“Yotel is a challenger hotel brand that is about seven to eight years old,” Fergus Boyd, Group Director of Digital and IT at Yotel tells this week’s Horizon Live podcast from a Horizon CIO roundtable dinner event earlier in the year. The invite only dinner saw 23 CIOs discuss the CIO role in digital transformation.
Yotel, founded in 2003 by Simon Woodroffe is part of the Yo business group best known for the Yo Sushi brand. Woodroffe is also famed for being one of the first dragons to enter the BBC’s Dragons Den TV show.
“Yotel turns over £50 million with only five hotels around the world and we have an ambition to reach 50 hotels by 2020 as we are opening three a year,” Boyd told the CIO community in Kings Cross, London. “The brand started off as a hotel in an airport, so we initially had Heathrow, Gatwick and Schiphol. And with air traffic control strikes that can be good news and bad news asn people have to lay over,” Boyd said on the day of a French air traffic control strike that saw his presentation briefly delayed as a CIO flying in from Paris entered the room. “All our hotels are about 50 to 80 rooms, so they are petite, but in this space we can squeeze a lot more rooms in, so we get the corner spaces in airports that retailers do not want to rent.
“During 2017 we will open two new hotels and are expanding into cities such as San Francisco, Boston (recently opened), Singapore and Amsterdam. All the hotels are the same concept of hotel with an average daily rate of $330 a night, so they are relatively high end,” he said. To illustrate the business model, Boyd explained that the Rotunda restaurant private dining room could feature two Yotel cabins, which are 16 meters squared.
Yotel as a disruptor
“We have a very potent design team that find spaces to build hotels in and they look at a cubic volume in a city centre or an airport and then look at the RoI (return on investment) of how many rooms or cabins can we squeeze into that space,” Boyd says of how Yotel disrupts the hotel industry by using data to work out a yield that will deliver consist business.
An example of this the central New York hotel close to Time Square Boyd says, by calculating that it could put 713 rooms in Yotel was able to beat the established players like Hilton. “We get the same average daily rate in the same space so in terms of RoI that is why this whole new segment is termed affordable luxury.”
“It is not an easyHotel with no frills,” Boyd says of the budget hotel brand run by easyJet founder Stelios Haji-Ioannou. “We have a queen bed, but it is motorised, so we borrowed from the airline industry , you walk into your room there is lots of space and what looks like a couch, you press a button and zoom and it comes down. We also have king size rooms and bunk bed rooms and a room for families. So it’s based on clever use of space.
“Simon Woodroffe had a bright idea from a BA flight coming back from Tokyo having been out there to hire Sushi chefs he got upgraded and loved the personal cabin and got together with Gerard Green from the hospitality sector and together they invented this whole smaller space luxury concept,” Boyd says of the disruptors novel approach to a luxury hotel room.
“The rooms are designed to clean easily as we sell the rooms nightly or a during the day with a minimum four hour stay and once you leave the room it is cleaned within 34 minutes and back on the market for sale again, so the occupancy rate is high as we sell the same room twice a day,” Boyd says.
“We are a mature startup, so not quite an Uber or AirBnB, but right now we are 33 to 35% online if you talk to Hilton or Starwood lucky if they are on 18%, the rest comes from travel agencies or FIT, (fully inclusive tour) packages and those guys charge a fortune, 20 to 25% and that is how people like Expedia make their money, so our focus is to try and drive as much of our business as we can through Yotel.com,” Boyd says of how important owning an audience and gaining direct revenue is. Boyd adds that the cost of a web sale is two to three percent of the sale, compared to 15% of a sale through an online travel agency (OTA).
Boyd extends the cost effectiveness of web based tools to the internal business too. “We are trying to be as crew savvy as possible, so we use Slack and modernish things. I’m less prescriptive, in Virgin and BA we had IT police stopping you using Slack and stopping you using pirate or shadow IT, I welcome shadow IT, I have been part of Shadow IT for two decades.
“Some of the salespeople are in New York, they are welcome to use new things because they will spot some new things before I do because they are selling to Silicon Valley. We trial it and if it works we adopt it very quickly, if it doesn’t work we kill it extremely quickly,” he says of using agile methods.
“Because we are scaling quite quickly, three hotels this year and five next year we are building models, an anytime model so the internal IT and digital have built a shopping list based on the number of rooms, open spaces and community areas. We are big on standard operating procedures as we have to be.
“The development team will then find a cubic space and I can say the cost of space will be X number of thousand and they can then pitch to the investors and the VCs and say this is how much we can squeeze a room in for.
