New Technology in the Hotel Industry – 2015

Robot Receptionist - Hotel Industry Technology
Image: Youtube
Every year, new hotel and travel technologies are born to amaze both guests and hoteliers. The birth of keyless entry has encouraged many companies to invest more time and energy in creating more innovative technology for the hospitality and travel industry. The following are the newest technology trends in 2015.

1. Apple Watch

Apple Watch was first introduced to the public in September 2014. It instantly started a buzz that rippled all over the Internet.

This year, Starwood has finally integrated their keyless app on the Apple Watch. With the help of Bluetooth, not only will guests be able to use Apple Watch as a key to their room, Starwood also made sure that guests can conveniently check in with it without the hassle of filling out forms or making phone calls.

Marriott, on the other hand, announced a new feature – the Apple Pay. This technology lets guests pay on the front desk simply by bringing their Apple Watch (or any other Apple device) near a contact-less reader. Marriott is the first hotel to release this feature and it will be available in different locations in the US.

Just recently, Accor announced their app, the Accorhotel Apple Watch app which is designed to work with smartphones in order to make reservations and get access to hotel information as well as property maps. This app also notifies guests when a room is available for online check-in.

IHG is also one of the hotel chains who joined in the buzz. Its Apple Watch app has the ability to translate words in 13 different languages, as well as help its user with common phrases.

Uber and Expedia are some of the travel companies that have also made adjustments to maximize the benefits that the watch offers.

Right now, we’re still waiting to actually experience Apple Watch in the hospitality industry. Although the number of hotels with this technology is currently limited, we can be sure that many more will eventually install this feature.

2. Social Hotel Booking

This idea started in 2013 when hotels started allowing their fans to book a hotel room through Facebook. Their goal is to lessen the time it takes for their guests to book a room. Shortly after, hoteliers started inviting their guests to book through Twitter. Since then, many companies created different applications to cater the feature on mobile phones.

During the first quarter of 2013, almost half of global hotels who participated in a survey admitted that they are using social media as a booking engine.

This year, Like2Buy made social hotel booking reach a whole new level. Conrad Hotels has just recently announced their new feature – booking through their Instagram profile, with the help of Like2Buy Technology.

3. Robot Receptionists

This new technology will be implemented in a Japanese hotel called Henn-na Hotel (which means “strange hotel”). The robots look like real humans that you will have goosebumps when you meet them. These hotel receptionists not only look human, but also talk like one. They are designed to be able to have an “intelligent conversation”, too.

Let’s see how guests will react to these robots when the hotel opens in July.

4. GPS – booking

Now this will make mobile booking an old technology. According to Washington Post, General Motors is adding a new and exciting feature on their OnStar GPS program they named “AtYourService”.

This is a paid subscription for drivers. The feature includes the ability to search for nearby hotels through a car’s GPS and then book it with the help of Priceline.com. Not only will your car be able to find and book a hotel for you, it can also direct you there.

5. Botlr

Also called “Hotel Robots”, these types of robots are different from the Robot Receptionists we mentioned earlier. (By the way, Henn-na Hotel will have Botlrs, too.)

If you have visited Aloft Cupertino in California recently, then you must have met these robot servants that do simple chores like cleaning, or delivering snacks or small amenities to your door.

This robot is powered by WiFi, uses a mapping system to navigate through the hotel, and a camera to avoid bumping into people. After the request has been delivered, guests can leave a review using the Botlr. If it is a positive review, the Botlr will dance. Isn’t it fun?

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Hotel Transaction Review for 2014

Cleveland Research has just recently released the results of overall hotel transactions throughout 2014.

The graph below shows that hotel cap rates started at over 8.0% in 2014 and has been inconsistently declining throughout the year, ending at 7.7%. Since the transaction volume in the hotel sector represents only 10% of all commercial real estate transactions, the data in this sector are subjective due to fewer transactions.

