How Independent Hotels Matchup Against Brands

Episode Transcript

Adam Harris: There are plenty of dials and levers that can be turned and flexed up and down, left and right. That will bring so much micro-transactional value to the guest as well as to your bottom line. It doesn’t take much. We’re talking about just making a dollar here or a dollar there and then saving a dollar here, saving a dollar there. You add all those things up, it’s going to be a lot of pennies, and it’s going to lead to a much better forecasting ability for you and your property to then experiment and ultimately go back to what the traveler is looking for and creating value on both sides going up. 

Robin Trimingham: Welcome to The Innovative Hotelier podcast by HOTELS magazine, with weekly, thought-provoking discussions with the world’s leading hotel and hospitality innovators.  

Robin Trimingham: Welcome to the Innovative Hotelier, brought to you by HOTELS magazine. I’m your host, Robin Trimingham. As many followers of this broadcast are involved in the independent lodging industry, I thought it would be interesting to do a podcast focusing on the current state and outlook of this business category to help owners, operators and industry professionals gain a clearer understanding of the ever-changing landscape of this travel niche. My guest today, Adam Harris, is the co-founder and CEO of Cloudbeds, and he’s here today to chat about the current state of recovery of the independent lodging business category, post-pandemic booking behaviors and a few of the travel trends shaping consumer choices as we move into 2024. Join me now for my conversation with Adam.  

Robin Trimingham: FOH is a global food service and hospitality company that manufactures smart, commercial-grade solutions. Headquartered in Miami, the company designs and manufactures all their restaurant and hotel products. They have showrooms and distribution centers located throughout the globe, and their products are always in stock and ready to ship from any of their distribution centers worldwide. Welcome, Adam. It’s great to get a chance to chat with you. 

Adam Harris: Thanks so much for having me. 

Robin Trimingham: I have to say, I was really impressed when I came across the state of the Independent Lodging Industry report that Cloudbeds had published, because there’s a lot of detail in there. So, I think this is a perfect time for us to talk about it, because for our listeners who may or may not be aware, you guys put that out last spring so we can talk about both the report and how things have played out a little bit. But, before we dive straight in, I think we better set the stage here a little bit by asking you to give us what’s your definition of an independent lodging business so that we have a framework for our conversation. 

Adam Harris: Easy. So, by independent lodging businesses, we mean any type of lodging business that isn’t run or managed by a major brand or some form of a chain. We love this segment, not only because independent lodging businesses are at the forefront of what consumers are in love with in our current sort of time, but the art of hospitality that these property owners are bringing is much-needed diversity and excitement that, unfortunately, I don’t find the big consumer brands are really doing and they’re almost becoming a commodity. So, we need more hospitality in this industry. And I think the independent lodging operators are doing just that, they’re putting that at the forefront. 

Robin Trimingham: In a year where we’ve seen so much consolidation, it’s great to talk to somebody who really represents what I’m going to call ‘the little guy’. What would you say, though, are some of the primary factors that make independent hoteliers different from those that are under a brand or those that are under a franchise business model? 

Adam Harris: Sure. We can summate it into a few things. One is manage your franchise properties. They have to follow a standard. Those standards are everything from branding to design, service, even software. But an independent hotel has unbelievable flexibility. I think one of the favorite things that we talk about is, when Cloudbeds operates with a partner-minded sort of approach, we’re sliding a box across the table, and then that operator gets to consume that platform that we deliver and build upon it. Right. We’re not trying to put them a round peg in a square hole. We’re saying there’s two sides to your business. There’s the business side, which is all the operations, all the day-to-day, and then there’s the art. Your job is to crush the art. We’ll help you be more efficient in the operations, which also leans into the operating side. And so that means that an operator can create a unique brand. They can create ambiance, they can do guest experiences different, they also can be incredibly responsive to what’s happening in the market in the world. They can look at macro-micro. And instead of turning a cruise ship, these independents just grow their boat in a little bit of a different direction, to go back to ‘the little guy’ analogy. 

Robin Trimingham: I really like how flexible an independent operator is able to be. And that’s a double-edged sword, because sometimes when they have too many choices, you get that paralysis of decision-making thing. What shall we do now? So, bearing all of that in mind, what would you say is the current state of recovery of the boutique and independent operator? Business category. 

