Following the terrorist attacks of 9/11, the travel sector felt the impact of a nation hesitant to travel. Simultaneously, the hotel sector’s pricing strategies were being influenced by the rapid development of OTAs that created opportunities for themselves at the expense of individual hotels and their brands. The hotel business was at first slow to react to the development of OTAs, and for a brief period it appeared that the industry was poised to lose control of it most precious commodity, namely the control of hotel room-night availability and pricing of those units.

Realizing that OTAs would commoditize the sale of discounted guestrooms, brand hotel companies aggressively developed their own proprietary online booking websites with “Best Rate Guarantee” rate matching and frequent traveler reward programs. Stripped of their ability to offer the “absolute lowest rate,” OTAs have morphed into online travel agencies, which now have the ability to provide a holistic travel experience, including a negotiated hotel rate combined with competitively priced airfares and car rentals, as well as lists of recreational, cultural and business activities at any worldwide destination. Thus for the most part the hotel industry has held sway over its own pricing destiny. However OTAs continue to play an important role in the sector by attracting guests to hotels and boosting occupancy with discounted sales of excess rooms on low demand days. Today the control struggle continues as owners and operators oppose attempts by the OTAs to compel hotels to relinquish their room inventory and pricing control in exchange for a listing on the OTA websites.

Advancement in technology creates capital-expenditure pressures on the owners of lodging assets, lest they become functionally obsolete. For example, earlier in the decade hard wired internet connection was required in all guestrooms to remain competitive. Today the availability of Wi-Fi service throughout a hotel is required, and providing it free of charge (mainly in limited-service hotels) provides a competitive edge. Examples of technological innovations that the sector has been forced to embrace and capitalize on in order to remain viable include:

The evolution of electronic guestroom lock systems. It was not that long ago that traditional keys were replaced by plastic key cards, which were rapidly supplanted by electronic key cards that will soon be displaced by biometric keyless locks;

Flat screen televisions are no longer a luxury in guestrooms, and hotel brand standards now require that all their properties upgrade;

Guest bathroom vanity mirrors that conceal an LCD television until activated, and guestroom availability of iPod/MP3 docking stations;

Electronic energy management systems that detect guest presence in rooms and allow for control and management of heating and air-conditioning costs while rooms are unoccupied, and monitoring and maintaining the same temperature comfort level when guests return to their rooms; and

The emergence of cloud computing whereby shared resources, software and information are provided to computers and other devices on demand, similar to an electric grid. This, is widely believed to be the next technological achievement that will have a significant impact on the global lodging industry.

During the past decade hotel technology has come of age, and automation in the lodging sector today is significant and growing. Technology developments enhance the hotel guest experience by providing information, entertainment and simplification. Through competitive pressures, hotel owners have been forced to upgrade their properties to keep up with the latest technology, or their assets may be rendered obsolete. In any event, technology in the hotel sector will be an important part of the growth of the industry in the years to come.

Daniel H. Lesser is senior managing d and industry leader for the Valuation and Advisory Services/Hospitality & Gaming Group of CB Richard Ellis in New york City. He may be reached at [email protected]