Hotel transaction Review for 2014

Below is the graph for US hotel cap rates and spread, showing that cap rates remained close to 500-550 bps. This is above the 10yr benchmark throughout 2014.

Hotel transaction Review for 2014

Cleveland Research also compared the activities of CBD hotel properties and suburban hotels. Throughout 2014, CBD Hotel properties had -35 cap rates while suburban hotel cap rates are flat. This could be the effect of more activities in the full-service segment from private equity and REIT buyers. The Economy, on the other hand, hit 9.6%, confirming the expected results for 2014.

Hotel transaction Review for 2014

US hotel cap rates by city shows that NYC metro has the lowest at 6.3% and Houston has the highest at 8.8%.

Hotel transaction Review for 2014

Deal volume continues to show improvements. The total in 2014 ($460B) is 20% ($85B) greater than in 2013.

Hotel transaction Review for 2014

Although the Hotel sector represents only 10% of all the commercial real estate transactions, it is one of the fastest-growing sectors in 2014 (both in dollars and percentage terms) having increased by 46% by the end of the year.

Hotel transaction Review for 2014

US hotel deal volume by type shows that full service properties are at 66%, lower than the percentage in 2013 (71%). However, it still represents the majority of deal value in 2014.

Hotel transaction Review for 2014

Compared to 2013, the hotel deal volume growth of full service properties has grown slower (it is up to 35% in 2014 compared to the 43% growth in 2013). The growth of limited service is notably high, compared to the $2B in 2013. It ended 2014 with $6B growth.

Hotel transaction Review for 2014

New York City Metro still dominates the hotel real estate deal volume, accumulating a total of $7.2B. NYC is followed by Hawaii, San Francisco, South Florida and Los Angeles, all four hitting between $2B and $3B. The total of these 5 markets represents almost half the total transaction in 2014.

Hotel transaction Review for 2014

Below are the top 20 largest buyers and sellers that represent the half of the total transaction volume in 2014.

Hotel transaction Review for 2014Hotel transaction Review for 2014

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Small Business Lending is Still Tight

Federal Reserve Banks of New York, together with Atlanta, Cleveland and Philadelphia had been conducting the Small Business Credit Survey and have just recently released the results on January 15.

The good news is the amount of credit available to small businesses continues to recover. However, it is still lesser compared to the credit supply available before the recession, especially for businesses with less than $1 million in revenue.

Cleveland Fed has the same conclusion when they put out their own report earlier this month.

bank lending cleveland fed
Report by Cleveland Fed

“Small business loans now stand 17 percent below the peak reached prior to the recession.
While small commercial and industrial loans grew 3.4 percent over the past year, this modest
improvement does not provide strong assurances about the health of lending in this space. In
contrast, lending to larger businesses (loans greater than $1 million) bounced back quickly
and loans outstanding are now more than 24 percent higher than pre-recession
levels.” – Cleveland Fed

The highlights of the small credit survey are as follows:

  • About 25% of small businesses hired new people in 2014.
  • 15% of small businesses got smaller.
  • 22% of over 2,000 small business had applied for loans during the first six months of 2014.
  • 54% of those who applied were given a portion of what they sought for and one-third were fully
    funded.

  • Attracting customers is the biggest problem faced by all small businesses during the first six
    months of 2014, which tells us that they had greater problems with demand than with supply.

  • The second problem is having lack of credit.
  • Other problems faced by the small businesses include uneven cash flow, increased cost of running
    the business, as well as complying with government regulations.

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    Minimum Wage Legislation on the Horizon

    The recession has ended but many American households still don’t feel so. As of today, there are millions of Americans who are living below the poverty line. In 2007, only 12.5% of all Americans lived in poverty but the rate has risen to almost 19% this year. Employees started receiving lower wages earlier this year, even those with advanced degrees.

