Mövenpick is hoping to escape what its CEO Olivier Chavy called the “cemetery of brands”.
Profit margins in the hotel industry are between 1% and 2% and are being squeezed by a combination of macroeconomic and industry-specific factors, such as a changing distributor landscape, tighter management agreements, and higher capital requirements for borrowing.
But according to Chavy, hotel operators are under greater threat from organisations like Uber and Facebook, which can leverage platforms to create experiences. He noted that Uber is the world’s largest taxi company yet owns no taxis; Airbnb is the world’s largest hotel company yet owns no real estate. And he sounded a note of alarm, claiming that many in the hotel industry are evolving too slowly to survive. “In the hospitality industry, we are in the age of stone,” he said.
Current “best practices,” such as loyalty programs, may be irrelevant to many customers—as well as expensive to maintain. Research conducted by Mövenpick shows that, for example, younger generations of customers don’t care about collecting loyalty points—they care about personalization. Meanwhile, loyalty points represent “billions of dollars of liability on the balance sheet” of the large hotel chains, Chavy said.
Likewise, long-cherished assumptions have to be cast aside. It was once a truism that hotel guests expected an experience that was “better than home”; millennials, however, want an experience that feels like home. “They don’t want their [in-room] experience to require an MBA to use the technology,” he said.
While technology is critical to continued survival and growth, its costs in the hospitality industry already represent between 30% and 35% of revenue, and it can’t come at a greater expense, said Chavy. Mövenpick is using Oracle Hospitality OPERA Cloud Services to unify customer account management, revenue management, and business information applications, which allows the company to simplify and reduce operating costs, he said. The company also plans to use Oracle cloud technology to improve its understanding of individual customers and do a better job of marketing.
The 70-year-old Swiss hotel and restaurant chain is growing quickly; it has some 30 hotels or resorts planned or under construction. But, said Chavy, “we have to rethink our business model.” For that, he said, Mövenpick will need to rely on cloud technology. “Things will change and fast, and those who are not ready will be in the cemetery of brands,” he said.