What I’ve learnt in my first 12 months at Avvio

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What I’ve learnt in my first 12 months at Avvio

12 months in any job is a good milestone to look back and reflect on achievements and experience and then consider the future. If I had to sum up my first 12 months at Avvio, I would split my observations into several areas.

My first reflection is my realisation of how much I really love working in a scale-up organisation. Avvio is an established company with incredible customer relationships and ambitions: I find this compelling and challenging in my role as CCO.

Avvio’s growth over the past 17 years is impressive. Since 2002 its been through early-stage development from start-up to established enterprise. It’s refreshing in a company that is at the centre of a seismic shift in a sector that is so ripe for change. The Avvio team is still incredibly hungry for the next level of growth and oozes commercial growth aspiration for the hospitality technology sector.

The death of the high street travel agent
To explain: over the past 30 or so years, the global travel industry has completely changed. Where the high street travel agent was the main booking method for consumers, like the rest of the retail market these traditional high street operators were displaced with online travel agents (OTAs). This led to high commission costs being driven down and hoteliers no longer relying on a disparate system of “friendly” tour operators to recommend and sell hotel rooms, generally as part of a package. Although this still happens in parts of the world, hotels have by and large moved online and consumers have become more informed with what the OTAs offer. Flights can also be booked at the same time as hotel accommodation or separately depending on personal choice and need.

Like the chicken and egg conundrum, I have often wondered, what came first: the flight or the hotel in this scenario? Independent decision making power has been handed back to consumers with OTAs recommending aggregated and easy to consume data for all elements of a holiday or business trip. From car hire to flights to hotels to “experiences” – you name it, it’s bookable online. As millennials got on board with doing things themselves and no longer being offered a limited number of ideas in a bleak, dreary retail outlet the market revolutionised. This has led to a loyalty shift to the OTAs rather than airline and hotel brands with the likes of Expedia giving free nights as a reward (more about loyalty later).

The new breed of travel specialists
To survive travel agents then changed focus to look at different segments and we saw increased specialisation leaving the generic travel booking options to the OTAs. Think of the luxury market, the grey or pink pound – agents found a new marketplace for themselves through focus – often based on demographic or specific interest audiences who would appreciate their bespoke and personal consultancy led recommendations based on expertise and in-depth knowledge.

Changing technology
The proliferation of mobile devices combined with the availability of quality and reliable internet across the world has put consumers in control of their travel destiny. We’ve gone from 300 million users since Google was established to now over three billion. That’s over half the world’s population! With this connectivity comes a plethora of information more valuable than ever.

As consumers we are no longer tied to a desktop device serving blue links at work or at home, we now have the freedom to do the background research ourselves and not be dependent on Thomas Cook to sell us a week of sun, sea (and sometimes, misery). We can even check reviews from likeminded folks who have first-hand knowledge, who have already done the hard work for us and who have offered us some validated assurance that our hard-earned savings are going to get us something nearer to our dream week away. We are finally in control.

Commodities and commissions
Partner hotels have been miffed with the pricing structure and commissions the OTAs are charging, even though they have actually reduced in recent times from the dizzy heights of 30 – 40% with the distribution routes already described to 15 – 25%. Look at the digital payments space and the interchange bank rates as an example. Let me tell you, they have never gone up and actually created the “race to zero” with new acquirers and gateways servicing the internet and its consumers falling over themselves to offer a “cheaper rate” as they all essentially do exactly the same thing. This description is what is actually happening in the hospitality space. It’s ludicrous.

Think of the electricity, gas or water supply to your house. No one really cares one iota that its British Gas or Eon, we just want our oven to heat up when we are hungry or get water from our tap when we need a drink. This same commoditised model is approaching the hotel sector at a rapid pace. Commission rates will, in my opinion, go down but value to hotels will be served through added service offerings. Whether by offering the benefit of convenience, time, money or choice, hotel businesses must seek to monetise through features and benefits.

