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Perspectives

Guest Rooms are Commodities. Now What?

2018-12-19


Here’s how hotel chains can use VR/AR to differentiate their brands — and boost direct bookings and customer acquisition.

Quick, which room below is in a top-rated hotel in the heart of Chicago and costs $161, and which is in a mid-range hotel on the city’s south side for $164?

Can’t tell? Neither can your guests.

For a long time, sameness was profitable for hotels. As the fast-growing tourism industry fed brands’ sweeping expansion throughout the globe, there was no downside to every room looking like the next one.

Now the one-size-fits-all approach is under threat. Boutique hotels are in vogue. Airbnb is booming. Online travel agencies (OTAs) loom as a mixed blessing, bringing in guests but eating into profits and diluting customer retention.

The result? Sameness is out. Replacing it is experience, and virtual and augmented reality (VR/AR) give brands the potential to break out of the pack. With VR/AR, brands can offer immersive experiences that go beyond sleek photos. Prospective guests feel what it’s like to bask in the sunshine at poolside, hear the clink of glasses in the bar, or even step into a hot air balloon.

The experience feels vibrant and personalized, and far more engaging than static media.

And that’s anything but routine. 

Amped-up marketing: How VR and AR boost bookings and customer retention

For the hotel industry, AR/VR drives revenue in distinctly different ways. VR can help differentiate within OTAs and increase direct bookings by serving as a pre-trip sales channel.

With its overlay of the physical world, AR’s potential is as an on-stay tool, enabling guests to get the most out of their trips — and driving ancillary sales and services.

VR gets real

VR’s you-are-there feel lets hotels engage with consumers who are off-property, both expanding their marketing reach and making it more inclusive.

The beauty of VR content is that it can live anywhere. The richest VR experiences are through top-tier consumer headsets such as Oculus Rift and HTC Vive. But your hotel website is another place, with 360-degree videos that prospective guests will most likely view on 2-D monitors. So is your mobile app. Smartphones and tablets are routinely equipped with the fast processing and memory speeds as well as the sharp screen resolution needed to make the most of resource-intensive VR apps.

Off-site viewing, however, holds VR’s biggest potential for the hotel industry. New channels are opening for distribution of VR content at scale, including YouTube’s 360 section and independent app store WearVR. (The assets are currently 360 videos that can be viewed within VR headsets. We expect that VR and 360 videos will eventually consolidate into a single category.)

Through these outlets, as well as OTAs and partnerships with city and state tourism boards, hotels will be able to push out content at scale.

We envision that by the end of 2020, customers will routinely expect VR content, similar to when lush website photos became the standard.

The lowdown on AR

AR’s outlook is even more robust. Our 2017 report identifies AR’s potential as greater than VR, buoyed by the release of developers’ toolkits from Apple and Google.

Like VR, AR has notched a string of successes in retail. Consumers have flocked to Ikea Place, the Swedish furniture giant’s AR app. The key to the app’s success is that it’s more than novelty, enabling consumers to virtually place furniture in their homes.

In the enterprise, manufacturers have made early inroads in commercial AR applications that offer true value, including equipment maintenance documentation and resources viewed via smart glasses. (For more details, see our report, “Disrupting Reality: Taking Virtual and Augmented Reality to the Enterprise.”)

What can AR do for hospitality? By improving experiences within the guest’s environment, AR can really shine as an on-stay tool for the tourism industry. Mobile AR, for example, requires nothing more than a smartphone. It’s the ideal tool to help guests with on-the-road endeavors like wayfinding. Google is already making strides with its Translate app, which renders reading materials in guests’ native languages. The app enables guests to find their way around more easily — and hospitality providers no longer need to print signs, guidebooks and menus in multiple languages.

Perhaps more important for hotels, resorts, casinos and cruise ships, AR allows for the discovery of experiences in context. AR applications can literally point guests to local services and destinations — and potentially generate additional revenue by extending e-commerce capabilities into AR. Apple Maps’ AR flyover mode, for example, lets viewers zoom over a city to see where they want to go.

Looking ahead: Determining where to get started on VR/AR

How do you begin moving toward the immersive discovery experiences that can differentiate your organization in the marketplace? Start with the basics. Here are the top questions your organization should ask about AR/VR applications:

Is there value for our audience?

Does the application make a task easier, faster or more efficient? Perhaps it helps guests learn something new or become better at a specific task. Maybe it entertains them. Determining the benefit at the outset helps keep your project grounded. It gives you a purpose to return to. 

Is the project a good fit for AR or VR?

Some immersive-discovery experiences work just as well if they’re not AR or VR. Does a prospective AR app need a real environment to function versus 3-D? Does the app interact with the real world? An AR overlay for the room-service menu might be a cool use of technology. But does its interactions offer guests genuine value or gee-whiz novelty? For a VR application, does the app need to fully surround a user to function? 

Who is the end user, and how will they use the content? 

The answers determine how you will capture the footage and therefore the cost. Simple VR or AR pilots might be BYOD; the only hardware needed is a smartphone. More advanced experiences might be created for HTC Vive distribution through digital platform Steam. 

What is my budget?

Software development kits by Apple and Google have made it easier to create AR apps and have significantly reduced development time. For more affordable content creation, Unity and Unreal are the dominant players. Both began as gaming platforms. They allow apps to work across multiple platforms, so you’re not committed to a single mobile platform. Unity has moved into emerging media and now allows organizations to purchase enterprise-level access to distribute and deploy content. Unreal’s model is commission-based. 

For basic AR, it’s all about scope. A basic AR app that lets guests scan a room and learn about the features, and that doesn’t delve too deeply into back-end features such as metrics and tracking, can cost $70,000 to $150,000. Once you add more interactivity, navigation and back-end elements, the cost starts to climb. Development time, including user experience (UX) and interface (UI) design, ranges from five to seven weeks.

How will the AR/VR app generate or impact revenue? 

Like all content that engages, AR/VR videos create revenue by driving preference. Consumers love video, and video conversion is high. (Sixty four percent of consumers purchase after watching branded social videos.) Mobile AR is a potentially important channel to monetize. It can boost already profitable ancillary services such as room upgrades and poolside amenities and add new ones by connecting guests with offsite destinations and activities.

To learn more, visit the Travel & Hospitality section of our website or contact us.

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Guest Rooms are Commodities. Now What?