How the newest generation of hospitality businesses is revolutionizing the industry

When we think of the hospitality industry, it’s easy to gravitate toward big names such as the Ritz Carlton or Hilton. After all, these world-famous franchises have been the face of the sector for a long time.

But the hospitality industry is huge, and there are many more businesses to look out for. This is especially true for Southeast Asia, where over 90% of the region’s 450,000 lodgings are small establishments and are largely unorganized, according to a report by research firm Benori.

With these different stakeholders in play, it’s become difficult for new players to not just ensure their survival but also find success within the industry. This is where the latest generation of tech-enabled hospitality firms comes in.

Through the generations

Before the 2000s, the hospitality sector was occupied largely by individually owned hotels or franchises, says Amit Saberwal, founder of hospitality chain RedDoorz. This made up what the sector called generation 1.0 and 2.0.

With the turn of the century, the rising importance of digital capabilities saw online tech-focused businesses emerge. These firms mostly acted as travel agents and aggregation platforms (think Expedia and Booking.com, for instance) and were the next evolution of the hospitality business model (aka generation 2.5).

This infusion of tech made a world of difference, according to Saberwal, who has eight years of experience as a hotelier and was previously the chief business officer of online travel aggregation platform MakeMyTrip.

“These tech companies did a great job for customer experience, customer service, booking, and bridging the gap between the consumer and hotel better than the hotels could do themselves,” he says.

Amit Saberwal, founder of RedDoorz / Photo credit: RedDoorz

This can be seen in how generation 2.5 hospitality companies can accrue a huge amount of properties onto their online platforms, giving consumers a larger variety of options than what their generation 1.0 and 2.0 counterparts could offer. Hilton Hotels, for example, has around 6,800 properties worldwide. While that’s a big figure, it pales in comparison to the roughly 3 million property listings available on Expedia.

That said, generation 2.5 firms can’t solve all the gaps in the industry, especially when it comes to the tech needs of small establishments.

Primarily, the owners of these accommodations often had to deal with a range of complex, fragmented solutions to operate their businesses. These include things like a property management system, a connection to multiple distribution networks such as Booking.com or Agoda, an accounting platform, a payment solution, and a dynamic pricing system, among others.

“It’s very difficult for a person who’s getting – in the Singaporean context – S$3,000 (US$2,200) to S$4,000 (US$2,900) a month as a hotel manager to have the mindset to bring all these [solutions] together and do it constantly,” says Saberwal.

The next evolution

This is where generation 3.0 comes in.

On the tech front, this new generation of firms provides small-lodging owners with something that previous generations could not: a combined set of solutions to help managers focus on day-to-day business operations and management.

In Southeast Asia, RedDoorz and rival Oyo have emerged as the two biggest generation 3.0 players, with 3,472 and 3,202 properties in the region, respectively.

Saberwal likens generation 3.0 businesses to ride-hailing startups like Uber and Grab, with lodging owners as the drivers of ride-hailing vehicles. While drivers take care of the day-to-day operations of the vehicle, Grab or Uber handles everything on the back end, such as the navigation and booking system as well as other related capabilities.

Similarly, some of the tech solutions provided by generation 3.0 businesses such as RedDoorz include dynamic pricing, booking features, property and payment management, and customer profile-based loyalty programs, among others.

The “secret sauce” that makes these solutions successful, he says, is data. By using algorithms and software to gather and analyze information, hospitality 3.0 companies can provide even greater value to the hotels they work with.

Data analysis is one of the biggest ways hospitality firms can capitalize on tech solutions / Photo credit: 123RF

For example, dynamic pricing allows RedDoorz to change the price recommendations for consumers based on the level of demand during certain periods of time. According to Saberwal, the potential upside of this is huge. In his experience, lodging owners can experience up to 50% increases in revenue during peak periods with price adjustments.

By providing an end-to-end solution on a single platform, hospitality 3.0 firms also help these owners reduce the costs associated with purchasing separate solutions and software. It also cuts back on manual labor, with more tasks handled by automated systems. All things considered, these advantages can help reduce overhead costs by up to 50%, says Saberwal.

Forged through challenges

That said, while generation 3.0 heralded a new era for the hospitality industry, it couldn’t escape the impact of the Covid-19 pandemic.

“We moved from 65% occupancy to single-digit [percentages] in one week,” Saberwal says.

To ensure the survival of the lodging owners on their platforms and their own operations, generation 3.0 businesses had to rely even more on their tech foundations and make it more central to their overall business models. For example, RedDoorz launched new fintech and ancillary products such as insurance coverage, flexible bookings, and paid loyalty programs to add new revenue streams.

Today, on top of the revenue generated from room bookings, RedDoorz is able to earn an additional 50% of this revenue due to these new product offerings.

“We started working hard to make more money from the platform rather than the owners,” he notes.

Apart from that, it also helped lodging owners find new revenue generation avenues, such as by adding vending machines to the property or allowing them to lease out empty spaces.

The hotels of the future

With tourism set to recover following the relaxation of travel restrictions, Saberwal believes that the pace of change within the industry will only continue to rise. To remain successful, generation 3.0 companies that are hyperlocal, such as RedDoorz, will have to know their markets extremely well.

For instance, 99% of RedDoorz’ customer base is domestic, which results in high repeat rate behavior among customers. On top of that, its supply base consists of small-format, local hotel owners. With RedDoorz’ growth strategy of starting in one city and cracking the supply and demand there before expanding further into other locations, it is able to stay ahead of competitors with a more global focus, especially in markets such as Indonesia and the Philippines.

On top of that, Saberwal believes that tech will eventually become so ingrained within new hospitality businesses that one day, it could be possible that lodging owners “don’t even have to have a person at the front desk.”

“Five years from now, it’s going to be a completely different game,” he adds. “The hotel of the future will be completely touchless, staffless, and [provide] a completely seamless experience.”

Currency converted from US dollar to Singapore dollar: US$1 = S$1.37

RedDoorz is a hospitality tech company with properties across 200 cities in five countries in Southeast Asia. By providing a wide range of tech solutions, it empowers small-format hotels to offer standardized and affordable stays to guests at every street corner.

To find out more about how RedDoorz is disrupting the industry, download this report.

This content was produced by Tech in Asia Studios, which connects brands with Asia’s tech community. Learn more about partnering with Tech in Asia Studios.