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Van Paasschen: Innovation key to fighting disruption

Column: industry Tag: innovation,hotel industry,Hotel Data Conference Published: 2017-08-16 13:56 Source: Author:

Former Starwood Hotels & Resorts Worldwide CEO Frits van Paasschen delivers the keynote address at the 2017 Hotel Data Conference. (Photo: Event Coverage Nashville)

NASHVILLE, Tennessee—The hotel industry has more than one big, bad wolf knocking at its door, but being nimble and forward-thinking will help keep the various threats at bay.

That was part of the message of the keynote speech delivered by former Starwood Hotels & Resorts Worldwide CEO Frits van Paasschen during the second day of the Hotel Data Conference.

During his talk, van Paasschen called on the hoteliers in attendance to devote more time and energy into identifying the threats encroaching on their segments of the industry, and to do what they can to prepare for them.

To underscore this point, he offered a simplified definition of what “disruption” is.

“Disruption is when you wake up and you realize you’re in trouble. And either you didn’t see the change coming or you saw the change coming and you didn’t do enough about it,” he said.

By that definition, disruptors include more than the usual hotel industry suspects—alternative-accommodations platforms and online travel agencies.

Van Paasschen noted the accelerated pace of change, driven by technology and social media, can make it somewhat difficult for hoteliers to keep their eyes on all the potentially disruptive forces, especially when working in a climate that is resistant to changing with the times.

He said there are a few reasons why people push back against change.

“Change does not benefit everybody equally,” van Paasschen said. “In fact, some people are harmed by change.”

Another reason change can be difficult, he said, is that cognitive bias leads people to not seek empirical truth but instead view reality in a way that supports their preconceived opinions.

“People aren’t actually rational,” he said. “It took behavioral economics to come along and say, ‘Not only are people irrational, but they’re systemically irrational.’ We make the same stupid mistakes together, and it causes something I call a change blindness. When we believe something, we look for evidence to prove what we already believe. We choose what we want to believe—not based on the data but based on what our cohorts and our friends and our peers believe. And maybe the best one is we tend to overestimate our own abilities all the time.”

He pointed to two major ways the hotel industry has been changing lately: through disintermediation and disintegration.

Disintermediation, van Paasschen said, is the result of traditional hotel companies being threatened by companies like TripAdvisor, which offered a level of transparency about the quality of properties—so much so that it eroded the value of hotel brands, Airbnb and Hotel Tonight, which provided consumers access to “underutilized capacity” for lodging.

As far as disintegration, he said, various vendors and third parties have been individually offering up services and functions, such as revenue-management systems, that were once the domain of hotel brands only.

Van Paasschen said when he was Starwood?CEO he recognized the systemic problem his company faced, both lacking overwhelming scale or the nimbleness of smaller companies. And he sought to combat that by creating “a tech platform that helped guests feel special and recognized.” That morphed into the company’s loyalty platform, Starwood Preferred Guest, which Marriott International officials have repeatedly pointed to as one of the primary reasons they acquired Starwood and its brands.

Advice for hoteliers

To counteract these issues, van Paasschen said, hoteliers should have a good mix of both traditional and cutting-edge skills, commit themselves and their companies to being innovative, and help others in their organizations take some ownership of the change happening around them.

He noted his teenage daughter knows more about social media than most of the people in the audience at HDC, but those types of skills need to be balanced with what he described as “old skills, which are based on how to relate to and communicate with other people.”

“The combination is what creates real power,” he said.

Van Paasschen noted the curve for innovation is shrinking all the time, and now companies like Tesla have found a way to create “negative cycle time in terms of innovation” by committing to constantly improving their products even after they’re in the hands of consumers.

“It used to be if someone in Detroit had a good idea, it would take five years for it to get to market,” he said.

While he noted people can be naturally resistant to change, he said that resistance softens if they “feel they have decision-making power.”

“We need to make sure we don’t make our organizations the recipients of change,” he said. “We need to make them co-authors of the change we’re all going forward with, not after-the-fact editors and critics.”

Some data around the state of the industry

In addition to van Paasschen’s speech, the second day of the Hotel Data Conference opened with a “Data that makes you say ‘hmmmmm’” presentation from Adam Sacks, president of Tourism Economics, and Elizabeth Winkle, chief strategy officer for HNN’s parent company STR.

Sacks and Winkle highlighted some high-level data points about the state of the industry and things influencing it, including the fact that the number of leisure trips per employee seems to be growing at an almost identical pace over the last 17 years, during which the number of business trips per employee also has been shrinking. Sacks said he doesn’t foresee the drop-off in business travel continuing indefinitely.

“There has to be a bottom to this thing,” he said. “There’s only so much businesses can continue to control travel because it’s such an important part of business activity.”

Another key data point was that baby boomers are an increasingly influential group, based both on the size of their families and the amount they spend on lodging. Sacks pointed out that people age 55 and over surpassed the 35-to-54 age group in both of those metrics recently.

“That does have profound implications on marketing and product development,” he said.

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