The room costs are more than a Hilton or a Starwood, but the average daily rate are better over the medium and long term for the same cubic volume, so that is how we win.
“We need telephones for security reasons, though I would love to get rid of those as people bring their own phone. We talk to our customers who are millenials, they want a big TV, they say give me streaming media, fantastic Wifi and give me human contact when I need it. So we use check-in kiosks, 94% use the check-in kiosk, and again they like it.
“There is no added value to a reception desk and we don’t have any check-out as everything is taken off the bill as you walk out and that is fine as there is nothing to chase you for. Customers will use the technology if they need to and at two or three am in the morning there is a person there if you need it, unlike an Air BnB, so we are not taking people out of the loop we are including them and training people up to be much more service centric, especially when compared to other hotels,” Boyd says.
Yotel now faces disruption from the established players in the hotel market copying the model, just as easyJet faced British Airways launching against it with Go in the airline industry. As the leading CIOs from easyJet told Horizon Business Innovation the challenge for those organisations is whether they can adopt the totally new ways of operating. Boyd says Marriott has Moxy, Hilton has Tru and Premier Inn have Hub a “that is between low cost and affordable luxury and Starwood have a brand called Loft, so everyone is chasing this squeezed middle ground so we have to move fast, what is different is that we are digital first,” he says.
IT at Yotel
“My role in Yotel is this thing Forrester call a CDO, chief digital officer, I can’t use the CDO title as we already have a CDO a chief development officer who finds the locations for the hotels,” Boyd says of a role that is about both running the the technology, but Boyd has a sales target too as he’s responsible for the website that faces the customer.
Giving Boyd a sales target is a sign that Yotel is a business that is honest and realistic about the role of the CIO or CDO to be a major force in the business. With direct online sales delivering an RoI of 15% more per customer it is critical for the CDO and the business to be focused on delivering that result and decreasing the need for inventory to be sold by OTAs who expect a significant commission. Organisations that want to become truly digital will need to trust and empower their business technology leaders to not only operate customer facing technologies, but take responsibility for increasing transactions.
“When I go to IT, I have a debate with myself, shall I upgrade the email or improve the customer Wifi and it is generally the customer WiFi.
“I buy cloud and I buy open source, our content management system (CMS) is Umbraco which is cheap as chips, but there is no neck to throttle if a system doesn’t work, I have Oracle, Salesforce, I start out light and as it is cloud based I can afford to buy more and more.
“I can go to my CEO and say upgrade this and we can keep out the OTAs. So OTAs are great for tactical filling, but keep them out as much as you can because of the cost of sale,” Boyd says of how having a sales target helps ensure he gains the funds needed for technology investment.
“I see no dichotomy there. Low cost IT is essential, lots of open source and I beg borrow and steal.
“We have fewer people, but in a very flexible fashion. I do distribution and I do IT and .com we need multi-skilled people and it is hard to find them. I go to recruitment agencies and say I need a project manager who is a good business analyst and a tech leader and they say that is three people, which one do you want, and I say I want someone who is good enough. No one is going to be perfect at all of these, but we chose people who are flexible, for example this morning I was doing customer service and we need people who are willing to help.
“I’m a digital mongrel, I was in engineering in electronic engineering from Queen’s Belfast, my original thesis was on power systems engineering and I like nuclear power and I understand what is inside a iPhone or an LED lamp and I like coding,” Boyd says of his career.
“I joined British Airways in the heady days before the Bermuda treaty when there were four airlines allowed to fly across the Atlantic and BA was one. Back then I was coding for the engineering ERP applications, back then BA wrote everything itself as back then you couldn’t buy a traffic analysis application so you wrote your own.
“I then moved into data warehousing, now called big data then moved into the early days of BA.com in 94/95 as BA got the bug for digitisation back then 24 years ago, thank goodness as that helped the airline during 9/11,” he says. Adding that the original British Airways website just listed the call centres.
“That department scaled up and became an internal team protected by the mothership with different procurement and supported by IBM and we ran agile delivery in 90 days back then before the term was coined and we had dragons dens where you would go in with a proposition and if you won you had 90 days to prove yourself and come back again and if you won again you had another 90 days and another slug of money or you were chopped and someone else got the money.
Boyd left BA to go to arch rivals Virgin Atlantic as head of innovation in 2007. “I’m promiscuous, from Big Blue to Little Red, home is where my pillow is,” he jokes.
“I always have hoped between IT and digital as I like the ability to get things done and for me IT gets things done and digital makes the money for things to get done.”