Digital transformation in the hospitality and leisure industry

Adapting to disruption

The majority of hospitality and leisure organizations’ response to digital disruption has evolved over time from ignoring it, to denying it, to attacking new entrants, to finally adapting to the disruption and to the new bases of competition.13 The attacks of new entrants have been largely in the form of political lobbying efforts. For example, in 2016, the American Hotel and Lodging Association (AHLA) started undertaking extensive efforts to lobby political institutions and regulators to impose taxes and regulations on Airbnb in order to level the competitive playing field.14 And in 2017, the AHLA was engaged in efforts to lobby the Federal Trade Commission (FTC) to intervene in what it contended were monopolistic powers and unfair trade practices by OTAs.13 Incumbents’ efforts to adapt to digital disruption and the new bases of competition have included mergers/acquisitions and brand expansions (e.g. Marriott’s $13.6 billion merger with Starwood Hotels to bring together Starwood’s Sheraton, Westin. W Hotels, and St. Regis properties with its Marriott, Courtyard, and Ritz-Carlton brands16 — giving Marriott more than 30 brands and making it the largest hotel chain in the world as at 2016).1 Incumbent’s efforts have also included investing in brand loyalty programs, further enhancing and differentiating on the human aspects of service (e.g. proactive and useful concierges, warm and friendly reception, great food and beverage and room service stall), cutting costs, forming strategic partnerships, and leveraging digital technologies like search engine optimization, social media, cloud, and mobile.

48 Digital disruption and digital transformation

Digital transformation efforts to date and their impact

Most hospitality and leisure organizations have recognized the importance of digital transformation to their survival and competitiveness. Many have been making big but targeted investments in digital transformation efforts to increase guest satisfaction/loyalty, operational efficiency and effectiveness, and revenue growth. For example, in 2018 improving digital customer engagement and guest loyalty was a top priority for many hotel and lodging organizations.18 These transformation initiatives have been and continue to target areas such as services-rich mobile apps, comprehensive and smart in-room services, sophisticated back-office data analytics, home-sharing-like attributes and experiences, virtual/augmented/mixed reality capabilities and offerings, cloudification of enterprise information systems, hybrid cloud and on-premise architectures, and omni channel presence and engagement. Enabling these investments has first required investments in structural, cultural, and people transformations. Organizations succeeding with their digital transformation efforts have been seeing competitive improvements in guest experience and value, efficiency and effectiveness breakthroughs, improved adaptability and agility, enhanced ability to disrupt the disruptors, and strong gains in competitive positioning.

Implications for hospitality and leisure managers

The hospitality and leisure industry has grappled with digital disruption and continues to do so. The organizations that have adapted to disruption and remain in a strong strategic position in the industry have embraced it and continue their pursuit of becoming worldclass digital businesses. Early career and prospective hospitality and leisure managers will likely enter organizations partway through these transformations. They may find successful, stalled, or failed transformations. They may have the opportunity to bring new energy and capabilities to participate in successful transformations, to supercharge stalled efforts, or to reengage their teams around a new transformation vision. In either case, the digital technology, digital business, and digital transformation knowledge and skills they develop now will be critical to their careers and the survival and longevity of their organizations.

Google and reflect

Al-driven e-concierge chatbot app, OTAs, hyper-personalization, SEO, dynamic pricing algorithm, Airbnb Plus, Airbnb experiences, online review platforms, experience economy, localness, hospitableness, ethical consumerism.

Discussion questions

  • 1 How do digital technology advancements cause disruptions in guest expectations and behaviors?
  • 2 Identify four changed guest expectations and three changed behaviors as a result of digital technology advancements.
  • 3 Identify three digital technologies that hospitality and leisure organizations can leverage to live up to the guest expectations identified in question 2.
  • 4 Identify two hospitality and leisure organizations that offer prospective guests a virtual preview of their potential experiences.
  • 5 Identify one or more hospitality and leisure organizations differentiating on localness and sense of community.
  • 6 How have digital technology advancements caused disruptions in the competitive field and in the bases of competition in the hospitality and leisure industry?
  • 7 Do you agree that new industry entrants like home-sharing platforms and OTAs have had an unfair competitive advantage? Should the government intervene to make it a level playing field?
  • 8 Where do the biggest home-sharing platform and the biggest OTA organization rank in a list of the biggest organizations in the hospitality and leisure industry? How long has it taken such organizations to reach this size and market position?
  • 9 How have digital technology advancements driven margin erosion in the hospitality and leisure industry? Can such margin erosion be reversed?
  • 10 What are the current key bases of competition in the hospitality industry? Are these different from what they have traditionally been?
  • 11 How do digital technology advancements disrupt data availability? How does the disruption of data availability create survival and competitive threats for hospitality and leisure organizations?
  • 12 Identify three or more approaches hospitality and leisure organizations have taken to adapt to digital disruption.
  • 13 Do you believe hospitality and leisure organizations have been successful at digital business transformation?
  • 14 Thinking about digital technology advancements, digital business, and digital business transformation, what do you think remains still to be done by hospitality and leisure organizations?
  • 15 Is there or can there be an end to digital business transformation?

