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Can the Hourly Use Model of Micro Stays Bring in More Revenue for Hotels?

Posted on: 24 March '17
Kiran Mohan
Kiran Mohan
Director – Travel, Transportation & Hospitality business

As a business or leisure traveler, how often have you felt the need for a hotel room for day-use or couple of hours? Whether it is for a quick refresh between meetings or long layovers during family trips, there are lot of scenarios where it makes perfect sense to book a hotel room for day-use or couple of hours. Day-cation and Micro stays are some of the terms associated with the ability to book a hotel or accommodation for less than a day or night, maybe for a few hours, usually at a significantly lesser rate than the typical per night rate.

According to ALSI (America’s Lodging Investment Summit) forecast, in 2017, US hotel industry’s RevPAR is expected to grow 2.5% (source: STR Global) while the occupancy rate is predicted to register a minor decline. This is a clear indication that growth in rates (ADR) will contribute to the overall growth of revenue as occupancy rates remain flat. The 2018 numbers are expected to be similar, with STR expecting a 2.9% growth in RevPAR. Given the mixed forecast on occupancy rates, what are the avenues for hotels to improve their occupancy rates? Can they leverage technology and other operational improvements to boost utilization? Let’s ponder over this.

What’s in it for hotels and guests to adopt the hourly model? The idea of renting out the room for day-use is a no-brainer. Hotels get more revenue out of the same perishable inventory, increase their occupancy rates and the traveler gets a nice place to refresh himself for a fraction of price that he would have paid for a full night stay.

So have hotels caught on to this trend and made micro stays available over their traditional distribution channels, including mobile apps?

Not so much. Let’s do a reality check.

How many of the large chain hotels support day-use booking on their websites? None so far.

How many major chain hotels do you see on websites like HotelsByDay, BytheHour or mobile apps that cater to this market? While there are some options available now in cities like New York and around major airports, it is still a very small number.

So, what are the challenges? Is it operationally difficult or do they lack inherent support from their front end and back end systems? The short answer is both, and the solution to address each of them is maximizing technology intervention.

Take housekeeping, for example. On an average, it takes about 25-40 minutes to turn over a room, depending on the type of hotel, room type and the usage pattern. Typically, a room that has been used by a family will take more time to clean than a business user who stayed for a night. So you are dealing with a hard constraint that theoretically limits you from getting full 24hrs of paid utilization for a room. Investing in software that apply analytics and usage patterns to schedule housekeeping activities will help reduce the down time for rooms. There are housekeeping solutions available which not only leverage mobile devices for communication, but are also capable of identifying the usage pattern, accurately predict cleaning times, and take scheduling actions in real time.

While optimized schedules result in faster turnarounds, integration with front desk systems ensures that there is real-time visibility on room readiness. When coupled with the IoT data that is captured from devices and sensors like beacons, both in and out of the room, these solutions can be used to accurately determine the guest’s presence and dynamically reschedule or reprioritize housekeeping tasks.

On the technology front, most hotels rely on standard commercial off-the-shelf (COTS) Property Management Systems (PMS) and other core reservation systems that either support day bookings in a rudimentary way or lack complete integration. As an example, some of the websites and apps that sell day bookings still rely on a fax to front desk for reservation confirmation (due to lack of integration), post which the front desk agent has to manually input the reservation and check-in the guest. Another challenge that is slowly being addressed is, the ability for these new age apps and websites to integrate with the various channel management solutions that manage and distribute rates and availability. Without these integrations, a lot of manual effort is required to manage allocations and distribute the inventory for day-use channels.

As hotels move towards next generation systems that are more bespoke than standard COTS, we will begin to see fundamental changes as to how a “room night” (or day) is defined and maintained in the inventory model. The measure of inventory will no longer be by the day, but by the hour, and there will be changes in the room rates accordingly. This new underlying model will enable hotels to distribute rooms for day use in a more pervasive manner across all channels (including the Conversational channel of chatbots) and support standard integrations across the fulfilment and demand systems.

Forecasting or allocation of rooms for day use will only get better with usage of data and analytics to predict demand on top of real time event processing systems that interface with the hotels’ Revenue Management Systems (RMS) and Central Reservation Systems (CRS systems).

Will upcoming years see an increased adoption of technology and enabling practices that will make micro Stays booking a given? Employing the strategy to keep micro stays exclusive to their dotcom channels, large hotel chains can hope to drive more direct bookings. Will it lead to a scenario of more and more hotels breaching the 100% occupancy level? Only time can tell.

If you are curious to explore how micro stays can add that additional revenue spike to your business, write to us at info@mindtree.com. Mindtree comes with years of experience in developing next generation bespoke applications for the travel and hospitality industry. With our API first, business led approach and best in class data & analytics capabilities, we can really make this possible for your hospitality brand.

Kiran is focused on working with customers in the hospitality and travel domain, helping them with their digital transformation initiatives. He has a deep expertise in various delivery models and domain standards within the travel and hospitality industry. Kiran leverages his subject matter expertise and delivery knowledge of over 14 years to partner with our customers and help them achieve their business goals. He is a certified Scrum Master and keenly follows the trends in hospitality Industry.

  • karthik anu

    Good and interesting information!!!

    Regards,
    Anu,
    xplorant.com

  • Seetharaman N

    Hi,
    Well analyzed and a good reading. I must say at http://www.6hourly.com we have made a great progress in this space over 24 months period as a pioneer in India. We have begun to see progressive response from both large hotel chains as well boutique properties recognizing the need for this trend. .We have more confidence now that this concept is here to stay and will grow to the delight of RM guys. Seetharaman /CEO/ http://www.6hourly.com