The tourism industry finally has a full recovery, to pre-pandemic figures, in clear sight. At the same time, as travellers are starting to roam again, new challenges arise in an increasingly changing world, marked by climate change and the exponential development of digital tools like AI.
In this context of recovery scattered with new worries, HOTREC, the umbrella association for European hospitality, held its 87th General Assembly in Brussels on 26 October, to discuss not only with its members, but also legislators, the state of the industry and the way forward.
Amid the General Assembly, Travel Tomorrow spoke with the association’s president, Alexandros Vassilikos.
What has the General Assembly revealed so far about the current state and future of the hospitality industry?
From what our members have told us, the worries in all countries are pretty much the same, and the issues. At different levels for different countries, because of the different types of hospitality in each country, but the problems are the same and the challenges are the same.
At the end of the day, it’s a circumstance where things apparently go well because we’re in a good year, still a rebound year from Covid, but everybody’s worried. This is the difficulty that my colleagues face with local governments – when you discuss with them about the problems, everybody says ‘but you’re doing great, why discuss anything?’.
In light of the past summer’s record breaking temperatures and the biggest wildfires ever recorded in the EU, a recent study from the European Commission predicts a shift in European tourism from south to north. At the same time, the existence of more than half of Europe’s ski resorts is threatened by climate change. How will these changes affect the hospitality industry?
It is undeniable that we start seeing the consequences of climate change, but it is still very early to predict anything, from my point of view. I think that we see different trends. We could look at it geographically, but we could also look at it seasonally. We have seen shocking things this season all around the Mediterranean, all around Europe. We saw wildfires in the summer, we saw floods all over Europe, and not in a particular slot of time, but all around the year. As we see that climate change is affecting all the countries, the model of seasonality will definitely be affected – with the rise of temperatures, you might have summer destinations that will be too hot to visit in some periods. But, on the other hand, the rise of temperatures makes ski destinations try and find new models of working, maybe off season, not in the winter but maybe in the summer. This is a trend that already exists.
While it is very difficult to predict where the industry is heading and when it’s going to get there, the one thing that I am very confident of is that our sector has proven that it can adapt. This is the main thing that we need to bear in mind today. We showed it during Covid and after Covid. Covid is a crisis that nobody saw coming, a scenario that was not written anywhere, during which we saw not only the strong will of people to continue to travel, but also the strong capability of the sector to adapt. This makes me very confident for the future. Because we have proven our possibility to adapt and our capability of adapting, so we will adapt.
But this is not a matter only of professionals. This is a matter of states. This is a matter of regions. This is a matter of Europe. And we all need to work together in order to find the models for the transition, first of all, to do what we are required to do as businesses in terms of green and digital transitions. But, on the other hand, what needs to be done for us? It’s a two-way street and it is very clear that it is not something that is dependant only on hotels and restaurants. It is something that is for the whole ecosystem that needs to keep the equilibrium between all the players involved in the hospitality scheme.
In the context of climate change it might be harder for SMEs to adapt and implement measures to become sustainable than larger chains that have bigger budgets. On the other hand, consumers are increasingly looking for more authentic, local experiences. Do you think the occupancy ratio between larger chains and smaller businesses will be changing in the future?
No, I don’t think it’s a competition of size. I think there are clients for everyone and we clearly see, both from the offer and from the demand side, different choices made for different groups of clients.
However, I do see the need to offer assistance to SMEs who, like you said, have maybe a smaller access to information or funds in order to achieve what is demanded from them in terms of transition. This is the role of national organisations representing hotels and restaurants and this is the role of HOTREC in Europe – to address these issues for the SMEs and create a pathway for them to have a clear way forward into how they will achieve being here the next day.
Yes, we have different capabilities and possibilities because of size, but, on the other hand, it is much easier for a family to decide on how they will run their small, 12-room hotel on a small island, take decisions and implement them from day one, than for an organisation that has thousands or tens of thousands of employees. So there are pros and cons in both sides and it is our job as a national representatives and as European representatives to give the possibility to small companies to also have access to funding for all these transitions that are on the table today and that they need to achieve in order to remain competitive.
