Why Marriott's CEO worries more about Amazon and Facebook than Airbnb

Marriott CEO Arne Sorenson understands that the tech giants are his biggest competition because they use data better than he does. What's less clear is how he's going to fix that.

Why data is the lifeblood of digital transformation

"We are in an absolute war for who owns the customer," Marriott CEO Arne Sorenson declared at a recent conference. "It's a long-term war, and 'long term' in digital space might be a few years."

While it would be easy to assume Sorenson was referring to new-school competitors like Airbnb, his comment instead points to a much bigger threat: Google, Amazon, and Facebook. Why? Because it's the tech giants who promise to dominate experiences through data. As Sorenson declared: "I think less about Airbnb than I do about Google and Facebook and all these other digital empires who own all of us."

Cheery, isn't it?

And yet it suggests that the Marriott CEO is thinking about competition with eyes wide open. As software and data take on increased importance in every business, traditional businesses that think they can continue competing with traditional competitors in finance, hospitality, and more are deluding themselves, and doing their investors a disservice.

Face the thing that should not be

Pity the legacy business that just wants to hunker down and enjoy that legacy. For decades a company like Marriott simply needed to worry about Hilton or Starwood enticing away customers with better properties or better amenities.

Today, Hilton is the least of Marriott's worries and Starwood is soon to complete its integration into the Marriott family. Instead, Marriott must worry about Airbnb and other new-school hospitality companies that can offer a place to sleep without taking on the capital expenditures to build them or even most of the operating expenses to deliver the hotel room.

Except this isn't even the company's biggest concern.

SEE: Big data policy (Tech Pro Research)

As noted above, Marriott CEO Arne Sorenson instead worries about the "digital empires who own all of us." Companies like Facebook and Amazon with an ever-swelling treasure trove of personal data that can be used to enhance someone's hotel stay...or their experiences in banking, dining, and more.

"What Amazon is doing with these digital assistants is reinventing search for voice search," Sorenson said. "[The digital empires] are all getting into hav[ing] a profile for each and every one of our customers....This is a battle we are going to be fighting for some time."

The battle, of course, is about data, and Marriott and its legacy peers in every industry are way behind in leveraging data to deliver exceptional customer experiences.

...A weatherman to know which way the data blows

Speaking just of the Amazon Web Services (AWS) business, Amazon CTO Werner Vogels once famously noted, "We're in the business of pain management for enterprises."

This "pain management" mantra has given AWS a blank check to take on the enterprise infrastructure market, but also push messaging collaboration, and more. In like manner, Amazon applies its ability to wring inefficiencies out of businesses to take on everything from retail to grocery delivery to media and entertainment and more.

As Sorenson suggests, however, the risk to legacy businesses isn't so much that Amazon, Facebook, and other "digital empires" will out-retail, out-finance, or out-logistics them, but rather will out-data them. I have Marriott's highest status within its loyalty program, yet the company still struggles to know very much about me.

For the past year, hotel employees have greeted me (and anyone else using the mobile check-in functionality) with "Hello, Mr. (insert mispronunciation of my name here). We've been expecting you." Except that it's clear they generally haven't been expecting me. And that they know very little about me.

Amazon, by contrast, knows what books I read, the sorts of things I buy for my home, what I ask Alexa to do, etc. If Amazon were to partner with an Airbnb or similar, for example, it would be able to provide a much more satisfying stay, informed by data.

Google and Facebook are similar. Marriott only seems to understand what room I explicitly tell it to reserve for me. These "digital empires" have a far better understanding of who I am, and how I'd like to be treated and what I might like to do during a trip.

Should legacy businesses like Marriott give up? Of course not. But they need to realize, as Sorenson implied, that they can't hope to compete with the digital hegemons long term by simply adding higher thread counts or fancier lobbies. They need to learn how to use data much more intelligently.

The sad irony is that I will gladly give a company like Marriott much more of my data if only they'll agree to use it to improve my travel experience. They don't, and this leaves an opening for the far less scrupulous digital giants to mine my data for their own benefit, not mine.

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Image: iStockphoto/tupungato