Adam Harris: Well, I can still remember when Covid hit and it left this mark on me. If you think about how the world reshaped itself. I had people saying, oh, this is going to be a couple months.  

Robin Trimingham: Oh yeah.  

Adam Harris: And then I had some really smart people saying, the world is not going to return to normal till 2023. In the two extremes, they are a little nerve-wracking, to be honest with you. So how can the world be shocked so quickly to then rebound in two months versus take three years to ultimately get back to what is new or normal? But here’s the reality independent hotels have outperformed franchise and branded properties throughout the recovery from pandemic days, meaning they’re still leading in terms of RevPar growth, and this is partly because of a couple of things. One is, unlike corporate travelers, leisure’s tend to think twice before booking a hotel and are very specific about their expectations. A corporate traveler tends to look at what’s within their budget based on their job title, what their negotiated rates are with, and they tend to just have loyalty towards that. You and I, when we go travel for fun, we’re looking for purpose, right? That purpose means that we’re going to be a little more flexible depending on what we’re after. And because of that, we might be willing to splurge a little bit more on a hotel room, but then save on some of our food and beverage. Or we might flex to be on those lay flats that are so, so comfy on airplanes. Maybe they’re not so comfy, but the lay-flat experience on an airline. 

Adam Harris: But then we want to save on the hotel stay because we argue that we’re only giving the hotel to sleep. So that flexibility has actually created a lot of connection between the leisure traveler and the hotel operator, and it has enabled the independents to differentiate themselves more. Some of that’s through driving more business to them directly, some of it’s getting creative with like monthly programs and extended stays, but basically, because of what the consumers are all about now, the independents could build their brand around it. So, in the last six months, we’ve seen a lot of sort of big brands talk about extended stay. Extended stay new brand, this concept, new brand, that is them following the herd. The extended stay business on the independent side has been growing faster than any other segment, right? But at the same time, the corporates are now realizing they’re at risk. They need to build products for that solution. This is a very fast-growing segment for corporate travel, and so they’re just trying to like play whack-a-mole a little bit around trends. But the reality is this has been paid for many years by some independent operators. Two of the biggest ones are powered by Cloudbeds, and they’re just ahead of the curve. Independents are ahead of the curve in pretty much every area, and we love that about them. And so I think the reality is, if you look at recovery, independents fared way better than every other asset class except for short-term rentals. That’s the only one asset class that actually beat them. 

Robin Trimingham: It’s interesting to see what goes on with the independents, because when we travel personally, I don’t know about you, but I think we’re much more open-minded to a new experience. We’re open-minded to “Let’s see how it goes, and, oh, well, this isn’t how we saw it, but hey, you know what? This over here is really good and I’m enjoying my vacation”. With business travel, that’s not the way it is at all. With business travel, we want to be in the box, we want it to be the same, we want the one that’s closest to the meeting, all of those things. And we’re really very rigid about that. So, I think there are an awful lot of ways that independent hoteliers can leverage the flexibility of a leisure traveler. Do you think that things are trending the same all over the world, or have you seen differences from one region to the next between, let’s say, the US and what’s going on in Asia or Europe? 

Adam Harris: So, I would definitely say that corporate travel has not fully recovered and I don’t know if it ever will, to be honest with you. But leisure sectors like APAC, Southeast Asia, more specifically parts of LATAM, are still seeing sustained pent-up demand, right? So, there are still some pockets where there is this exodus to go travel and the traveler is seeking unique experiences in lesser-known places. 100% sure of that, our data is pointing to that. But I wouldn’t say it’s like one category of independent. I actually think it’s pretty broad. I think leisure travel in general is still wanting to get out there, and that’s also fueled by the fact that there’s some big macro events that are going to take place in the next decade. So, one is there’s this $98 trillion worth of savings, right? This huge amount of money that’s stuck in an older generation of population around the world. They control the majority of spent, right? I didn’t call them boomers on purpose, but that’s a term that gets ascended to that population. That wealth is either going to go to the millennials or the Gen Z’s, or it’s going to get spent, right? Well, guess what? My mom and my dad have spent more time traveling in the last couple of years and I’ve ever seen them in their entire life. They’re getting out there and they’re experiencing things, so we’re seeing that trend. 

