July 7th, 2018
Alexa for Hospitality is the new official gateway into Amazon’s universe of programs, products, and services.
We call it Amazon for Hospitality because the tie-ins and synergies go beyond guest experience and speaker sales. AFH is a clear stake in the ground. It’s Amazon’s official announcement stating that yes we are interested in travel and that we are here to both help and to disrupt.
These first partnerships with Marriott and others including RedAwning are telling and could disrupt some of the competitive dynamics in the space.
From here, Amazon has many levers that it can pull to incentivize adoption and to cross-sell, while gaining deeper entry into the parts of the value chain that make sense. Those groups that participate will likely find advantages spanning product, marketing, procurement, IT infrastructure and more.
Consider the following:
The Ecosystem. Amazon is the online retailer turned technology company, turned consumer electronics company, turned production studio, turned media platform, turned cloud computing bahemoth, turned membership club, turned grocery retailer, turned advertising platform, turned logistics carrier, turned home security and services company, and now hospitality technology company. Hotel groups and rental property managers need all of those things.
The Gateway. AFH sells like a hotel technology solution, but it’s also a gateway product between brand ecosystems. Eventually, Amazon and partners may figure out how to monetize Alexa as an ad platform e.g. through promoted activities, restaurants, and other recommendations to guests. We think that the bigger long-run opportunity for Amazon is with cross-selling its various business units into hospitality. That includes the full suite of AWS offerings, product sales including Alexa and its line of private label durables and non-durables, brand exposure with hotel guests, and with growing its Prime membership base.
Exclusivity. Exclusivity gives AFH teeth. Alexa for Hospitality is currently a club. Access is available via invitation only. How Amazon chooses to roll this out to the rest of the industry will determine a lot. Marriott would love to be the only global hotel chain with Alexa-enabled properties. Amazon would love to see a global Marriott roll-out. The real money here is in the deeper business relationships formed between Amazon and AFH participants. Overextending access might compromise these important first relationships.
Leverage. Amazon could become a formidable force in global hospitality by choosing which partners gain full access to AFH and Amazon’s ecosystem of services and products. Those that participate could seek competitive advantage on both product and cost. Amazon has a lot of levers that it can pull to incentivize hoteliers to integrate with Alexa. Things like exclusive cross-promotion for hotel loyalty program members; discounts on bulk procurement of products across Amazon's full line of private-label home brands; and competitive rates on data storage.
Front and back of house. The potential is clearly there but Integrating Alexa into the hotel tech stack will take work. Functionality will start with structured data and general commands and queries that are already retrievable through Alexa. Automation for property and brand-specific operations e.g. ordering room service or extending reservations will come over time. How far will hotels go to integrate with Alexa?
Supply chain. Tie-in with Amazon logistics and retail. We speculated back in April that Amazon would push its way deeper into the vacation rentals management supply chain. Part of the recent AFH announcement included the reveal of the RedAwning Smart Concierge service. Among other features, the program will offer discounted rates on voice-enabled devices, home automation items e.g. appliances and security products, but also housewares and linens, which we can only assume will be Amazon’s owned line of products. (learn more about RedAwning).
Audience. Amazon has roughly 120 million active Prime members and 200 total global users. Marriott Rewards has over 110 million members and accommodates roughly 300 million guests annually (our quick estimate - see notes). Significant exposure for Amazon in the event of a wide-scale roll out. Strong brand alignment and reach potential for Marriott if Amazon were to actively promote Alexa to consumer as a “travel assistant” of sorts.
Differentiation. AFH will help Marriott differentiate and convert lookers into bookers, especially on third-party sites i.e. the OTAs and metas. We envision the Alexa-enabled banner proudly displayed on hotel search results. Smart or traditional. Which would you pick?
Showrooms. Apple spent billions building and maintaining its brick-and-mortar retail network. Steve Jobs brilliantly executed on physical retail when all other device players went the other direction and online. Amazon's move into hotels might be even more brilliant. Hotel groups will gladly pay Amazon to promote its products. Amazon has many levers that it can pull to incentivize adoption.
Skills. Hotels will also work to make Alexa smarter, by building up the Skills that other hoteliers can in turn use to power their properties.
Housekeeping. Earlier this year, we speculated on Amazon's move into housecleaning services as another line that connects the Amazon ecosystem to home sharing and the growing alternative accommodations market.
Learning the business. Alexa for Hospitality will officially plug Amazon into global hospitality. From here the company will likely go in various directions, testing entry points within the technology vendor ecosystem, the supply chain, and direct-to-consumer marketing. We expect more acquisitions and partnerships along the way.
Approximation for total number of annual guests staying at Marriott properties globally:
[1.3 million rooms * 365 * worldwide 2017 occupancy rate (74%) * average number of guests per booking (1.7) ] / average length of stay (2 nights) = 298 million
Average number of guests per booking and average length of stay are educated guesses.