Unlocking growth for small hotels through technology 

By Brontë H. Lacsamana, Reporter

INDEPENDENT HOTELS are grappling with the task of predicting customer behavior, which is crucial for effectively selling rooms and services at the most advantageous price, according to an industry expert.

Small hotel owners find that the process, even on online travel agency systems, can be time-consuming, Rafael Daniel Jouwena, chief executive officer of online hotel management company Cocotel, said in an interview.

The use of artificial intelligence (AI) can help increase average revenue growth by 6%, with 40% of marketing and sales departments around the world able to do so, according to McKinsey’s 2019 global AI survey.

However, these AI high performers are able to become such because of their manpower and capital. Independent hotels, in contrast, often struggle to compete with larger hotel chains that have dedicated teams to manage these aspects of the business.

For Mr. Jouwena and his business partner Reginald Go, this realization got the gears in their heads turning and led them to start Cocotel in 2019.

The concept envisioned a comprehensive platform functioning as a “one-stop shop” that enables customers to conveniently search, compare, and reserve accommodations, while simultaneously equipping hotels and resorts with the essential tools for successful marketing and efficient management of bookings and revenue.

“We want them to save cost by using our own property management system and at the same time our channel manager. Basically, they can save their money if they partner with us,” he said.

This way, small, independent hotels that do not fully utilize technology can be given a fighting chance to navigate the complex state of tourism in the Philippines, further complicated by the pandemic.

There are over 500,000 hotels in Asia-Pacific, but only 1% are hotel chains. This means a whopping 99% are run by independent owners, said Mr. Jouwena.

“The ones easily recovering after the pandemic are the big hotels, the five-star hotel chains. But how about independent hotels and resorts that are still struggling to improve their sales?” he said.

Though Cocotel deals with hotels and resorts, the struggle is real for all micro, small, and medium enterprises (MSMEs), which comprise 99.58% of Filipino businesses, as per the Philippine Statistics Authority.

ADAPTABILITY
Being adaptable to changes is the surefire way to secure the survival of any business, no matter how big or small, Mr. Jouwena said.

Being adaptive also reduces the risk of getting blindsided by sudden circumstances like a pandemic or a change in trends.

“Even traditional businesses have technology in order for them to actually grow or survive,” Mr. Jouwena noted.

In 2019, a study conducted by McKinsey showed a nearly 25% surge in the utilization of AI in conventional business operations. Since then, this growth has continued to accelerate, exemplified by trends and technologies like ChatGPT, which have disrupted businesses worldwide.

Digital marketers and copywriters have adjusted to utilize the artificial intelligence tool to boost search engine optimization for hotels, restaurants, and everything in between.

Mr. Jouwena said that online content creators now make use of ChatGPT to boost Google SEO (search engine optimization).

“Good thing Cocotel is a tech enabler startup, so we were able to adapt to changes like that in order for us to be at par with our competitors,” he said.

McKinsey expects that AI-based price and promotion could deliver between $259.1 billion to $500 billion in global market value.

EDUCATION
Independent hotel owners, the main market for Cocotel, may not always be keen on adopting technology, especially given how overwhelming it can be.

This is where education comes in, according to Mr. Jouwena.

“We create seminars for our hotel partners on the importance of dynamic pricing and revenue management … This means we help them with revenue optimization and increasing their sales online,” he said.

Small business owners, who may lack formal training in business expansion, may not always possess knowledge of practices such as dynamic pricing, which involves adjusting prices based on demand and supply fluctuations, he noted.

The many algorithms involved when dealing with online systems also deters these MSMEs from taking on the challenge.

For Mr. Jouwena, both the private and public sector must be involved in helping this sector of business owners, especially in the Philippines where around 99% of businesses are MSMEs.

PARTNERSHIPS
One of the most important partners to have is the government, as the one responsible for policy and implementation on a large scale.

“They already have enough resources and communication lines to all partner hotels. That’s why we want to support local government units (LGUs),” said Mr. Jouwena.

He noted that particular hotels with a high volume of bookings or guests can benefit entire communities, since more tourists implies more money coming into the local economy. Upskilling seminars boost tourism and local livelihoods.

A beachfront resort in Nasugbu, for example, may have more guests by leveraging better technologies to sell online, but this will mean they will need more employees.

LGUs can also help look after not just resort staff, but independent tour operators, like those who rent boats for island hopping.

“This can stimulate the economy in that certain area and that’s the reason we partner with the LGUs,” Mr. Jouwena said.

Nationwide, the impact of visitors can be seen in the number of arrivals, which reached 2.65 million in 2022, according to the Department of Tourism. This translated to P214 billion or roughly $4 billion in estimated revenue.

FORESIGHT
Revenge travel means businesses have to be in touch with the trends and needs of the season, noted Mr. Jouwena.

“We want to make sure that we are as competitive as possible for us to get the bookings first.”

He said that hotels and resorts have to offer special promotion rates for the rainy season, falling in the third quarter of the year, since it is the weakest. They can then make up for this by charging higher rates during the Christmas season.

Methods like advance selling and competitive pricing help hotels pull through, with the goal to be fully booked all throughout the year.

“This is applicable not only to the hotel business; it’s the same with others,” Mr. Jouwena said. “As a businessman, you need to predict what will happen for you to be ready for unforeseeable circumstances.”

PERSEVERANCE
Mr. Jouwena’s one piece of advice to MSMEs is to simply start and then do one’s best to succeed.

“It’s really hard to start, but if you have the dedication to finish, that would be a good story for you to tell to other people,” he said.

This involves demonstrating a readiness to take risks, but only after conducting thorough research in the specific industry, he added. Following that, it is essential to take action promptly because “if you delay, it will never materialize.”

It took Mr. Jouwena ten years to start his business, and despite the difficulties caused by the pandemic, he said that the fulfillment is still worth it.

“There’s no smooth road but at the end of the day, if you just believe, you will feel the rewards and feel proud of yourself,” he said.