A major hotel chain can make $500-600 annual average revenue per user (ARPU). Facebook, by comparison, makes around $140 annual ARPU in the US. Of course, one of those companies has a much less flexible cost structure, what with the buildings and the service workers.
Hotels at scale are thus desperately trying to become a kind of software company, a thin client on top of the messy hardware of physical rooms to sleep in and caretakers thereof.
Mega-merged companies like SPG-Marriott are divesting themselves from owning actual hotels and fast. They sell the hotel itself and simply license the name and services back to the new owner. Marriott, for example, owns less than 30% of its physical properties. From the tenor of their annual reports, they wish they owned 0%.
AirBnB was built in exactly the opposite way: They made a powerful software tool, which is a uniquely cheap method to create a brand in the modern era. The tool attracted the hard assets (short-term rentals closer to the places travelers wanted to be than any hotel could ever get). AirBnB has dabbled in hotels, but even with the HotelTonight acquisition
, they are blissfully avoiding owning physical things, like any good millennial.
Hotels must sell a huge amount of inventory: at just one property, hundreds of rooms, every single night, every day of the year. The room sales problem appears to be a classic software one. If the specificity of a hotel room were a bit lower, it would be an ideal fit the real-time auction marketplaces that have given Google and Facebook FANGs
But it a problem currently only marginally solved by software, with an inefficient and fractured set of systems. Hotels pay Expedia commission to book you in a room, or they pay you directly (and far less) in the form of loyalty points to book with them, or they hunt down locked-in corporate sales one large company at a time with human direct sales.
All of these intermediaries–including such seemingly customer-friendly sites as TripAdvisor–work for the hotels themselves, not you, the consumer. In fact, no one in the travel booking equation works for you, unless you’re paying the highest end of travel agents. Even if your company pays for corporate travel management, they are the customer. Corporate travel is all about cost management for the company, not a better experience for you, fellow worker-traveler.
Opportunity is written all over a messy marketplace with no one working for the consumer
. So next I’m back to the product side of imagining just what a solution might feel like.