    We may have observed that the government has been economically productive but American workers still do not see their wages increase. In fact, if their wage is not stagnant, it declines. This issue poses as a challenge to the economy. Most believe that the pay scale issue is the reason why there is an overall income inequality.

    While the wages of 37 states declined by 0.1%, 13 states controlled by democrats recently raised their minimum wage by 0.9%, 5 states through legislation and 8 states through inflation indexing. In 2021, Seattle is expecting to have a minimum wage of $15 by gradually increasing their minimum wage. On the other hand, California is currently working on their California Minimum Wage Increase Initiative for the purpose of raising the minimum wage to $12 per hour by 2016. It is the only large state that can place a minimum wage initiative on November 2014. Other smaller states who attempt to vote for higher increased wages include Alaska, Arkansas, Illinois, Nebraska and South Dakota.

    Conservatives do not like the change, arguing that it will result in reduced job growth. But Jared Bernstein, the former chief economist for Vice President Joe Biden, concluded that there is 1.8% job growth in states where minimum wages were raised. As a result, unemployment rate declined to -1.2%. Bernstein admits that these are just small changes. However, they prove that minimum wage hike is not the reason for reduced job growth. Most importantly, the senate could soon vote for the increase of national minimum wage. The election is pending, and decisions will come down on not only the minimum wage issue, but also the legislators that will make the difference in the decision.

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    REITs and Hotel Companies are “Rocking & Rolling”

    Q3 reports from various hotel companies as well as various REITs show great performance and outlook for the hospitality industry. Topping the list was Hyatt Hotels with net income was $32 million during Q3. RevPAR increased 7.6% year over year. Hyatt which sold its Hyatt Residential Group and other assets also announced openings of eleven hotels in the quarter. “The global economic environment continues to be healthy for travel demand, particularly in the U.S.” said Mark Hoplamazina, president and CEO of Hyatt Hotels. “We continue to open new hotels in important markets”. Also, Hyatt currently continues to be active on the transaction side as they have seven full service and select service hotels listed for sale.

    Q3 also is a banner quarter for REITs, with Host Hotels & Resorts leading the way. Host’s net income increased to $144 million a significant growth from same period last year which was $19 millioin. Other performance indicators also showed significant growth. At FelCor Lodging Trust adjusted EBITDA increased to a stunning $61.1 million an increase of $6.3 million. Significantly up for previous comparable periods. FelCor sold three non strategic hotels and also agreed to sell three more with aggregate gross proceeds of $102 million. According to Richard Smith president and CEO of FelCor, “I am very pleased with our performance in the third quarter. This strong growth reflects the successful execution of our strategic plan and transformation of our portfolio”.

    Marriott, Hersha, and others have also reported great period over period growth and performance. It looks like the industry is healthy and sees nothing but blue skies.

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    Apple’s Solution to Never Lock Yourself out of Your Hotel Room Again

    Have you ever locked yourself out of your hotel room? You may not remember to bring your keys with you especially when you’re just leaving your room service tray outside your door. Or better yet, remember the time your magnetic strip got ruined because it was too close to your cell phone? Well, Apple has the solution and the “key” for one of the most common problems of travelers these days.

    You can ask ‘Siri’ to post on social media, change the TV channel and monitor your health and fitness – these are some of the amazing things you can do with the Apple Watch and iPhones. And to make your vacation hassle-free, convenient and fun, Apple is also planning to integrate a feature that allows users to check into and unlock their hotel room. You can even make mobile payments through this watch!

    Along with the iPhone 6 and iPhone 6 Plus, the Apple Watch was introduced to the public by the Apple Inc. in Cupertino, California last month. Gadget enthusiasts are excited for the release of this smart-watch in the early 2015. Likely other smart phones and watch solutions will follow with their own technology developments.

    To drive this technology into the industry, Apple is partnering with Starwood’s Hotels to make this feature possible. This application will have the ability to unlock hotel rooms by simply hovering the watch over the door. It’s amazing what this $350 watch can do, although you have to partner it with an iPhone to function.

