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DE LOIT TE CON SU LTIN GTHE HOTEL OF THE FUTURE

About This ReportPROJECT OVERVIEWThe hotel industry is in a period of significant evolution andopportunity. This report will help companies understand whereand how to disproportionately invest today to account for howneeds and expectations of hotel guests are likely to evolve in thenext 5-10 years.This research focuses on mid-tier hotels that are struggling todifferentiate in the “sea of sameness.” We answer, “How might weenhance the traditional hotel offering to support high frequency,mid-tier business travelers as their needs shift and theirexpectations of the role of a hotel evolve in the future?”After an eight-week process of generative research and synthesis,we have identified five opportunity areas to guide hotel companiesin making strategic choices for their future.HOW TO USE THIS CONTENTThis document provides a comprehensive report of the researchfindings and the opportunity areas. It serves as the foundation forother materials that will be created depending on the particularpurpose and audience. We imagine three paths to leverage thecontent in this report:INFLUENCEGain eminence by providing materials, such as a whitepaper or blog post, that can influence future approachesto scenarios.KICKSTARTAccelerate future concept development work by providing anindustry POV and user insights to jump start projects faster.COLLABORATEEngage in an immersive co-creation process with clients tobring a new service offering to life.D O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6N OT F O R C L I E N T D I S T R I B U T I O N3

The Hotel of the FutureTABLE OF CONTENTSD O B L I N D E LO I T T E CO N S U LT I N G L L P 201 604UNDERSTAND THE CHALLENGE09MEET THE OPPORTUNITY AREAS40MAKE STRATEGIC CHOICES45APPENDIXN OT F O R C L I E N T D I S T R I B U T I O N4

THE HOTEL OF THE FUTUREUnderstand the ChallengeD O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6N OT F O R C L I E N T D I S T R I B U T I O N5

THE CHALLENGEToday, hotels are all about brands.Yesterday, hotels were all about spaces. Hotels both owned and operated their hotels.Today, hotels are all about brands and the many faces of one hotel chain. However, thehotel industry is in a period of significant evolution and opportunity.HOTELS FACE MANY NEW CHALLENGESThe rapid pace of change and evolving customerpreferences is forcing traditional hotel brands toexplore ways to cultivate customer loyalty, drive trafficto their direct sites, and capture greater share of wallet.The new and varied competitive threats from thirdparty intermediaries (i.e., OTAs), non-traditionalentrants (i.e., Airbnb), and start-ups are disrupting themarketplace and placing stress on the traditional waysthat hotels do business. Today, hotels are structuredand act in silos making it difficult to successfully adaptand operate in an increasingly challenging ecosystem.THE VALUE OF BRANDS IS DECREASINGOne of the biggest challenges hotels face is thedecreasing value of their brands and their shrinkingbase of loyal guests. From OTAs to the commoditizationof hotels, brands need to extend and deepen theirrelationship with travelers in order to stay relevant.Yet current approaches like offering more services,free amenities, and loyalty points won’t deliver thereturns brands need to stay relevant. Hotels needD O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6to be more imaginative about the resources that areavailable to them and how they are utilized to developa stickier brand that can’t easily be replicated. Thiswill be important for hotels to consider as they becomeincreasingly interchangeable with one another andcommand a smaller portion of the traveler’s share ofwallet. Encroaching third party intermediaries areincreasingly pigeonholing hotels into a smaller portionof the guest’s overall travel journey. Both brands andowners need to reimagine how a hotel might manifestitself beyond the guest’s hotel stay in order to redefinethe value that hotels can offer.1 in 4 travelers allocate more than75% of their share of wallet to theirpreferred hotel brand. DELOITTETHE MARKET IS OVER-SATURATED WITH BRANDSAdditionally, after the entrance of Airbnb, travelersnow expect their lodgings to provide a variety of uniqueand delightful experiences. In response to this thenumber of new hotel brands that address this emergingneed are popping up at a surprising rate. Brands willincreasingly find it difficult to differentiate with therush to boutique-style hospitality. Hotels need tochange the rules of the game by rethinking hospitalitybeyond solving for short-lived trends.6.1 % growth per year in the boutiquehotel industry since 2009. IBIS WORLDBRAND REQUIREMENTS ARE TOO RESTRICTIVEHotels also face new challenges on the role theyplay for both guests and locals. Guests want toengage the local scene, yet brand requirements arestill too restrictive for properties to embrace thelocal community in any meaningful way beyondincorporating new aesthetics. There is a dividebetween brands that know best about guests andowners that know best about properties. This divideprevents both parties from discovering greateropportunities for hospitality. To overcome thisdivision, brands will want to examine other roleshotel can play to democratize decision making.BUSINESS MODELS ARE TOO NARROWMost importantly these new trends are challengingindustry orthodoxies and will have implications onthe way hotels do business. Traditionally, hotels havefocused on getting heads in beds. Yet, this continuesto pit the conflicting business models of owners withbrands and prevents optimization for both parties. Theissue is that hotels too narrowly define the purposeof their current assets. Hotels need to rethink theone-to-one relationship of space to utility to explore acombination of options (many spaces, one purpose; onespace, many purposes; many spaces, many purposes).Owners and brands need to realign goals in order todiversify the customers a hotel can serve.“The brands have a global not alocal perspective. As an owner youhave to make tough decisions to dowhat’s best for your guests and youremployees.”BRYAN, DRIFTWOOD HOSPITALITYN OT F O R C L I E N T D I S T R I B U T I O N6

