A VISION FOR THE MODERN HOSPITALITY AND GAMING INDUSTRY IN A VUCA WORLD

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It’s truly amazing to see how the modern hospitality and gaming industries have shifted over the past 15 years, but there is a lot more work to do. The conditions under which gaming and hospitality organizations make decisions, plan forward, manage risks, foster change and solve problems to grow their business and customer footprint have become infinitely more challenging. When I speak with clients around the world, they struggle to understand why it has become so difficult to make sustained progress in achieving their goals and objectives. Simply put, it’s because we live in a ‘VUCA’ world where Volatility, Uncertainty, Complexity and Ambiguity are the name of the game.

The historical trends and examples of VUCA within the industries are widespread and are now apparent.

Oversupply, increasing and new competition and brand blurring: There are over 1,500 gaming properties in the U.S. alone and the world’s 10 largest hotel chains are now offering a combined 113 brands, 31 of which didn’t exist a decade ago. The growth in the number of brands and the related increase in the number of venues, gaming positions and rooms has caused a major shift in gaming and hospitality supply and demand. If competitors and their brands are expanded to include online travel booking, alternative accommodations (AirBnB) and gaming (daily fantasy sports, iGaming), then these alternative accommodation and gaming business models are colliding with the entrenched operators and stealing market share in ways big and small.

Global and national legal and regulatory environments: Gaming is one of the most highly regulated industries on the planet. But the expansion of transparency around financial transactions, environmental and non-smoking/alcohol legislative changes and especially the very approval of physical and online gaming has been on again, off again in many jurisdictions around the world creating volatility, uncertainly and complexity.

Security: Certainly physical security of properties and guests are of paramount importance. But with the rapid consumerization of technology and digitization of customer data, cybersecurity is no longer an uncertainty, but is complex largely due to lack of prioritization and misunderstanding. Constrained and stretched capital budgets combined with both staffing reductions and management structure streamlining have dramatically brought cybersecurity risks to the forefront of gaming and hospitality organizations. Consumer privacy and confidence are pillars to loyalty — one just has to look at legislative changes, court rulings and organizational financial statements to see the impacts of any uncertainty on this point.

Consumer generational shifts: The days of the novice consumer are over. Just as organizations thought they had figured out millennials, Generation Z comes along with the oldest members of this cohort being barely 18, but by 2020 will account for 40% of all consumers. Gen Z has come of age with a mobile Internet that’s allowed them to go deep on any topic of their choosing, learn from like-minded fans, and have had a wide variety of self-service, gaming and entertainment options at their fingertips. Similarly, the shift of focus on non-gaming spend that started over a decade ago, and was dramatically accelerated with the U.S. housing and financial meltdown, is now running into a much higher expectation shift across all generations for gaming and hospitality experiences. The volatility and ambiguity around these generational customer differences, transitions, behaviors and expectations impact the gaming and hospitality product, services and design.

That’s a lot of factors to assume you can have the same go to market strategy. To be successful going forward, executives need to build culture and structure around VUCA factors, including how they combine to impact the organization and how they will lead in this operating environment. One of the keys to managing in VUCA environments will be to change the perception of IT from a siloed cost center and utility provider to a strategic business partner and change enabler. Over the past decade, when CEOs noticed IT, their main concern was about how to reduce the cost of IT. Over the last 2 – 5 years,

however, business leaders have become more interested in IT. They already knew the value of finance and human resources, and they are getting a grip on marketing, procurement and logistics. But now both CEOs and board members are taking an interest in information technology. While this current focus has been driven largely by the cybersecurity, digital disruption and consumerization VUCA trends, the fact that Info-Tech’s research indicates that 67% of CIOs/CEOs are unclear on the target role for IT and that 66% of organizations are not preparing for disruptive technologies supports my experience that digital innovation can generate material value. Technology, and its ability to enable better innovation, higher productivity, faster growth, and specifically enable the intelligent use of data, may be the only way to effectively manage in VUCA environments.

The message is simple: instead of ignoring or fighting VUCA trends, embrace them. Experiment and lead through IT leveraging the convergences that are dramatically changing how customers connect, interact, and transact with your business. Technology is now part of people’s daily lives at home and at work, so they expect digitally-powered customer experiences in room, on the casino floor, at the pool and elsewhere at the property throughout their stays, whether they are traveling for business or for pleasure. In the modern connected digital property, a customer is able to use their mobile phone for a wide spectrum of services from making their flight, car and hotel reservations and acquiring their digital room key to open their door, to checking on the availability of their favorite slot machine or table game, playing a mobile casino game, managing their loyalty, controlling every aspect of their hotel room including lights, temperature and TV content and providing service and experience updates via social platforms. Driving this point home is a Hospitality Technology study in 2014 that illustrates the expected mobile hotel features. Digital options such as these are increasingly table stakes and will become the norm sooner than many operators realize.