Payment gateway companies have tackled this same scenario by offering multi acquirers or different payment options. Hotels are starting to adopt to changing subscription models offering line of sight over a percentage of their hard-earned profits.

I did say I would talk about loyalty and how that has changed. I’ve seen hotel brands fall over themselves to “keep” loyal customers and the big players – you know who they are – do this relatively well. Consumers become “points hoarders” and build perceived loyalties with organisations that don’t really give back much.

Advocacy is the new loyalty and great companies evolve to adopt new models. Research shows us that millennials want new experiences and therefore are not likely to stay with you again and again. I’ve seen incredible incentives through social advocacy which to me is the new source of loyalty.

Picture this scene: You’re a happy customer whose checked out of a hotel, and tweeted or posted to say how efficient the front of house staff were. You then get in a taxi, flicking through your photos from the night before, and see a great shot of the incredible Old Fashioned (cocktail, if you’re not a connoisseur) you had the night before. This – the dark moody light of the bar – would look great on your Instagram. You tag the hotel, and promptly receive a ‘can’t wait to welcome you back!’ comment.

This interaction is likely to get me to tell more of my friends that “you’ve just, got to stay at this hotel the next time you’re visiting London”. This is the power of people and one which hotels need to harness. In an incredibly crowded market, inventory in London in the 4- and 5-star space makes it especially tough for the independents to stand out from the crowd and even more difficult to stand out in front of the OTAs this type of social media advocacy over loyalty will help enormously.

Market evolution
We’ve learned from different sectors of the market on commercial models but we’ve also learned from other verticals on how to conduct business online, but the hotel industry still has a long way to go. Technology remains disparate and the nature of technology ecosystems is still evolving. Property management systems (PMS) still generally lead the race for the dominant piece of tech in a hotel set up. This means if you have restrictions in your own business model, for example, if you operate hotels as well as serviced apartments, finding compatible tech stacks that work together is tough if not almost impossible.

Great mew(s) (oops, see what I’ve done there) companies are surfacing and starting to play an important role but the legacy old guard is still a dominant force with a ton of people trained to operate those systems at the coal face. Innovation is often via partners who essentially become outsourced development houses for hotels. That’s a sticky plaster for a mid-term middleware savior or a call for a longer-term view on thriving digital ecosystems.

What Amazon, Spotify, Netflix all have in common? Well, apart from being incredible companies that have surfaced over (fairly) recent years, they do one particular thing that makes our lives as consumers easy. They excel at User Experience (UX). Due to the power of UX and machine learning I seldom, if ever search through endless tracks to listen to my favourite music. It’s done for me and actually, the content served to me – often with bands I have never heard of – is pretty bang on what I would like to listen to. That’s the magic of AI and machine learning coming together to curate personalised track lists that they are sure I will like. Same with the other fantastic organisations I mentioned. OTAs go part way to do exactly this for hotels but with a huge problem to the hotels themselves. They offer inventory from hotels they think will match with user expectations but with no view on the hotel’s brand. This has resulted in hotels essentially selling their souls to a page of listings and although this does put heads on pillows it’s expensive.

However, it will create a new problem as AI gets smarter. Google can now predict when to book for the best rate and better (or worse, for hotels) can automatically cancel your reservation and make a new one at a competitive product all without you doing anything at all. It gets even more creepy. If you have a direct reservation with a hotel and received a confirmation via Gmail, theoretically Google could sweep your Gmail account with a bot and book you an alternative without even asking based on your likes and dislikes.

We haven’t got to this point yet but when I started at Avvio I often heard that the two major OTAs were also Google’s biggest advertisers and would never encroach on their space. Step forward a matter of months and Book on Google is now the single biggest threat to OTAs. Such is the fast-paced industry, where you can be small but global. As I now step into year two a new world of opportunity awaits!

By |2019-07-19T13:08:07+01:00July 18th, 2019|News|