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© Springer-Verlag Berlin Heidelberg 2016
Roman Egger, Igor Gula and Dominik Walcher (eds.), Open Tourism, Tourism on the Verge, DOI 10.1007/978-3-642-54089-9_6
(1) (2)
Crowdsourcing in the Lodging Industry:
Innovation on a Budget
Brendan Richard
1, William P. Perry
2and Robert C. Ford
1University of Central Florida, Orlando, FL 32816, USA CII Holdings (Pty) Ltd, Gauteng, South Africa
Brendan Richard (Corresponding author) Email: Brendan.Richard@ucf.edu
William P. Perry
Email: William@CIIHoldings.com Robert C. Ford
Email: rford@bus.ucf.edu
Keywords Innovation – Crowdsourcing – Stakeholders – Goal conflict – Lodging industry
1 Introduction
For the longest time, hotel brands have followed the ‘closed’ model of innovation by creating amenities in-house and force feeding them to guests, with an
increasingly dynamic marketplace, and the emergence of a younger and more sophisticated travel consumer, this model no longer works
Chekitan Dev, Cornell University
As the lodging industry challenges itself to develop new models to adapt to the ever-changing ways in which we work, travel, and experience leisure, it has found a willing partner in the crowd. By seeking to co-create solutions with a diverse crowd of potential customers, interested parties and experts, hotels are opening up their
innovation process to the world. Hotels are hopeful that through this two-way dialogue they will be able to develop new models of service excellence, to provide a new level of authenticity and personalization, and position themselves to successfully adapt to future trends. One such firm recently announced the start of a campaign to
collaboratively design the world’s first ‘cotel,’ a crowdsourced hotel. This hotel will be designed and funded by a worldwide crowd of contributors and built in New York City’s Downtown district. Seeking to infuse the industry with new ideas, and
possessing the belief that the intelligence of the crowd is greater than that of any one expert, the company is offering up to thousands in prizes for design contributions. The design competitions, judged by a panel of experts, will seek out contributions in the areas of digital services to improve the guest experience, and designs for the suites and public spaces (Vivion, 2014).
The drive to partner with the crowd to co-create solutions is not limited though to just small and boutique hotels. As Marriott executives seek to shift their image from “a sea of sameness to a world of difference,” and avoid as some younger guests have quipped “another beige room,” (p. 1) they have sought to engage in a truly consumer-driven innovation process (Barnes, 2014). Eschewing the old corporate-centric method of innovation followed by a delayed process of guest validation, Marriott has instead constructed a new innovation lab at its headquarters where the idea starts with the consumer. Leaving traditional focus groups behind, hotels are taking advantage of social media, which acts as a real-time, worldwide focus group. Other prominent brands such as Starwood Hotels and Hyatt Hotels have recently taken similar steps including opening up innovation labs, seeking out contributions through social media, and partnering with open-innovation consultancy groups. Driving all of these efforts is the simple logic that in order to better understand what is most important to the
customer, and how best the hotel can meet their needs, hotels need to seek out solutions from the customer (Trejos, 2013). To better appreciate why this new innovation
technique is applicable to and beneficial for the lodging industry, we seek to first understand the current state of the industry, the challenges it’s facing, and the
opportunities that exist.
Lodging represents one of the oldest industries in existence. Originally little more than four walls, a roof and a bed; early forms of lodging existed solely to provide shelter for travelers. Yet, within the past century the industry has grown from relatively humble beginnings to playing a vital role in the development of trade, commerce and leisure travel on a global basis. In the U.S. alone, over one billion roomnights are sold each year, with revenues exceeding 150 billion (STR Analytics, 2013). Innovation over the past century has seen the development of amenities such as telephones originally introduced by Statler, wireless service and flat screen televisions to creating standards of opulence as pioneered by Ritz, financial innovations that created branded chains such as those forged by Conrad Hilton, and technological innovations such as the first central reservation system (Holodex) introduced by Kemmons Wilson (Bardi, 2006). In spite of all this innovative activity, however, the lodging industry is constantly
challenged in its efforts to design products and provide services that meet the ever changing needs of the guest.
Chain hotels in the lodging industry typically operate with the support of multiple stakeholders, including: the institutional owners, the brand, and the management company. The institutional owners provide the capital that builds the properties and owns the land. The brand provides the marketing effort that seeks to provide a customer preference. The management company provides the operational expertise and
capabilities that ensure that the investment of the institutional owners is maximized while protecting the brand promise for the brand and making money for the operator.
Obviously, those goals can and do conflict as they do in any organizational arrangement where one function seeks to prioritize their own interests over those of other functions (Barney & Hesterly, 2009). Getz and Carlsen (2005) have suggested that this owner-manager structure could result in less specialization in management, less professional managers, and lesser resources. Martínez-Ros and Orfila-Sintes (2009) further surmise that this relationship can ultimately lead to a decreased likelihood of hotels engaging in radical innovations.
The competing goals of financial stakeholders has been driven by the recent rise in institutional ownership. While the history of this industry has been characterized by sole proprietors, the success of investors in finding a consistent and sustainable yield in the 1990s led to the increased bundling of individual properties in financial packages that could be sold on Wall Street to individual investors or to cash heavy institutional investors looking for places to invest growing pools of retirement funds. The goal of these investors is consistent and predictable yield. Thus, they sought and found
packages of properties that would yield a consistent percentage (Raleigh, 2012). While ownership seeks to drive profitability and value to the shareholders, the brand and management firms seek to maximize revenue per their contractual obligations. Given the conflicting goals of the stakeholders and the short-term investors perceived
unwillingness to engage in a long-term innovation strategy, how can the industry generate the innovative activity that will allow it to sustain its ability to perform? In other words, what strategy can it find that is inexpensive, requires few resources, and consumes little time. We suggest the answer lies within open innovation, specifically crowdsourcing, which can yield the innovations the industry needs without incurring substantial costs, consuming resources, or utilizing dedicated employees.
Over the next 5 years the industry will begin to again experience expansion, with strong growth in boutique and extended-stay hotel, resorts and spas (IBIS, 2013).
Institutional investment will increasingly turn its attention to international growth fueled by expansion in developing markets such as China, India, the Middle East and Africa and Latin America, with merging economies expected to account for 57 % of
international arrivals by 2030 (UNWTO, 2011). Guests are demanding new facilities and amenity offerings such as: open lobbies, social spaces and distinctive designs.
Guests are seeking authenticity, new experiences, personalization, all while maintaining simple and seamless service. In addition, over half of consumers in the lodging industry consider sustainability when making a purchasing decision. There is room for growth in leveraging consumer sentiment, engaging guests, leveraging social media and creating unique experiences.
It has been contended that core tourism actor’s, such as hotels, possess limited resources for innovation (Hjalager, 2010). Adapting to new trends can be challenging, risky and ultimately costly. New trends require new knowledge, new ideas, new processes and procedures. New ideas will require new innovations in order to obtain practical, beneficial, implementable solutions. It is therefore imperative that the lodging industry considers and explores new innovation techniques—especially ones that are less costly, and produce solutions that are easily implementable. This chapter provides the readers with: an overview of innovation in the lodging industry and its
impediments, strategies to overcome these impediments, a rationale for why
crowdsourcing is an appropriate innovation technique, a crowdsourcing framework with examples of solutions for the industry, and the managerial implications of pursuing a crowdsourced strategy.