In the near future, being in the game will mean that the entire property is digital. While the customer is interacting with all these traditional and mobile-enabled touch points throughout their customer experience, the property is fed a constant stream of data about the customer, from location to betting patterns, to stated vs. actual passions, preferences and behaviors. Gaming and hospitality organizations that embrace the mobile and digital disruption, while combining transactional system data with the streaming touch point data created by the guest could generate as much data as the entire casino generated in a day in a traditional environment only 2-5 years ago, but with so much more intelligence!

Physical casinos, resorts, restaurants, hotels and other non-gaming amenities will become digital and those that are already digital will become data optimized physical casino resorts that seamlessly merge the physical and online experiences.

Clearly, knowledge of the customer continues to be fundamental, but now our industry is uniquely positioned to collect enormous amounts of data on operations, customers and prospects. New competencies are needed to mine this data to know what makes customers tick. Many gaming and hospitality organizations still struggle with traditional business intelligence, analytics and data platforms to gain insight into the past and total customer worth – that needs to be addressed. But the advantage will go to those that can quickly move to more advanced digital business capabilities with supporting analytics to predict what a customer is going to do next, hyper-target to a market of one throughout the entire customer journey and to personalize the guest experience in order to keep up with this rapid-fire change. This is where marketing, IT and front-of-house operations are converging.

Furthermore, customers today, especially, but not exclusively, Millennials, are embracing – even demanding – self-service and Person to Machine (P2M) customer experiences. These are customer experiences in which tasks that don’t require human intervention are powered by automation and algorithms, while tasks that do benefit from human beings get true human warmth from capable human employees. While this may seem to go against the very fabric of luxury or hightouch guest services, these capable employees are then able to leverage technology and data to deliver higher-value, relevant, meaningful, emotional outcomes, interactions and even shareable physical experiences that matter to customers today and as they evolve going forward. Japanese Henn na Hotel (Weird Hotel in English) and the Hilton McLean hotel in Virginia are already experimenting with this disruptive technology, so the early adoption phase has started. In a North American gaming and hospitality industry of near saturation and oversupply where it is relatively easy for customers to switch to a competitor and for those competitors to match the table stakes of the experience, competing on a dynamic and exceptional customer experience has a dramatic impact on customer loyalty and revenues. Only those organizations that are structured to anticipate VUCA and transform beyond the physical to differentiate and compete on digital will be well positioned to provide a better customer experience and respond more nimbly to changing customer needs.

The difficult reality is that before business leaders and boards get ideas about being the Netflix of gaming and hospitality they need to remember that 50% of organizational change and transformation initiatives fail, and these initiatives will be no different if not addressed properly. Organizational change management, transformation, IT and digital are capabilities that can and need to be measured, diagnosed and developed. Once the first step of a data-driven capability baseline is established, it’s then possible to set about prioritizing, optimizing processes and changing how the organization will adopt and operate in this VUCA world. Then comes understanding which trends and shifts will create the most business value, and how to effectively adapt and strengthen their positions to VUCA disruptors while evolving to meet customer expectations. This approach will enable operators and owners to tilt the fundamentals of VUCA in their favor for competitive advantage without limiting the business to a narrow perspective of market events and committing to excessive, possibly disconnected and fragmented projects.

The gaming and hospitality world has never been static, but the future is infinitely more challenging thanks to VUCA. The VUCA environment will force leaders and organizations to think differently, go beyond being a service provider and demand more flexibility from the technology infrastructure and operations. Early adapters are already out of the gate and from my experiences both opening and turning around properties I can say that changing course is much harder than creation. Those gaming and leisure organizations that undertake the non-trivial transformative journey to become VUCA adaptive through digital, will undergo some pretty fundamental changes to how they budget, organize, prioritize and do business at almost every level. CIOs who can facilitate this understanding and enable the organization are not just getting the ‘seat at the table,’ they are uniquely positioned to help the CEO build the table.

In summary, technology combined with an IT environment that is adaptable to the strategy of the business and the trends in the market needs to be the foundation, but commitment to business transformation and investment in people to support the evolution needs to come from the executive and board level. With those building blocks, gaming and hospitality organizations can leverage, enhance and bridge customer experiences between the new digital property and the bricks and mortar physical experience for both competitive advantage and bottom line benefit. And isn’t this the culmination of what we have been striving for the last 15+ years?

An entrepreneur, former gaming and hospitality CIO and now consultant, executive advisor, and speaker, Larry Fretz is the Gaming and Hospitality Practice Lead at Info-Tech Research Group.

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