Adam Harris: The second thing that I get excited by is not only is that transfer of wealth, and what that’s going to represent is the millennials and the Gen Z’s in the world are rising up as part of a middle class. So, the middle class globally is getting bigger. Well, when you have more money, what do you do? You like to travel with it, right? At the same time, they’re not spending as much money on like TVs or motorcycles or boats or whatever, the cool toys that kids used to have. They’re spending it on investments, experiences, things that are going to set themselves up for a better life. And so, that’s not slowing down, that’s actually accelerating. And we’re going to have a billion and a half people for the very first time staying at a hotel in the next decade. And that’s just purely from rising middle classes. That’s coming from China, India, parts of LATAM even parts of Europe and the US. All that rising and wealth is just going to lead to more travel experiences. But our industry is behind being able to even accommodate them because their desires and the ways they interact with technology are so far forward versus what the hotel actually has or is employing. And we’ve got some catching up to do. 

Robin Trimingham: Yeah, you’re making an excellent point because you have these sort of contradictory forces all impacting and bouncing off each other at the same time. I had a fascinating conversation with one of my other guests, and we were chatting about the fact that I’m an old person, believe it or not. And when I was being raised, even just being taken out to a restaurant, there was a big deal. But millennials have taken their kids everywhere. And so, these Gen Z kids have been raised with the idea that taking three and four trips a year, that’s totally normal. That’s what we do. 

Adam Harris: Totally normal. 

Robin Trimingham: It’s going to say they’re raised with the idea that we just were a generation in flux. In flight. We move all the time, we learn all the time, we work all the time. And technology paves the way for us, like all the time. And it’s a completely different mode of thinking. And I think you’re right. I think hoteliers in general really have not latched on to that idea and what that means for them in terms of opportunity. 

Adam Harris: I 100% agree with you. And I’m going to point to this little device right here. Okay. So, this device is 18 years old now. This little iPhone is 18 years old. This thing changed our lives, whether for good or for bad. But what the new generation is really experiencing is a consumability of many services, experiences and new ways. Better, faster than we’ve ever imagined. So, the fact that I can go into Spotify and pick a song from The Beatles that brings nostalgic because my mom and dad used to listen to it growing up in milliseconds instead of having to go to Tower Records and buying a CD, just the digital adoption of what we as consumers have seen, the speed of that is unbelievable. Then add AI into that conversation, it gets even more scary. But, here’s the problem: the hotel industry, according to some very big consulting firms, is one of the largest industries in the world. That being said, if you force rate all the largest industries in the world from a digital adoption curve, meaning the end users consuming new technology, hotels are aligned with agriculture, hunting and construction. Those are our peers: construction, hunting and agriculture. We’re ranked 20th as an industry, despite being the fifth largest in the world. So, what on earth is wrong with us? Well, here’s the problem. We have decades-on decades of disconnected technologies fitting into the realm of what a hotel operator needs to consume to run their business effectively. 

Adam Harris: You have door locks that aren’t digital. 13% of all door locks in the world are digital, which means that you and I could use our phone to unlock them 13% of them. So how do you create a better guest journey when supermajority of door locks that are unlocking a guest room need a physical key or some type of onsite on-premise technology, or step well that creates queues at the front desk, that creates horrible first impressions with a tired guest who might have been traveling from afar. And to your point, it’s opposing forces that are causing conflict in what we need to ultimately do to climb ourselves out of this hole. And it doesn’t take much. But it does take us getting in line with some of the trends that are shaping our future. And those trends are obvious, they’re very obvious. They shouldn’t be like, “Wow, that’s new. I never thought that would actually matter”. But like, they’re very front and center. And so, it just takes innovative companies like Cloudbeds and others to keep pushing and trying to drive our industry just one step at a time closer toward a better guest journey, which is going to take some technology. 

Robin Trimingham: You just talked about trends, and I know in your report you referenced five major trends. Now, I think we could probably go on for an hour and a half about this. So, for our listeners, can you just very briefly tell us what those five trends are? 

Adam Harris: Absolutely. So, this was easy value-driven decision-making. So, that’s number one. That trend probably sticks with us going into a future couple of years. It’s due to the fact that we have seen inflation in our lives. Chickens doubled, milks doubled, a million things have doubled. We don’t need to get into that pain. But, as a result, consumers are using their dollar and they’re trying to put it to work with the most maximization as possible. Two: the front desk has to go virtual. To go virtual, it means we need some automation and we need some technologies like contactless check-in, mobile locks, things like that. So we could talk for three hours on why that’s probably not going to happen sooner, but we need to go digital. Blended travel meets hybrid hospitality. I love this for some reason. Wall Street Journal clips it. It’s called mullet Travel with business in the front, party in the back. They use the mullet analogy. I think that’s silly. I like saying that, but.  