It’s a matter of ecosystem, like I said before, everybody is involved in this. We need to find the equilibriums in order not to leave anybody behind. For me, there is no scenario where you will only have one type of hotel or one kind of tourism. There is space and there is demand for many types of tourism and many types of hospitality providers. The smaller restaurants, the family-owned hotels are the gatekeepers of European hospitality, they represent the European hospitality at its core, so I definitely believe that there will be space for them, maybe even growth in space for them, as people look for more genuine experiences today more than any other time.
Following the recent blocking of the Booking – eTraveli merger by the European Commission, HOTREC said in a statement that “European hoteliers are faced daily with the unfair behaviour of powerful OTAs”. What impact do online travel agencies (OTAs) have on the hospitality industry, especially SMEs?
It is very important to keep a level playing field. The evolution of the sales model in the tourism industry has been evolving very fast, making it quite difficult for SMEs to follow. We have to deal with huge companies that work with algorithms that nobody knows, nobody understands, and we need to be here and make sure that this sales model doesn’t hurt the small companies and gives equal opportunities for everybody to appear in search engines, to be ranked, to have reviews and so on. This needs to be done in a very transparent way, because the big groups have the possibility of investigating how the algorithms work, while a small hotel in a small village in France or small a small restaurant has much more limited capabilities.
It is the job of HOTREC and national organisation to protect small businesses, but mainly the work needs to be done by the EU institutions – in the same way that they protect consumers, they also need to protect small businesses and ensure a transparent way of working on the market that will not allow prevailing positions to hurt small businesses.
Speaking about these algorithms that we don’t fully understand, and considering that Booking, Tripadvisor, Expedia have recently launched AI-powered travel planners, what role do you think AI is going to play in the future of the hospitality industry?
We clearly see that there needs to be a change in generation in small businesses in order to get acquainted with technology – there are first or second generation hoteliers and restauranteurs very reluctant to technology, but when the generation after them arrives, they are much more easily approachable and they understand technology and they go for it.
At the same time, we have done some research already at HOTREC level. I would say yesterday and today, AI in hotels is limited to a few of the many services we offer, mainly reservations, sales, search engines, everything that happens before the booking.
If we take a step back and look at the big picture, it is clear to me that for quite a few years to come, again I don’t want to predict the future, but for quite a few years to come the vast majority of jobs in in hotels and restaurant will be protected from AI. I often use the example of a hotel in Japan, might have been 20 years ago, that opened with robots instead of receptionists and was a huge thing. It was full all the time, people would want to go and have this experience. But after a few years of operations, they fired the robots to get humans at the reception. Because at the end of the day, when you travel somewhere, you want the experience, you want the contact with locals, you want to speak to someone and when you go to the bar to have a drink, you want the bartender to be there and not a robot to pour drinks in a glass and leave it on the bar.
So, if we take a step back and look at the big picture, I think that the jobs in hospitality are here to stay. They offer personal contact, they offer experience, and this is something that will be very difficult to replace, or at least I hope I won’t live to see the time where we will replace humans by robots in terms of contact.
That being said, there are many smaller divisions of our work today, like online sales and reservations, where AI might be much more present than in other sectors. And this connects to what were discussing before on how this affects small companies. Do they understand why they are rented here or there and the algorithms behind it and how all these works? But this is still a very small percentage of the jobs in in the hotel and restaurant industry. Someone will need to cook the food, someone will need to serve it, someone will need to make the beds. All these being done in a human way adds to the European way of life and to the concrete product and experience that we are here to protect.
Technology is here undeniably and it will affect the way we do business, but hospitality has a human factor that you cannot take away, otherwise it’s not hospitality anymore. The jobs in the hospitality industry will evolve, but they will remain.
How is the increasing popularity of short-term rentals (STRs) affecting the hospitality sector and overall tourism industry?
