As published in the Hospitality Upgrade Autumn ’19 issue
According to last year’s IMD World Digital Competitiveness Ranking – which assesses a country’s adoption rate of digital technologies by looking at (a) the available talent pool to develop and implement new technologies, (b) the regulatory environment, governance practices and frameworks within which organisations have to operate in, as well as (c) the agility of countries to integrate new technologies – Asia-Pacific has had the highest scores, closely followed by Europe, Middle East and Africa (EMEA); the Americas lagged behind. However, when looking at a country-specific level, the United States of America secured the top spot. It is stated that the US has bolstered its overall ‘digital savviness’ through improvements in the area of knowledge, training and talent, as well as its regulatory framework. Yet, a different study conducted by Bloomberg still puts four Western European and four East Asian countries ahead of the US. This goes to show that the field of technology in the business environment is a hugely complex one. Success depends on many factors and variables, ranging from people and skills to investment, research and development, infrastructure and the regulatory governance structure.
But, how does this relate to the hospitality industry? Findings published by the Harvard Business Review, built on research by the McKinsey Global Institute (MGI), put the hospitality industry at the bottom of 22 surveyed sectors as it relates to ‘digital advancement’. This last spot is shared with, among others, the mining industry. This is not good news for the hospitality sector – and its executives are aware of it.
The fourth industrial revolution is spreading fast – and those business which do not manage to keep up pace will quickly be left behind
One aspect that has, so far, held back the hospitality industry from a digital standpoint and caused a below-average adoption rate of new technologies is the fact that the sector is, in general, vastly dependent on a myriad of different systems. Often, these technologies do not even speak to one another, and data warehoused in them are incomplete at best and in the worst cases inaccurate and/or inconsistent across the various platforms. Moreover, the sector is defined by a complex web of industry stakeholders (suppliers, brands, white-label operators, operators, franchise partners) operating and preferring different technologies to track, document and/or forecast.
The lack of compatibility and dated infrastructure slowing down operations as well as the adoption of new technologies are, however, only some of the issues. In a Cornell roundtable discussion, hospitality leaders further identified the velocity of innovation and the variety and veracity of data as factors that further complicate the digitalisation process. Potentially a bigger threat still are the legacy systems, which were implemented years ago but never really updated. Managing a transition from such old systems to new ones is a complex challenge and one that not only requires technical expertise but also organisational restructuring and the implementation of innovative work processes and best practices to leverage and better harness new technologies. The task is complicated by the fact that nowadays every single division of a hospitality business has touchpoints with technology. As usability, efficiency and effectiveness of data, information and technology are closely linked to the skills, knowledge and know-how of those developing, using and/or interpreting it, the argument can be raised that every single key decision maker within an organisation should have a strong understanding of certain principles as it relates to technology and the handling of data.
Giving a Chief Digital Officer (CDO) or Chief Information Officer (CIO) more prominence at an organisational level can help the cause, but it is just one step towards improvement. It should be noted that CDOs have different backgrounds and skill sets to those of CIOs; yet, both share an understanding of the digital arena (one with a stronger focus on commerciality, the other with a stronger focus on systems). Looking at some of the largest hotel companies reveals that the ‘digital leader’ has certainly gained his or her seat as part of the senior management – something that we would all expect in this day and age. George Turner, EVP and Chief Commercial & Technology Officer at the InterContinental Hotels Group as well as Scott Strickland at Wyndham are just two examples. At Hilton and Accor, though, Noelle Eder (Chief Information & Digital Officer) and Gilles de Richemond (Group Chief Information Officer) are not part of the executive leadership team; however, their bosses Jonathan W. Witter (Chief Customer Officer) and Maud Bailly (Chief Digital Officer) are. Furthermore, it is encouraging to note that the Boards of many hotel organisations include several Non-Executives/Directors with digital, e-commerce and/or technological backgrounds. At Marriott International, for example, this would include Directors such as Eric Hippeau, Lawrence Kellner, Debra L. Lee and Margaret M. McCarthy. Hippeau is former CEO of the Huffington Post and Partner of a technology venture capital firm, and he served, for example, on the Board of Yahoo! Inc. McCarthy is a seasoned CIO herself whilst Kellner was Non-Executive Chairman of Sabre Corporation, and Lee currently still serves on the Board of Directors of Twitter Inc.
However, not every voice of the ‘digital leaders’ is also being heard beyond the Executive Leadership Team, and those ‘digital leaders’ who gain greater visibility towards the Board do so (formally) only through the Executive Committee. One might raise the question whether all the other, more informal committees and workgroups that are focused on technology and the digital transformation, and exist within all these hotel companies, warrant being ‘brought to light’ under a more formal structure. Ultimately, what is needed is greater integration, mainly through more discussions and conversations about technology, data integrity, data handling and data interpretation across the entire organisation and its various management levels. It can be argued that this should not only help to digitally advance the organisation, but also to raise awareness for ethical systemic questions centred around data and sensitive information. In order words, hospitality organisations should think about more advanced governing bodies, or processes, that help direct the discussion and regulate implementation and application of technology. This could take the form of, for example, a special ‘digital committee’ that governs, monitors and promotes the ‘tech agenda’ and the codes of conduct. The need for such a move is heightened by the fact that many hospitality organisations are globally operating entities; yet, rules and regulations regarding technology and data usage vary across jurisdictions and countries. Self-regulation thus should play a key role in ensuring that the consumers and business stakeholders can hold organisations accountable for any breaches.
Embracing the digital agenda
Not all is doom and gloom, though, because the hospitality industry is taking steps in the right direction. Senior executives are voicing their thoughts and concerns and are aiming for greater visibility, and more discussion, as it relates to the ‘technological revolution’. Then, there is the HTNG initiative that, for example, set-up the Travel and Hospitality Information Sharing and Analysis Center (ISAC). HTNG is a “self-funded, non-profit organization with [more than 400] members from hospitality companies and technology vendors”, as well as other hospitality stakeholders, “[participating] in focused workgroups to bring to market open solution sets addressing specific business problems.” ISAC, instigated by several hospitality Chief Information Security Officers that form part of the HTNG network, aims to “confidentially share information about best practices, security threats and solutions”.
Yet, whilst these external bodies and associations certainly promote the digital agenda, the general public is, at times, quick to criticise those as merely being set up for ‘optics’ rather than true ‘change agents’ (point in case being the, now dissolved, AI Ethics Board from Google). Thus, setting up and incorporating a more formal in-house governing body would be a vital next step to better manage this business field.