But it’s easy to remember.  

Adam Harris: It’s easy to remember, right? So lodging businesses need to adapt that flexible space. Special rates for extended stays. The hybrid audience. You might get a businessperson one day, you might get a consumer on the weekend. You need to blend your experience to fit both of them right. You’re going to need to have high-speed internet, but then you’re also going to need to have some of the luxuries that we would want as we’re on a leisure stay.  

Adam Harris: Four: New tech disrupts travel search and inspiration. Look, Google remains the dominant search that we find information in the world. There’s some promising technologies that are coming out there. One, you have TikTok and the other social media influence, and then you have this term, AI, ChatGPT, Bard or whatever you want to call it. Those are two originating search tools, right? These are new ways for us to search. Social media is influencing about 60% of all search traffic for hotels now, right? So, like the originating discovery phase, like “I want to go somewhere”; you’re getting that inspiration from Instagram, TikTok, your friends on social media. You’re not getting that from reading an article in a magazine or perusing the internet. You’re actually flipping through your social networks that are influencing you, and that’s leading to something. And then the fifth one, and again, this is something that I believe we could talk about for hours, but that’s shifting from amenities to experiences in stay. How do you create, I don’t know, less amenities as part of your stay, but more interest in experiences? 

Adam Harris: I’ll give you an example. There’s a small property in San Diego called The Pearl, it’s one of our close partners. They do weekly movie nights, so they actually bring the community into the property with this movie night. It’s super popular and so it’s a mixture of local and traveler. They also try to bring uniqueness, so they’re designing their concepts around the San Diego vibe. So, a lot of San Diego food influence, a lot of their amenity is tied towards going paddleboarding or being in the ocean or going sailing in the bay. So they’re trying to make you feel that you can incorporate things like art, culture, local cuisine, products, but yet, still provide a very accommodating stay and do all the things. And they don’t care about the bathrobes or the slippers. At the end of the day, this is a debate that I’ve had with some really powerful, really smart operators. I don’t live like a king. My wife doesn’t look like a queen. I don’t need sheets changed every single day, I don’t need fresh towels every single day. To me, that’s a lot of energy, a lot of wasted time and a lot of waste of people, resources. So why are we still doing some things that don’t make sense for our economy, for our staff, for the shortages that we have and, more so, for our environment? So, like I do think we need to shift from amenity to experience. And that’s something that will happen over time. 

Robin Trimingham: Established in 2002, FOH is a woman-owned global food service and hospitality company that manufactures smart, savvy commercial-grade products, including platewear, drinkware, flatware, hotel amenities and more. Driven by innovation, FOH is dedicated to delivering that wow experience that restaurants and hotels crave, all while maintaining a competitive price. All products are fully customizable, and many are also created. Using sustainable, eco-friendly materials such as straws and plates made from biodegradable paper and wood, and PVC free drinkware. FOH has two established brands: Front of the House, focused on tabletop and buffet solutions, and Room 360, which offers hotel products. Check out their collections today at fohworldwide.com. 

Robin Trimingham: It’s a tough discussion because the big fear is change. And if you are a luxury property, whether you’re a boutique or part of a national brand, if you’ve always had all those little itty bitty bottles in the bathroom and you know that your guests are hoarding them up and taking them home in their suitcase, you do not want to be the first guy who says, “no, we’re not doing that anymore”.  

Adam Harris: Correct.  

Robin Trimingham: It’s the herd mentality working in the wrong direction. 

Adam Harris: That’s right. But it takes the consumer to speak with their wallet. They’re definitely speaking with their wallet a little bit, and I think they’re commenting on what matters. 

Robin Trimingham: Let’s talk just a little bit more about how you see value-driven decision-making impacting the independent hotel sector. 