THE CHALLENGEHotels will need more than brands todifferentiate in the future.“I’m not so sure how long brandswill survive and what is the longenduring factor that makes onesustainable.the market is oversaturated and there are still moreto come.”TOM ITOGLOBAL HOSPITALITY LEADER, GENSLERD O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6“By and large the hotels that we ownare in an A location, are extremelyhigh-quality, and are going toattract customers regardless of thebrand they hold.”REVENUE MANAGEMENT LEADERLODGING REIT“Corporate hotels, they’re not awful,but they’re forgettable: nothingstands out, they all feel and lookthe same, you can’t tell them apart,and you are happy to leave.”DAVIDFREQUENT BUSINESS TRAVELERN OT F O R C L I E N T D I S T R I B U T I O N7

THE CHALLENGETomorrow,hotels will need to be about people.Hospitality will always be about experiences and connecting to people. Even in the face of new technology,evolving customer preferences, and new competitive threats, hospitality will require a human touch. Apersonal and an active approach will place hotels on the same footing as the guests they serve and theowners they work with.TODAYHotels offer a one-size-fitsall hospitality that servesno one.Hotels chase instead ofincorporate guests.Hotels are separatedfrom the surroundingcommunities.Hotels focus on one spacewith one purpose.Hotels think of themselvesas mostly physical things.The hotel of the future will bean integrator of partnershipsto offer new and variedexperiences that can evolvewith guests.The hotel of the future willbe an integrator of networksand people to build morepersonal connections withand between guests.The hotel of the future willbe an integrator of cultures,merging global brands withlocal roles in communities.The hotel of the future willbe an integrator of multipurpose spaces to provide aplatform of resources thatcan serve new customers.The hotel of the future willbe an integrator of servicesand businesses to play as thenexus of the travel industry.TOMORROWD O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6N OT F O R C L I E N T D I S T R I B U T I O N8

OPPORTUNITY AREASThe hotel of the future will be anintegrator with a job to ERAN INTEGRATOR OF EXPERIENCESAN INTEGRATOR OF PEOPLEAN INTEGRATOR OF CULTURESAN INTEGRATOR OF SPACESAN INTEGRATOR OF PROCESSESThe Curator integrates externalpartnerships to keep hospitality fresh andthe experiences it provides guests relevant.As the Curator, hotels can deliver a varietyof environments that support the mindsetguests want to be in, providing delightthrough choice, and the ability to explorenew experiences.The Matchmaker reimagines guests ashaving an equal role in the process ofbuilding personal connections with thebrand and between guests. It extends anddeepens the relationship with guests bycreating a culture around the brand andallowing the brand to be defined by thisnetwork of guests. The Matchmaker drawson the current strengths of hotels likespace and hospitality to build a compellingnetwork of guests that can be used to attractmore business.The Neighbor expands the hotel into thecommunity and engages locals. It’s adestination place for guests and locals, butit’s more than a portal to the local culture—it’s an active participant in the community—a good neighbor that fits into its surroundingcontext. The Neighbor integrates by mergingthe global brands with the local cultures.That means having qualities that can adaptto context, while maintaining an overallbranded experience and service.The Architect utilizes and repurposes spaceand assets. Rather than thinking of a singlebuilding in a single location, for a singlepurpose, the Architect maximizes space andresources to think outside that box, quiteliterally. The Architect integrates multipurpose spaces within and outside the singlehotel to offer a whole new level of flexibility toguests, while serving new customers, too. It’sreimagining hotels beyond heads and beds.The Choreographer focuses on everythingbut physical space and real estate assets. It’sthe virtual concierge and the logistics guru.It integrates services and businesses to play asthe nexus of the travel industry—and deliversa seamless and convenient experience for thebusiness traveler.Connected, personal, interactive, social,intimate, and networkedLocal, active, contextual, cultural,adaptable, participatory, and responsiveDiverse, resourceful, flexible, distributed,and spatialConvenient, seamless, efficient, automatedand virtualPERSONALITY TRAITSExperiential, experimental, fresh, variable,exploratory, and delightfulD O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6N OT F O R C L I E N T D I S T R I B U T I O N9

