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‘Ultimate Terror’: Is Virtual Reality The Hotel Sector’s Next Disrupter?

More than a decade ago, BD Hotels co-founder Richard Born read that anyone in business who wasn’t thinking about how technology could radically change what they do would be left on the dustheap of history.

The developer of some of Manhattan's most popular hotels says it was a statement in Thomas L. Friedman's book "The World Is Flat: A Brief History of the Twenty-first Century" that he took to heart. But now he thinks he should have done even more.

A room at the Ace Hotel New York City.

“Of course, I said, ‘I’m in the hotel business. I mean, you can technologically do a lot of things but you can't technologically come to New York and have a trip without staying here,’” said Born, who, along with BD Hotels co-founder Ira Drukier, has the city’s largest portfolio of boutique hotels. “What I didn't realize is how our business would be disrupted by the [online travel agencies] ... or that there [would be] 50,000 Airbnb units in New York City.”

Technology has taken a sledgehammer to everything from taxis to workplaces to grocery shopping. Experiences, many believe, remain sacred — with curated, Instagrammable moments now topping the list of what consumers are chasing. But with travel being the ultimate experience, most would consider the world of hospitality and the hotel business safe from a ground-up disruption, despite the growth of Airbnb.

But Born, the creator of the Pod Hotel collection and a force behind some of New York City’s hippest hotels, including the Bowery, The Greenwich, the Jane Hotel, the Ludlow and now, the Chelsea, doesn’t rest so easy.

“We haven't reached exhaustion on new ideas that are going to disrupt things. I have no idea what that means," said Born, who will be speaking at Bisnow’s New York 2019 Hotel Summit Jan. 24. “There is one ultimate terror. The ultimate terror is virtual reality.”

BD hotels is developing the historic Chelsea Hotel

Travel is not about museums and monuments, Born believes, but about experiencing other people. Until artificial intelligence is able to replace those personal interactions, he said, the world will still want to come to New York City and rent hotel rooms here. But he doesn't think that great replacement is as far-fetched as it seems.

“You know, maybe you can go on a virtual trip and have virtual personal interactions with other people in that virtual room with you,” he said. “You know, you could really drink at a bar with somebody you know, with your headset on or with your glasses on or whatever else is needed. So who knows. Never say never.”

So far, Born has carved out an incredibly lucrative niche by creating intrinsically cool places in a city into which millions flock each year. Nearly 63 million tourists came to New York last year, a record number despite early fears that the Trump administration would have a chilling effect on tourism.

At the same time, the city is in the middle of hotel boom that has added more than 6,500 rooms in the last year and a half, according to Marcus & Millichap’s hospitality research report for the second half of 2018, and some 16,000 more are on the way.

The demand is there, for sure, but it is a fiercely competitive game. Technology and disrupters like Airbnb are pushing hotel developers and operators to step up and find new ways to create experiences for their customers.

The bar at the Beekman Hotel.

"The traditional form of hospitality doesn’t change," said GFI Hospitality Vice President of Asset Management Jeremy McBride, whose firm owns the ACE Hotels in Palm Springs and New York, the Beekman in Manhattan's Financial District and the James in NoMad. "It comes down to creating service and how you become more efficient. Technology isn’t the answer for everything."

McBride said it is important to be thoughtful in how technology is deployed within the hospitality environment — particularly as the average consumer is evolving and changing so quickly.

"The industry thinks about delivering gadgets to guests without fully thinking through how the staff can utilize it to deliver the experience expected," he said, adding that high-tech innovations can complicate things, rather than improve them.

At the ACE in New York for example, GFI now provides an iPad in every room to allow guests to communicate more easily with the staff. The company also partnered with Amazon to test out Alexa technology in the rooms — though they found guests had some reluctance about using it because of privacy concerns, along with voice recognition sometimes being challenging.

At the Beekman, there is a text messaging system between guests and the staff — which people actually use.

Ultimately, many people who visit the hotels are seeking something else, and they want technology to help them disconnect, incongruous as that may seem.

“The idea of the Beekman is to take somebody back into the 1880s, and feel like what it was like to live in the 1880s,” GFI Capital Resources Group Chairman Allen Gross said. "So you are experiencing the past in a great venue … It all boils down to the service."

Barone Management's Scott Barone — whose hotel developments include the Arlo Soho and a yet-to-be-announced luxury hotel in Tribeca — said his only fear about technology and the hotel business is that it may erode jobs, resulting in fewer people traveling. He noted that the city’s new era as a technology hub may pick up the slack.

“You can’t sleep on the internet,” he said, adding that his only real bone to pick with Airbnb is that, while a “great business model,” it should be subject to the same taxes as hotel operators.

Still, the way he has been approaching the development of hotels has shifted to provide for millennial customers who want to be able to sit on laptops and other devices, lapping up WiFi in communal areas.

“Go back five to seven years, at an independent or boutique hotel you would be focused on framing [public spaces] in more food and beverage," Barone said. "Now, instead of doing, let's say, five big couches, I’m doing two big couches and I’m doing a bunch of high-top stools and communal tables where 40 people can work and congregate.”

You can hear Born and Gross speak at Bisnow's New York 2019 Hotel Summit at the New York Marriott Downtown Thursday, Jan. 24.

UPDATE, JAN. 11, 1:30 P.M. ET: The Arlo Soho is a hotel on Hudson Street in New York City. A previous version of this story used an old name for the property. This story has been updated.

Related Topics: Richard Born, BD Hotels, Pod Hotels