Adam Harris: I feel like I’m going to be a broken record. I’m going to keep talking about the experience a little bit, but nevertheless, bear with me. Things like star rating, in-room amenity might have played a much bigger role pre-pandemic for how consumers were shopping. Today, the pendulum has switched to the complete opposite direction: guest journey, guests experience, the uniqueness of the place is probably driving much more of the decision-making. That being said, someone who booked a four-star chain in the past might now go for a three-star boutique instead, because they’re less concerned with some of the amenity and they’re more concerned with the fact that they’ve got local music coming on site. They’ve got a really fun sort of bistro bar that serves tapas or whatever it might be. And, at the end of the day, this has become much more of the experience and it’s less the property. I think that’s really exciting. So, for me, that gives a completely new light to how the art of hospitality gets designed around a physical building. So, a physical building can have a fun chandelier or a creepy stairway or a ghost-hunting pass. But who wants to go stay at a property where you feel like you’re not going to go to sleep at night? A lot of people actually do. They want to sleep in a hotel that has a history and maybe has some haunting, like the Del Coronado, one of the most prestigious hotels in the world here in Coronado has a whole floor that you were prepared the weird stuff is going to happen during your stay, whether you believe in ghosts or not. I actually kind of like that. If you are trying to create an experience and you have some of that history in your property, there’s an audience that wants to come stay at your property. It’s not me because I don’t watch horror movies, but there are people who do. And so, the beauty of that is, if you have this fixed asset that takes a lot of money to repurpose, meaning like a hotel physical building to make it bigger costs a lot of money, and it might even not be zoned or even possible in your city to add additional amenities in things like physical amenities. It’s really hard, like a pool. You might not be permitted or some of those amenities that properties of bigger size. What you can do is you can re-concept, you can reposition your experience, you can flex on things that are that’s like icing on the cake. But the foundation is still a cake. But it could be one with chocolate frosting or vanilla frosting. 

Adam Harris: You have so much artistic design and flair that can go into it. It really means that you get to rethink how you optimize around distribution, how you think about digital marketing, how you think about your check-in, all of those actually can be operationally cheaper for you to run the property, but drive a tremendous amount of value to the guest and actually flex up in your occupancy. So, we see this all the time. We see flagging properties come take advantage of our technology. They reposition their brand from “I need a front desk” to “I don’t have a front desk”. They take ten persons who are running a 200-room property to two or maybe one and a half. Think about the change that means. And so that ultimately means we’re getting into go park discussions, which I’m guessing we probably will have at some point given where we’re shaping some of your great questions. But, at the end of the day, value-driven decisions means you have to offer value back to your consumer. That’s it. So, the consumer is looking for value. You can deliver value back in and that value could be in the form of a limited type of amenity, but a flex on other things that are the intangibles. And I think that’s what I’m most excited about. 

Robin Trimingham: I think we’re reaching a place in time where they’re going to have to be a rethink about what is an amenity, and at what point does the amenity become the experience. I’ll give you a silly, simple example. One of the best independent properties I’ve ever seen had a really huge, thriving Friday night following because they had a big platter of buns with little bits of roast beef, and the little itty bitty sandwiches were free, they were a predecessor to a slider. They were free. But of course you need one of those and you get thirsty. So you would start buying beverages, and they had some music and people would hang around all night long eating the itty bitty sandwiches, running up the bar tab and listening to the music, and the place was just full of people all the time. They were doing fantastic, really profitable business because the amenity had become the experience. 

Adam Harris: The bar. Yeah, the experience, the bar, right? And that’s why I look at hotels as real estate. You’re maximizing every square foot of real estate, and it needs to have purpose, like one of my favorite hotels I’ve ever been to. It’s no longer there, it was a resort in Hawaii. You walk in and it was like this palatial lobby where I’m like, “why on earth is it this big?” Like, this could be more rooms, this could be experiences, this could be so many other things, except for this grand palatial entrance to make you feel like you’re royalty. Now, I understand that was the old concept, but the new concept, to your example, it doesn’t take much. It took sandwiches to create an experience. Sandwiches. That was the loss leader. So, I think there’s many bite-sized things properties can do.   

Robin Trimingham: Bite-sized, exactly! 

Adam Harris: Sorry, I had to say it. I couldn’t resist. But like yes, bite-size changes that really bring a lot of smiles to people’s faces and get people talking about you. 

Robin Trimingham: Yeah, and things that just about anybody can appreciate in your report. And — I’m going to quote this, make sure I get it right — you said that “2023 will be about creatively reimagining travel amidst chaos”. Okay. Why did you predict that and to what extent has it played out that way or not? 

