Autonomous Vehicle Guest Leasing Program — How the hotel industry can regain market share from Airbnb
One of the greatest beneficiaries of the autonomous vehicle will be the traditional hotel industry.
Hotel owners and operators that manage world class brands will be able to streamline their unique approach to customer service, increase food and beverage revenue, incidentals revenue and reduce parking costs and fleet operations overhead.
By openly embracing an autonomous vehicle strategy similar to the one described below, hotels will be able to offer a unique service that distinguishes their property from their competitors and the peer-to-peer lodging industry. With the rapid growth of peer-to-peer lodging industry lead by Airbnb, hotels have to adopt and improve their product in a non-traditional fashion.
By adopting the product to benefit from the future, hotel owners and operators have to first understand the following data points:
1. An individual who has stayed in peer-to-peer lodging in the last five years is half as likely to prefer staying in a traditional hotel.
2. In 2016, Airbnb will account for 5.4% of total U.S. room supply, up from 3.6% last year according to an estimate from Goldman Sachs. To put this number into perspective, only five star hotel operators have a market share greater than 5%.
The Challenge for Hotels: Getting ahead of Airbnb
While the strategy will need to be unique to each and every property, the general premise can be applied to the industry as a whole. AJ Willmer, a technology consultant based in Beverly Hills states the following, “the technology will take care of itself”. Mr. Willmer is correct and it is important for the hotel industry not to prejudge autonomous vehicle technology.
Today, we do not yet know how the technology will evolve or how individuals will adapt to new modes of transportation. What we do know today is that autonomous vehicles are going to change the world and industries will have to adopt their business models to accommodate for autonomous vehicles.
To successfully adapt business models and prepare for a future with autonomous vehicles, one must remove oneself from the hotel industry and refrain from thinking just like a hotel operator.
The future is autonomous vehicles will be a subscription service. In the future we will subscribe to a car brand and summon one of the car’s models depending on the journey that you were about to embark on. If are going skiing you will summon the SUV, if you are going to the beach you will summon the convertible.
Car Ownership – A Thing of the Past?
The car will be owned, maintained and serviced by the car manufacturer through a subsidiary service such as BMW’s ReachNow. The car no longer will used exclusively by you and your family. “We do feel that the car sharing is going to significantly increase in the future” says John Stapleton, North America CFO of General Motors. Mr. Stapleton is correct to a degree and in the future, the car will be summoned when you need the car.
But what if you had an exclusive premium luxury non-shared subscription for your primary vehicle? You arrive at the hotel and now what do you? Do you tell the autonomous vehicle to park and pay a daily parking fee? Or do you lease the car back to the hotel for a daily hotel credit based on the time you will not need the vehicle?
This would depend on if the hotel offered an autonomous vehicle guest leasing program. Carlos Ghosn, Chairman and Chief Executive Officer of the Renault-Nissan Alliance has stated; “Connectivity and autonomous driving are about to change driving in ways we’re only beginning to understand.”
Mr. Ghosn is correct in his thinking and this is why it is important for hotels to once again lead on new technologies. The hotel industry has a long illustrious career of being an innovator. One of the first central fire alarm systems was installed at John Jacob Astor IV’s St Regis in 1904, which improved the safety of the guests staying in the hotel.
An autonomous vehicle guest leasing program would allow hotel owners and operators build upon the legacy of innovation commenced by John Jacob Astor IV with the opening of the St Regis in New York City in 1904.
Autonomous Vehicle Guest Leasing Program
Today’s hotels would be able to streamline their unique approach to customer service, increase food and beverage revenue, incidentals revenue and reduce parking costs and fleet operations overhead by implementing the following an autonomous vehicle guest leasing program strategy.
To streamline the approach to customer service, guests arriving to the property in an autonomous luxury vehicle that they subscribe exclusively to, would be offered the opportunity to lease the vehicle back to the hotel for a daily hotel credit that can be used towards incidentals while on property.
By offering the daily credit in exchange for the vehicle, hotels would eliminate the need to own and operate a fleet of traditional house cars with a driver. By no longer owning and operating a fleet of house cars, hotels would eliminate the monthly overhead costs for car payments, gas and/or electric charging, maintenance, parking and drivers.
Applying a daily hotel credit to a room night is a proven strategy that allows hotels to discount room nights without lowering the published room rate. Based on historical spending averages, hotel guests tend to spend more when they are receiving a daily hotel credit.
While hotels would not be able to depend on an autonomous vehicle guest leasing program to replace their house cars on day one, they would be able to depend on the program in the future as premium non-shared autonomous vehicles gain market share.
Additional Benefits
- • Vehicle insurance payments would be reduced to liability as the hotel would insure the autonomous vehicle while it is leased to the hotel by the guest.
• Not only would this reduce monthly expenditures, it would lead to an increase of TRevPAR (total revenue per available room) as guests would be more likely to stay on property for meals and order a nicer bottle of wine at dinner, which would increase their incidentals spend while the vehicle generates revenue for the hotel.
• As vehicles sit idle 94% of the time, hotels have to park the vehicles on valuable land that could be used to further enhance the guest experience instead of storing cars. For example there are 16 five star hotels in Los Angeles County according to American Express Travel and Los Angeles County has approximately 200 square miles of land (14%) devoted to parking according to a study from the Journal of the American Planning Association.
Imagine if a percentage of that land could be converted into green spaces in and around hotels what it would do to the guest experience? With sixteen five star hotels and hundreds of miles of land devoted to parking, hotel owners and operators in Los Angeles County have the perfect opportunity to optimize land use by developing and implementing an autonomous vehicle leasing program.
Autonomous vehicle leasing programs are the future. It is a program that is currently not well suited for Airbnb today due to the structure of how the peer-to-peer lodging industry currently operates with individuals hosts.
Once again, hotels will have the advantage when it comes to new innovations. But this advantage will not last forever. It is important for hotel owners and operators to fully embrace autonomous vehicles as they are the future that will allow their businesses to continue to grow in the midst of fierce competition.