and if hotels have been less innovative on this side, both the product and the service standards are evolving. The product with a better understanding of future travellers’ needs, addressed by such designs as the new Holiday Inn Express room epitomising versatility and the popularisation of mobile app check-in; the service with a true focus on training and new ways to deliver local expertise, for budget to luxury brands alike.
Note for self: my local coffee shop is very classic: they even refuse to install WiFi so as to foster conversations. But in a great example of bundling product, in this case great coffee, with service, they allow me to order my usual cup of filter via a Twitter Direct Message. I send it when I leave home, about 7 minutes away, and my order is ready when I arrive. It’s a small gesture, but it reduces the main friction of coffee shops, the queue, without altering the best part of it, great coffee and jolly conversations.
2- Available on demand > mobile app fulfilment
The disappearance of the Internet touted by Google’s CEO Eric Schmidt means that service delivery will become more and more seamless: there is already an expectation for everything to work well, fast, and all the time.
A temporary slow down of your home’s broadband speed, once forgiveable, can now be reason enough to switch providers. A loading error in an app may not warrant its immediate removal yet, but it will soon, and it already means that you are unlikely to give it a second chance.
It’s about making sure the benefit is available in the most immediate way possible. Mobile apps have been central to this. But it is really about fulfilment in whatever way is fastest.
In a world made of brand overload, differentiation comes from the brand promise: you stand for something that you actually deliver consistently. Note how I avoided using “over-deliver” here: over-delivering breaks a brand’s promise just as surely as under-delivery does. A branded budget hotel giving you chocolates at check-in certainly is nice short-term, but long-term you will be disappointed when staying at other properties of the chain and not getting these chocolates, which in turn will means a less truthful relationship.
Many see technology as the key aspect to this on-demand trend, and it certainly is one of its main facilitators. However technology is at its best when it bridges the gap between people. Something like Passbook makes travel easy by helping flyers to get on quickly, but also by allowing flight attendants and other members of staff to focus on creating a great experience. However it does require the staff to know about its features, and to stay up-to-date with their travellers’ habits, which change quickly.
Note to self: Kickstarter is a great example of the power of on-demand and technology bridging the gap. When funding a project, backers get regular, detailed updates about its progress by the founders of the venture, thus creating a real community of engaged users willing to part with invaluable feedback and truly interested in being part of the story behind the project. You will not find a bigger ambassador of EONE’s Bradley watch than myself, for instance
3- Priced by usage > segment by occasion
The Futures Company calls this the most misunderstood piece of Uber’s business model: the essence of Uber-like models is pay-as-you-go, or in other terms, it’s paying for usage rather than ownership. This is the basis of services like Netflix or Spotify. Where Uber innovated however is in their infamous surge mechanism, in which at hours of greater demand, the price is multiplied by a certain factor.
For proponents of yield management, and certainly for travel professionals, this is nothing new: a whole family of jobs from pricing strategists to revenue managers is based on this principle, whether that be for flights or for stays. It is interesting because it places the emphasis on occasion: not people, not segments, not products. Occasions.
Most occasions will be ordinary, so pricing will have to be cheap. But some occasions will be extraordinary, and thus able to command a premium.
In this day and age of flat-lining growth indicators in most of the developed countries, and few signs of change for the better in the long-term horizon, this occasion-based pricing helps to appeal to all people. Not specific segments, not particular targets, not special assets. All people.
This is something we already do rather well in the travel industry, but there is an opportunity for more granularity, to encourage up-selling notably: would it be worth, when your normal rooms reach 80% occupancy but your suites average 5%, to lower the price of your upgrades? We occasionally do so, but such and similar techniques could help us to make the most of this sense of occasion, as well as the rising numbers of switchers.
Note to self: big hotel groups have more chances to make the most of this last pillar, as their multiple brands usually cater to different occasions already. there is however a potential mid-term for more differentiated rooms in specific hotels, which would also concur with the personal service side of things. I would happily take a small room and make my own bed in exchange of lounge access during my stay. Anyone for the taking?
How is your business approaching these principles? What is the one that is most important to you?