THE HOTEL OF THE FUTUREOpportunity AreasD O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6N OT F O R C L I E N T D I S T R I B U T I O N10

THE HOTEL OF THE FUTURE AS ACURATORAs a curator you are an explorer, an experimenter,a tastemaker, and a branded experience.FOR GUESTSFor guests craving variety anddelight in a beige world ofhospitality, the Curator offers morechoices and new environmentsfor guests to explore differentlifestyles.D O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6FOR HOTEL CHAINSFor brands competing with theunique experiences of alternativetravel, the Curator leveragesthe capabilities that come withpartnerships to continuouslyredefine hospitality and keepbrands fresh for guests.FOR OWNERSFor owners who are looking fornew capabilities and sources ofrevenue, the Curator positionsthe hotel as a channel for productplacement and experiences thatincreases property value anddecreases the overhead costs ofkeeping hotels fresh.N OT F O R C L I E N T D I S T R I B U T I O N11

MEET THECURATORNathan is a designer and brand content manager whoalso rents out a room in his 3-level flat in Chicago asa super Airbnb host. Business travelers seek out hisaccommodations because it offers a unique experiencewith its highly curated art, objects, and sauna.“A lot of people stay with me because they are intrigued by the design and my lifestyle. Business travelers—they are laid back. They are looking for a place that will be more of a retreat. Some people just want a bed,others an experience. My place is one of those places.” NATHANENVIRONMENTS INFLUENCE BEHAVIORSSEEKING ENVIRONMENTS THAT RELAXUSING TRAVEL TO EXPLORE NEW LIFESTYLESGuests are sensitive to the small things that put them in certain moodsand mindsets, especially when they aren’t helpful. We heard from manytravelers that there is something about the spaces of most hotels thatfeels lonely and depressing. But when hotels thoughtfully consider theirspaces, guests respond favorably.Guests need a variety of environments to support their changing moodsand needs. Business travel is disruptive and emotionally draining enoughthat travelers look to the hotel to be inspired, energized, productive, or torelax at the times when they need it.Especially for young travelers, traveling for business provides anopportunity to explore new types of spaces. Guests enjoy staying atplaces with personality that reveal other possibilities for life. It offers achance to suspend reality and to try a new identity and life on for size—it’s like dress up for adults.“The art and the quirky things hotels dowith their space give people something totalk about and engage each other.” DAVE“I find myself actingdifferently in wellconsidered spaces.”ERIKD O B L I N D E LO I T T E CO N S U LT I N G L L P 201 69 in 102 01 5 S K I F T M AG A Z I N Etravelers try to incorporaterelaxing moments into everybusiness trip they take.“Any time you travel you are looking to see newthings and experience new environments. A goodhotel does the same thing—you get to see a newspace and be a part of that for awhile in the waythat you want to be inspired.” HILLARYMO ROOMSis a hotel that providesrooms with different themesto nourish each individual’ssensation and sensibilityof art.N OT F O R C L I E N T D I S T R I B U T I O N12

INTRODUCING THECURATORAS A CURATOR, THE HOTEL WILL.Empower guests byoffering rotating flavors ofrooms and experiences tochoose from and customize.Elevate the hotel to abranded experience thatdesigns spaces targeted atguests’ desired mindsets.Build partnerships withcompanies to leverage theirreputation and capabilitiesto continuously offer qualityuser experiences not foundelsewhere.Facilitate guests’exploration by offeringopportunities to try on forsize new lifestyles, habits,or products.We know environments influence travelers’behaviors and mindsets. To address this, hotelswill need to design environments to deliverwhat feels like a more personalized experience.We know guests seek out hotels withenvironments that can make them feel moreproductive, relaxed, inspired, or energized.To address this, hotels will need to provide avariety of different types of spaces that cansupport the current and changing needsof guests.We know that guests appreciate thoughtfuland simple, yet quality spaces and servicesover luxury. To address this, hotels needto reimagine how it defines and delivershospitality that communicates qualityto guests.We know guests use travel as a way of tryingon new lifestyles and identities. To addressthis, hotels will need to predict how guestsproject their own brand and reflect that inthe environment.D O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6N OT F O R C L I E N T D I S T R I B U T I O N13