Adam Harris: Prior to the pandemic, travel was more or less predictable and lodging businesses could forecast essentially what my business was last year. It might be a little improvement, but it’s pretty steady growth. Oh, I feel like the pandemic changed it all. It’s like, yeah, I can’t rely on 3% year-over-year growth anymore in demand. It is all over the place. And like the whole concept of like revengeful travel, it just makes it way more hard and difficult for an operator to say “Adam is showing up six months from now” because Adam isn’t planning his trips till six weeks prior now, because Adam’s busy and Adam’s got other things going on in his life, and Adam never seems to get on top of his own travel journeys (just note to self). So, when my family goes, we’re doing it last, last minute. If you look at this, there’s a couple of things that are having problems. Now, this is not hotel-specific. This is car rentals are having the same issue with surge. So, you’re getting these moments where travel surges because a bunch of people just want to go for a trip to New York for Presidents Day, and they all decided in six weeks or less. And so rental cars — luckily you don’t need a rental car in New York — but hotels drive up their price because they’re all using sophisticated revenue management. Airlines have to flex, and those routes become more expensive when there’s layovers or cancellations or storms or anything. 

Adam Harris: It causes unbelievable disruption in our industry. And so, the whole travel process is more complicated. And to be honest with you, it stinks right now. It’s not very good. I love the industry, I love traveling, I hate traveling right now. It’s not fun. It is constantly being delayed. And like, I’m a regular, I’m the highest level status on Delta 360, right? So, like, for me it used to be like I’d go to the lounge, I’d check in early and you know, everything was fluid. My God, I never know what I’m going to experience when I show up at the airport, I never know what I’m going to experience when I book an Uber and I definitely have no idea what a hotel is going to operate like when I arrive. So, if that’s me and I’m a frequent traveler, I don’t know how that feels when the leisure traveler gets out there and starts getting cancellation delays and they start freaking out on “what am I going to do next?” Okay, so right there alone, we predicted that with the revenge travel, there would be chaos following purely based on our ecosystem is not set up. Our industry is short on staff.  

Robin Trimingham: Oh yeah.  

Adam Harris: There is too many unpredictable travel patterns, right? And as a result, that’s got to cause chaos somewhere. Something has to give. It just couldn’t sustain itself, and I think we got that right. 

Robin Trimingham: On the airline perspective, I won’t call them out, but there’s a very major North American airport where the baggage conveyor belt thing has been broken for months, and they’re mounting bags like sky high and then getting a cart and taking them all at once. It’s a mess. 

Adam Harris: Yeah, I didn’t want to quote some of the airline industry. I didn’t want to pick on the airlines. But if you look at Cirium and you look at their aviation analytics, 80% of all flights in North America were on time. That was in May of 2023. You fast forward to the end of the summer, it was 65% of all flights were on time. Like that’s problematic, right? I’ll give you a great example. I checked in at a Marriott property, a Marriott-affiliated property in New York. I was taking a red-eye to New York, and I had two long days. And so, I booked the night before so that I could ensure that when I arrived at 6 a.m. in New York, I could go straight to the hotel and go to my room and sleep for three hours before my meetings. Well, guess what? Newark had a flight outage, which caused a bunch of redirections and a bunch of people getting stuck and taking trains to New York or whatever it needed to be. They sold my room because I didn’t show up the night before, even though in the notes in all these things it said “he’s arriving at 6 a.m.” and I paid for the room. And so, I got there, and they’re like “I don’t know what to tell you, your room won’t be ready until 4 p.m.” and I’m like “That doesn’t work that way”. And so, then it became this back and forth with a GM who did what he was supposed to do. You had a no-show, you sell the room. However, they didn’t read the notes. So why would the notes be buried in an application? 

Adam Harris: So, in our case, you can’t check someone in unless you read the notes. Our technology actually would have prevented the walking that ultimately happened to me. I had to be walked to another property and I was dead tired. And so like, that’s a horrible journey, but I just I look at what’s happening between air and hotels, they’re connected. But here’s how Cloudbeds is trying to make a difference. Now, we have Whistle, it’s our guest engagement platform that allows two-way conduits to the staff at the hotel. If I need a towel, or if I have pre-arrival needs or if I’m late and saying, “Hey, I miss my red, I do not sell my room, I will be there at 10 a.m, I booked this ahead of time,” they would have had the ability for their staff to organize around what the guests are looking for, both pre-arrival and during stay. That’s revolutionary. That’s like going to a Fairmont or Four Seasons or a St. Regis and getting the text message concierge. We’re bringing that to the masses. We believe that every hotel should deploy the same technology because this is where the guest is on. They live on these devices already. Interact with them on their own device, don’t make them email or phone call, just go back and forth and live environments. 

