From Frankfurter Allgemeine Zeitung (print edition), Friday, November 4, 2022, page 23, translated

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Hotels need a technology upgrade

Staff shortages and evolving consumer needs are major digitalization drivers

After breathing an initial sigh of relief, the hotel industry is now back to being very worried. In spring 2022, it looked as if the end of the Corona pandemic was on the horizon. There was a revived desire to travel, whether for business or pleasure, and hotel rooms were attracting record prices – a development that continues to this day. The industry was in the midst of a tourism boom.

Six months later and the industry is gripped by fear and uncertainty in the face of spiraling energy prices and inflation, both of which are pushing hoteliers’ costs ever higher.
But is this pessimism justified? Companies that have carved out their own unique section of the market and are adapting flexibly to evolving demand can certainly take a more positive view of recent developments. After all, the current crises will massively accelerate the transformation of the industry. Traditional hotels are being forced to reposition themselves. Especially when it comes to digitalization.

Some sections of the industry are experiencing a bizarre situation in which hotels are charging top prices but are not operating at full capacity. This phenomenon is due to acute staff shortages. The simple truth is that, in many areas, staffing levels have not recovered since the beginning of the pandemic. Large numbers of employees were laid off as hoteliers looked to drastically cut costs – and many are only coming back very slowly, if at all. As a result, some operators can no longer operate at full capacity. Staff-intensive procedures, such as reception and administration, are chronically understaffed.

Digitalization can provide a remedy: Around 80 percent of classic hotel processes can be digitalized. This saves time and money and helps to free up valuable resources. Today, algorithm-driven software can take over every step of the “pricing” process. Thanks to apps, cloud-based systems and modern access technologies, travelers can check in and out flexibly via their smartphones. Technology that is already being used can replace up to 65 percent of missing personnel and create new, supplementary business models.

There is another reason the industry so urgently needs to transform: Modern travelers, today and above all in the future, want to travel differently – as recent surveys have shown. For instance, 37 percent of the respondents who took part in a representative YouGov survey said that they can imagine staying in a high-quality serviced apartment during their next vacation.

Few people today want to spend 20 minutes waiting in line to check in at a hotel’s front desk, tailor their schedules to strict breakfast times, or put up with mediocre in-house gyms. Beer also tastes better in a trendy bar than in a dusty hotel lobby. Today’s hotel guests much prefer getting restaurant tips and real-time updates on local attractions via WhatsApp rather than having to wade through outdated paper brochures on the cramped table in their hotel room.
The latest travel trends demand new hotels and new concepts – not anonymous concrete blocks with hundreds of standardized rooms. The demand side of the market is increasingly being shaped by the “Airbnb generation.”

Many of today’s city travelers have become accustomed to personalized deals from platforms like Airbnb, which allow private accommodation providers to market their own apartments in trendy urban neighborhoods.

As time has moved on, the “Airbnb generation” has become less interested in low prices, but they have retained their original aspiration: self-determined travel. They remain as focused as ever on architecture, atmosphere and authenticity. They also want to make the most of their time – for modern travelers, fast internet and smart digital processes are non-negotiable. Many conventional hotels can no longer keep up.

As a result of the pandemic, travel and work have become ever more closely intertwined. Working where others spend their vacations, that’s the idea behind the new “workation” trend. More and more companies are empowering their employees to work remotely. After all, it’s just as easy to answer emails and hold video conferences in Barcelona, Berlin or Lisbon. Individual, contemporary accommodation is now often preferred to a standardized hotel complex.

Curiously, there are hardly any corresponding offers to meet this increasing demand. Regulations on the misuse of residential space have cut the supply of tourist accommodation, and not only in Germany. In Europe’s top cities, there is a supply vacuum of up to 60 percent.

All of this creates a massive opportunity to satisfy rising demand by repositioning traditional hotels and repurposing former office space. Both of which also make sense from an urban planning and sustainability perspective, as they preserve valuable living space.

The imminent transformation of the hotel industry is also of great interest to investors. Digital apartment concepts involve far less risk than conventional hotels; they even offer a significant value uplift. In addition, enhanced space efficiency unlocks greater revenue potential, as office space and communal areas are no longer needed. As long as the industry doesn’t fall asleep at the wheel, it need not fear the future.

Christian Gaiser is the founder and CEO of the Berlin-based hotel operator Numa Group.