    Using smart phones to unlock hotel rooms is a pilot program released by Starwood Hotels and Resorts earlier this year. This new technology, when partnered with lock maker Assa Abloy, will result in a more convenient hotel stay. At least you won’t be locked out with just your robe on.

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    City of San Francisco Enters the Hospitality Business

    On Tuesday, October 7, 2014, the San Francisco Board of Supervisors voted 7-4 to pass a law that came to be known as the “Airbnb Law” which will take effect in February 2015. It is estimated that this will generate over $11M in tax revenue for the city of San Francisco. This law legalizes the practice of turning homes into little hotels.

    These hotels are part of a worldwide phenomenon originated by Airbnb, a company now valued at $10 Billion and sights on going IPO. Incidentally, that valuation is higher than some very established hotel companies. So, from Paris to Portland the trend of turning homes into “ad-hoc” hotels have generated much controversy with regards to legality, taxation, and safety.

    This law addresses some of those concerns and puts restriction on the practice. More than two years in development, the law now allows for the Airbnb practice to be a reality. San Francisco has long barred residential rentals of less than 30 days. This new law allows short term rentals under certain caveats. The law allows only permanent residents to offer short term rentals. It also establishes all the new hotels “defined as a registry of hosts”. It also mandates Transient Occupancy Tax (TOT). And, limits the rental in terms of days, and lastly it requires “the host (hotel)” to carry a liability insurance level of $500,000.

    All of these guidelines will fall for enforcement by the Planning Department. This is great opportunity for San Francisco residents to earn extra income and for the city of San Francisco to maintain permanent residential units converting to vacation rental.

    Airbnb has over 5,000 rental units available in San Francisco. The 6 year old startup has a valuation higher than many established brands. Airbnb was very upbeat in statements after the law was passed. Good news for residents of San Francisco, they are now able to get into the hospitality business. Bad news for hoteliers, 5,000 rooms are like 50 new hotels with a 100 rooms each coming into the environment.

    Since the dawn of time, it has been practiced to allow at your option a stranger, who is far away from his home, stay in the comforts and conveniences of your house. A simple and responsible act of kindness that now is a business opportunity for the household and the city of San Francisco.

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    Los Angeles Minimum Wage Increase for Hotel Employees

    Since 2010, workers at LAX have had a higher minimum wage that is now up to $15.84/hour. Recently, this ordinance was also approved for thousands of hotel workers.

    Hotel employees and lawmakers have been pushing for a higher minimum wage. And on September 23, they cheered as the Los Angeles city council voted 12 to 3 for a gradual, citywide minimum wage increase. So far, it is the highest minimum wage for hotel workers in the US.

    There are conditions, however. The $15.37 rate will be given to hotels with 300 rooms or more. Smaller hotels with at least 125 rooms will be impacted on 2016.

    Last year, it was reported that 27% of LA’s population lived in poverty and a wage increase could be the solution. Many supporters believe that this will create balance in the community when employees would be able to provide for their family by spending their salary in local businesses.

    Other cities are expected to follow the lead of LA. Wall Street Journal announced that 11 state legislatures will implement a minimum wage increase this year. Massachusetts is planning to order an $11/hour wage in 2017. President Barack Obama, on the other hand, agreed to raise the federal minimum from $7.25 to $10.10 an hour. This would be the first nationwide increase since 2009.

    Other states like Alaska, Arkansas, Nebraska and South Dakota are considering ballot initiatives to push the increase of minimum wage. In Long Beach, voters approved a $13.53 minimum wage and paid sick days for hotel workers.

    Business advocates believe that higher minimum wage will result in job loss at many hotels. They argue that increased minimum wage has a negative impact on the local economy.

    This could be a trend nationwide as states and counties look to businesses for their own economic woes.