Robin Trimingham: It is really amazing just how quickly some of these new technologies can completely change the travel experience. So, why are independent properties so perfectly positioned to benefit from this confluence of macro and micro trends and stuff that you and I have been chatting about? 

Adam Harris: Big brands are real estate, independents are hospitality. That’s how I off the cuff answer that. And here’s why. Independents give travelers what they often look for, so, slowing down, curating in a conversation, just hospitality. That’s the number one priority. Without franchise agreements and some of the rigid brand guidelines, it enables them to conform to not only the experience that we talked about, but, to be honest with you, the agile sort of behavior around, “Oh, shoot, Covid wipes 30% of my staff out, I can’t hire 30% of my staff anymore, what am I going to do?” Well, an independent might not be governed by unions, they might not be governed by certain standards of who you have to have on-site, which means that you can flex down and you can retrain and up level skill. So like, some of the things that I love is I have a property out of Maine that has a property group out of Maine that has five properties. They have trained their front desk staff and their housekeeping staff to do the same job. Okay? because they know there are moments where they need extra help. And so, they’ve upleveled two different individuals to do to do more of their property. 

Adam Harris: Now, they’ve automated a lot. They don’t have a front desk, they have no person on staff. So they have five hotels in the same city, they’re all clustered together with the same team that operates all of them and, based on whistle and going back and forth on needs, they’ll just run someone of the property to take care of that service or not. It is a brilliant operating business model, but if you’re a franchise, you couldn’t do that. It’s not possible. You are conformed to blinders and guardrails, and I think this industry doesn’t need blinders and guardrails anymore. It needs innovation, and it needs people to stop, listen and take a step back and say “What we’re doing is wrong because the consumers are shouting from rooftops that they want something different and they’re just not being delivered”. That’s where short-term rentals stepped up. Short-term rentals stepped up during the pandemic days by offering them even greater flexibility. But now, the guest is coming back to the hotel because they were sick of the inconsistencies around short-term rentals because these aren’t professionally operated businesses. 

Robin Trimingham: Yeah, and contacting the owner when there’s a problem that can be problematic, for lack of a better way to say it. Let’s chat about a question that’s come up several times along the way. Everybody I talk to seems to have a different opinion regarding whether OTA or direct bookings are trending up. And where are Millennials and Gen Z? Where are they booking? What does your data say about all of this? 

Adam Harris: So OTAs are 100% trending up. That’s always been the case. That’s been consistent year over year, except for during the early pandemic days. But, interestingly enough, our data also shows that they haven’t replaced direct reservations to pre-pandemic levels, okay? So, even though things are moving up, they’re not taking from the direct reservation. They’re basically cannibalizing each other to some degree, and that is a very good thing. And I actually don’t think that ever goes back to pre-pandemic levels, which means hotels, at least our hotels, are able to maintain larger market share for direct reservations. So, during the pandemic, many hoteliers sold their inventory to local travelers, right? That whole “Is it drivable?” They started marketing to the driving distance. Many hotels updated their websites during that time. They updated their booking engines. They started offering marketing-ish or promotional value to the savvy technical consumer. They also started doing packages for extended stay: “Come here, check in on a Thursday and work for two days and then enjoy the weekend rates,” right? So, what they ultimately did is they outsmarted what an OTA is very good at, and that’s reaching the consumer. But the consumer has always done 36 touch points to book a hotel room, 36 touch points to book a hotel room. 

Adam Harris: So, even though I might book through Booking.com, I’m still probably going to the hotel’s website. So, there’s moments there that if you upgrade your entire ecosystem of whatbrand.com represents to you and how a consumer can interact, you’re going to capture some of that. And so even though that billboard effect is very real, all of us are seeing in shouting from rooftops that we need to just do more for these independents to give them a fighting chance, because at the end of the day, the franchises or the major brands in the OTAs have partnerships in place, right? There’s a symbiotic relationship there. They’re obviously at odds, but everyone wants more direct reservations. But, at the same time, we’re seeing record booking volumes, record revenues coming from the OTAs. And so is this entire industry. So, I don’t necessarily have a definitive answer to this as one is better than the other, but what I’d say is it’s moving in the right direction, and I think the share of market going to direct is here to stay with the right tech and more so the consumer is aware of that. And so we just need to continue to do so. 