Notes

  • 1 Newman, D. (2018). Top 6 Digital Transformation Trends in Hospitality and Tourism. Forbes. Retrieved from www.forbes.com/sites/danielnewman/2018/01/02/top-6-digital-transformation-trends-in-hospitality-and-tourism/#356723ae67df
  • 2 Newman,D.(2018).Top6DigitalTransformationTrendsinHospitalityandTourism.Forbes.Retrieved from www.forbes.com/sites/danielnewman/2018/01/02/top-6-digital-transformation-trends-in-hospitality-and-tourism/#356723ae67df
  • 3 Newman,D.(2018).Top6DigitalTransformationTrendsinHospitalityandTourism.Forbes.Retrieved from www.forbes.com/sites/danielnewman/2018/01/02/top-6-digital-transformation-trends-in-hospitality-and-tourism/#356723ae67df
  • 4 Newman,D.(2018).Top6DigitalTransformationTrendsinHospitalityandTourism.Forbes.Retrieved from www.forbes.com/sites/danielnewman/2018/01/02/top-6-digital-transformation-trends-in-hospitality-and-tourism/#356723ae67df
  • 5 Mody, M., & Gomez, M. (2018). Airbnb and the Hotel Industry: The Past, Present, and Future of Sales, Marketing, Branding, and Revenue Management. Boston Hospitality Review, 6(3). Retrieved from www.bu.edu/bhr/2018/10/31/airbnb-and-the-hotel-industry-the-past-present-and-future-of-sales-marketing-branding-and-revenue-management/
  • 6 Mody, M., & Gomez, M. (2018). Airbnb and the Hotel Industry: The Past, Present, and Future of Sales, Marketing, Branding, and Revenue Management. Boston Hospitality Review, 6(3). Retrieved from www.bu.edu/bhr/2018/10/31/airbnb-and-the-hotel-industry-the-past-present-and-future-of-sales-marketing-branding-and-revenue-management/
  • 7 Newman,D.(2018).Top6DigitalTransformationTrendsinHospitalityandTourism.Forbes.Retrieved from www.forbes.com/sites/danielnewman/2018/01/02/top-6-digital-transformation-trends-in-hospitality-and-tourism/#356723ae67df
  • 8 Newman, D. (2018). TopöDigitalTransformationTrendsin Hospitality and Tourism. Forbes. Retrieved from www.forbes.com/sites/danielnewman/2018/01/02/top-6-digital-transformation-trends-in-hospitality-and-tourism/#356723ae67df
  • 9 Newman, D. (2018). TopöDigitalTransformationTrendsin Hospitality and Tourism. Forbes. Retrieved from www.forbes.com/sites/danielnewman/2018/01/02/top-6-digital-transformation-trends-in-hospitality-and-tourism/#356723ae67df
  • 10 Ivanov, S., & Webster, C. (Eds.). (2019). Robots, Artificial Intelligence, and Service Automation in Travel, Tourism and Hospitality. Emerald Publishing Limited.
  • 11 Newman, D. (2018).Top6DigitalTransformationTrendsin Hospitality and Tourism. Forbes. Retrieved from www.forbes.com/sites/danielnewman/2018/01/02/top-6-digital-transformation-trends-in-hospitality-and-tourism/#356723ae67df
  • 12 Newman, D. (2018). TopöDigitalTransformationTrendsin Hospitality and Tourism. Forbes. Retrieved from www.forbes.com/sites/danielnewman/2018/01/02/top-6-digital-transformation-trends-in-hospitality-and-tourism/#356723ae67df
  • 13 Mody, M., & Gomez, M. (2018). Airbnb and the Hotel Industry: The Past, Present, and Future of Sales, Marketing, Branding, and Revenue Management. Boston Hospitality Review, 6(3). Retrieved from www.bu.edu/bhr/2018/10/31/airbnb-and-the-hotel-industry-the-past-present-and-future-of-sales-marketing-branding-and-revenue-management/
  • 14 Mody, M., & Gomez, M. (2018). Airbnb and the Hotel Industry: The Past, Present, and Future of Sales, Marketing, Branding, and Revenue Management. Boston Hospitality Review, 6(3). Retrieved from www.bu.edu/bhr/2018/10/31/airbnb-and-the-hotel-industry-the-past-present-and-future-of-sales-marketing-branding-and-revenue-management/
  • 15 De Vynck, G., & Zaleski, O. (2017, May 5). Hotels Plan Lobbying Push Over Priceline-Expedia "Monopoly." Retrieved May 24, 2020, from Bloomberg.com website: www.bloomberg.com/ news/articles/2017-05-05/u-s-hotels-plan-attack-on-the-priceline-expedia-monopoly
  • 16 The Associated Press. (2016). Marriott Buys Starwood, Becoming World's Largest Hotel Chain. Retrieved May 24, 2020, from CNBC website: www.cnbc.com/2016/09/23/marriott-buys-starwood-becoming-worlds-largest-hotel-chain.html
  • 17 The Associated Press. (2016). Marriott Buys Starwood, Becoming World's Largest Hotel Chain. Retrieved May 24, 2020, from CNBC website: www.cnbc.com/2016/09/23/marriott-buys-starwood-becoming-worlds-largest-hotel-chain.html
  • 18 Comcast. (2018). The Next Phase of Digital Transformation in Hospitality. Retrieved May 24, 2020, from Comcast.com website: https://cbcommunity.comcast.com/community/browse-all/ details/the-next-phase-of-digital-transformation-in-hospitality#fn2
 
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