Short-term rentals are not new anymore, they have been here for more than a decade, many destinations now have more beds in STRs than in hotels. They undeniably present a very disruptive model for the hospitality industry, that has pros and cons. The professionals of hospitality have already had a very mature view on STRs – we’re not asking for them to be banned, we’re very conscious that this is something that is here and it’s here to stay, but it needs to be regulated. It’s absolutely necessary that the consumer has the same rights, hence, the provider of the bed has the same obligations in terms of security, in terms of fire escapes, in terms of pest control. All these are rights of the consumer and there is no argument against the fact that regulation needs to be horizontal.
On another side, we need to look at local societies. I won’t say it’s a growing phenomenon in a positive way, but within the last months we’ve seen more cities reduce or ban STRs because they see that they are changing the model of the city, they are punishing many social categories that cannot find housing. This is a second point of view, where you start to have more of a social problem. Moreover, as it was discussed today, there are a few regions in Europe where we talk about overtourism. It is no secret that if you deep dive into the data, you will see that overtourism has occurred over the last decade with the rise of STRs. There is no way to go into a city or an island or anywhere and suddenly say, I will build a thousand hotels and not get a reaction from local societies. Nobody will allow them. The laws do not allow it today. Nobody will allow a thousand hotels to be built. But, on the other hand, this is what has happened, not in terms of hotels, but in terms of houses that left the housing market and became part of the hospitality scheme.
So yes, STRs should exist, they are welcome to exist, but they need to be regulated. First of all, like hotels for the consumer, but second of all, all the local societies need to decide at what level they want them and how they are going to affect the rest of the society locally.
A recent research showed that opting for accommodations like AirBnbs no longer brings the financial advantages for consumers that they did at the emergence of the platform. Considering this and the uncertain conditions that guests might encounter when arriving at these accommodations, since they are not as strictly regulated as hotels, what do you think the future of these platforms is?
I think it depends on the destinations. Pricing is something that is very dynamic. Usually, in terms of competition, what I see in different local markets is that traditionally STR does put itself a bit cheaper than hotels, thus getting the local business. Behind this there is a financial mechanism where hotels have a lot of existing costs that are fixed, but you could have an STR that has zero fixed cost. For a hotel, the costs are much different in terms of employment – even if I have only one occupied room in a hundred-room hotel, I still need three receptionists in a day to cover three shifts. The same goes for housekeeping, the same goes for the kitchen, etc. So it is a very different model and it has been an entry point on the market for STR to be competitive towards hotels, in terms of cost.
We have seen, of course, a very big rise in the in the selling prices of STRs, but I think that the market will decide at the end which one gives the service and what kind of accommodation anyone wants to choose. And again, it’s an open market and it’s logical to have different propositions. A house is different than a hotel room and there are clients for both. But again, for me, we are past the competition level.
Restauranteurs, as members of HOTREC together with hoteliers, are very happy to have more clients because of STRs in some regions. But they’re also very conscious that if the region goes into overtourism mode and explodes, at the end nobody will have any business. So it is very mature to make sure that you keep the market at the level it should be and not try to push it too much, because if it goes wrong, it will go wrong for the whole market and after that there won’t be any distinction between this accommodation or that accommodation.
Lastly, what is the most important legislation that European hospitality needs from EU institutions in the near future?
I think that what is mostly needed is to reduce reaction time. The market is very dynamic and what is needed will not be in terms of which law do we want, but in terms of when we want the law. When something happens, we want a much faster reactiveness. I am perfectly aware of the of the difficulty at the European level to achieve this, but this is the most important thing because we see the speed with which things evolve.
We were talking about generations before. I’m sure that every generation speaks in the same way about the previous and the next generation and I can remember my parents and my grandparents talking about their children and comparing how things were. Differences between generations will always exist. But the difference of our time is not the fact that there is a difference between generations. The characteristic of our time is that the speed of change is much faster and within one generation the changes that happen are much more significant and disruptive. I always say that the there is no disruption anymore, disruption is the new evolution. Evolution is linear, disruption is self-explanatory, disruption disrupts the way that things work. So if you don’t have the legal system to follow in speed this constant disruption, then you are left behind, which will be at the cost of SMEs because they will not have the possibility to privately invest how to deal with all this change and disruption.