Robin Trimingham: That’s interesting. We’ve only got a couple of minutes left here. So, let’s finish up by talking just a little bit more about extended stay, because I was interested that your report said, at least with the independents, the average length of stay is four nights or less. In your opinion, what could a boutique operator do to try and attract guests for longer stays? Because longer stays more stability? 

Adam Harris: Two things. One, going back to that value, it all starts with value. So, in an inflationary environment, you are trying to take a business traveler and convert it into a longer-term traveler. So, you need to be able to meet the needs of the business, but then address the needs of the leisure stay. So, that blended traveler really needs to be thought through, and that might mean you have to upgrade your internet, or create dedicated workspace or create a common space. If you’re not doing a lot of meetings anymore, well, make that a little co-working space, with a little bit of lounge and comfy chairs or private booths so they don’t have to work in their hotel room. Next week I’ll be in Boston and for Google’s travel advisory board, and I have to do a board meeting, like my company’s board meeting with my board out of a hotel room. That’s the least desirable place to sit for seven hours in your hotel room, but it’s what we do. We don’t have an office in Boston, so it’s fine. But, nevertheless, so blend travel and then bringing that back to the value discussion. So, if I’m addressing those two sides of the coin, what do I need to do to create the opportunity for longer-term stays that goes above and beyond my primary focus of my accommodation offer and like balance that? But, if you look at your ADRs, and then you look at your RevPars, and then you look at layer below, and you look at your GOPPAR and then you’re ultimately your TRevPar, you can begin to play with the mixture of who you’re attracting towards. So, you might want a hundred ADR, extended stay for 30 days in a room because you know you’re always going to have unoccupied rooms based on all your new patterns. So, that might be you selling down your rate, but actually might be a great way to boost your profit because, to your point, you do little bite-sized sandwiches that brings in drink consumption, or you do walking tours on the weekend that are an incremental $15, or you afford that individual the ability to wave routine laundry in sheets in your room, which saved you $1.50 every day that you didn’t have to do detergent and water and electricity. So, for me, it’s not looking at your margin numbers like “Oh, my RevPar is higher than it’s always been.” Who cares? That’s out of your control to some extent, because that can be market forces. I want to know, are you more profitable by guest both on accommodation and incidentals? That’s what I want to look at is average spend. 

Adam Harris: And if you feel like you have two camps of consumers that are interacting with your property and you don’t understand why you have two camps, well, look at the data. The data is going to tell you why, where they are coming from. And so, platforms like Cloudbeds are uplifting the data side of what a property is actually producing, with very rich and robust capability of understanding and turning that data into actions. But look, we have a university, we have lots of content online to talk about what data you should be looking for, we’ve done the comparisons between TRevPar, GOPPAR, RevPar and ADR. I think we need to just up-level the skills of understanding what to look for in a property, and then from there you can conform to what you need to do to tweak the business. But, right now, we talk about dials and levers. There are plenty of dials and levers that can be turned and flexed up and down, left and right. That will bring so much micro-transactional value to the guest as well as to your bottom line. It doesn’t take much. We’re talking about just making a dollar here or a dollar there and then saving a dollar here, saving a dollar there. You add all those things up, it’s going to be a lot of pennies, and it’s going to lead to a much better forecast ability for you and your property to then experiment and ultimately go back to what the traveler is looking for and creating value on both sides. And I think that’s the simple math, but there’s a lot of complexity inside that. 

Robin Trimingham: I do think that you and I should talk again in the future because you have shared a lot of very insightful information, and when you’re an independent out there on your own, it’s really hard to get good insights. So, I want to thank you very much for your time today.  

Robin Trimingham: You’ve been listening to The Innovative Hotelier. Join us again soon for more up-to-the-minute insights and information specifically for the hotel and hospitality industry. You’ve been listening to The Innovative Hotelier podcast by HOTELS magazine. Join us again soon for more conversations with hospitality industry thought leaders.