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    Hotel Surcharges You May Not Be Aware Of

    The hotel industry sure plummeted during the global recession, but quickly found a way to get back on track. In 2012, hoteliers collected approximately $1.95 billion in additional surcharges and fees. As if a few mandatory fees are not enough, more outrageous hotel surcharges are added to the list every year.

    According to a study released by New York University professor Bjorn Hanson, the hotel industry is breaking its record by charging customers $2.25 billion in surcharges and fees. This practice is not new since hotels started charging for hot water, towels, and even a penny for each ride in the hotel elevator way back in the 1990s. According to hoteliers, this is a great strategy to keep their doors open.

    Airport shuttle, for example, is usually free, but some hotels are starting to collect fees for this service. Also, beware of “complimentary” drinks and snacks. Bottled water already costs over $5 in hotels. These are normally served on your hotel desk so beware!

    The hotel industry has found a way to make these services seem more than what they’re really worth. “Be extra-attentive,” Hanson warns travelers.

    Cancellations have different fees depending on hotel policies, no matter how early you do it. Even if your plans have changed and you need to check in early or check out late, you have to pay for that.

    Due to the rising energy cost, the “energy surcharge” was born so don’t be surprised when you see this on your next bill. Hotel golf courses and lawns may look appealing, but some hotels charge for groundskeeping surcharges.

    Even if you are not planning to open that in-room safe you actually never needed, hotels will still charge you $1 – $3 simply by having it in your room. And while most coffee shops offer free Internet everywhere, hotels charge for the use of their high-speed Wi-Fi services, per minute or per day. You have to pay per device, too! So if you’re using the laptop and someone else in the room is using an iPad for the internet, you’re paying double.

    Now that’s a lot! But we’re not done counting yet. The in-room minibar is a great hotel amenity not until the items in it turned into potato mines. If you don’t want to pay for it, you have to be extra careful. Because there are sensitive machines, your bill will keep adding up even when you accidentally nudged an item. Even adding your own food in the minibar can incur fees. You think it’s safer to request the minibar to be emptied before your arrival? Think twice unless you want to be charged a “restocking” fee.

    Also, receiving and mailing packages now cost up to $25 per package. Guests have to pay for luggage holding, too. Don’t forget the mandatory valet which normally costs $25, plus the tip, of course.

    If you like to pay for extra convenience, Las Vegas is the place for you. Avoiding the long lines, early check in, and late check out cost $30 each. If you want a specific type of bed or a certain room, get them for $30.

    A lot of travelers are frustrated with these changes. However, there are ways you can avoid these unnecessary fees. When in doubt, it’s okay to ask hotel personnels. Also, doing your research ahead of time will save you from surcharges and hidden fees.

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    Fair Franchising – A Glimpse of the Future

    California is known as the home of franchising. Recently, some businesses raised their concerns regarding the California Senate Bill 610 which was introduced by Senator Jackson on February 22, 2013. Also pertained to as “fair franchising”, it is intended to protect franchisees and to benefit employees as well.

    While some are thankful for the government’s release of this bill, most businesses believe that the fair franchising bill is far from fair. This bill will lead to reduced product quality and damaged business brand, factors that will certainly hurt small businesses. As a result, business owners’ efforts and hard-earned money will go to waste.

    We can see a lot of fast food chain owners revolting, but this legislation greatly affects the hotel industry, too.

    The realization that this bill could limit expansion throughout the state is a proof that while it is intended to help business owners, its consequences do the opposite. Looking into the future, we see small businesses closing and owners leaving their future developments behind.

    Small businesses are now begging the government to stick with the current franchise model. We can agree that the situation in the hospitality market is balanced and further changes are unnecessary. In fact, it has been helping small business hoteliers build their brand and strengthen the system. This is why we can observe that the occupancy rates of most hotels are increasing.

    There are also businesses that are consistently not performing well. This bill will not allow these businesses to be removed from the market, and will thus have a negative impact on the industry and the state of California.

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