WORKING WITH THECURATORSpecific attributes of this new role of the hotel could include:EXPERIMENTAL PRODUCTSFRESH DESIGNSVARIABLE SPACESEXPLORATORY EXTENSIONSDELIGHTFUL POP-UPSThe Curator can monetize the designof hotels by allowing guests to purchaseproducts they experience at the hotel.Participating companies are charged a“slot fee” to gain exposure to guests.The Curator can re-energize the hotel’sbrand and environment by partneringwith lifestyle brands to redefine thehotel’s hospitality offering to reconnectwith guests’ values.The Curator can offer guests variety andchoice at the hotel by offering both publicand private rooms, spaces, or experiencesof different styles to support the moodsof guests.The Curator can allow guests to notjust vicariously experience differentlifestyles but to recreate them at home.The Curator elevates the reputation of thehotel by becoming an experience centerwhere tastemaking happens.The Curator can provide unique andexclusive guest experiences offered inlimited supply to create demand andcontinually test new ideas.On-site purchases or redirected to seller.Working with celebrity designers to offerunique experiences in key locations.Offering key areas in the hotel that aredesigned to target specific guest modes.Giving guests a how-to manual to recreateexperiences and designs at home.Offering a small number of curated rooms,products, or experiencesOnline store where guests can purchaseproducts during and after their stay.Develop rotating partnerships withlifestyle brands to design unique spacesand experiences.Designing flavors of rooms or even anentire hotel to service a variety of guestmodes.Trained staff to assist guests withcustomizing and designing experiencesat home.Offering a mix of curated rooms, products,and experiences that rotate seasonally.LOW TOUCHHIGH TOUCHD O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6N OT F O R C L I E N T D I S T R I B U T I O N14

THE HOTEL AS THECURATORNathan is a designer and brand content manager. He travels often for businessand although he is an Airbnb host, Nathan typically likes to stay in boutiquehotels when traveling for business. For him, the unique experiences he finds atboutique hotels helps him compensate for the pain of traveling for business.CHOOSES A ROOMCHECKS OUT HOTEL APPThis trip Nathan has to go to New York and is bracingfor it to be hectic week. He wants to find a place thatwill be a relaxing retreat for him. He heard from oneof his recent Airbnb guests that the Curator hoteloffers the ability to choose from different types ofrooms and he wonders if there could be one thatwould help him manage the upcoming stressful week.He goes to the Curator’s online app to see what typesof rooms he can choose from and finds a wide varietyfrom wellness, to productive, to inspirational roomsto choose from.Nathan sees that one of the rooms is themed around relaxation andwas specially designed by a well-known and reputable brand that is anexpert in this area. He knows for sure now that this room will definitelydeliver what he needs and the quality will be top notch. So he choosesthe relaxation room for his upcoming stay.USES OTHER SPACESIN HOTELTRIES OUT AND PURCHASES PRODUCTSWhen Nathan arrives to his room, it’s better than what he expected. It fullysupported his stress management for the week. He especially loved the lampsin the room that offered just the right lighting to foster a relaxing mood. He hadseen these lamps before but never had the chance to really experience themand what they could do for a room’s atmosphere. Nathan is now completelyconvinced by the lamps and he notices that he can purchase them throughthe Curator’s app and receive a discount. He decides to take advantage of thisopportunity to purchase them and have them delivered to his home.D O B L I N D E LO I T T E CO N S U LT I N G L L P 201 6During his stay, Nathan finds himselfneeding to work late. Although heloves his room, it isn’t what he needsright now. He leaves his room to lookfor a good place to work and discoversthat the hotel just recently renovatedtheir business center partneringwith Steelcase to optimize it forproductivity. He locates the perfectchair

The hotel of the future will be an integrator of cultures, merging global brands with local roles in communities. The hotel of the future will be an integrator of multi-purpose spaces to provide a platform of resources that can serve new customers. The hotel of the future will be an integrator of services and businesses to play as the