What is the metaverse and how can it be harnessed by hospitality?

Spending money on computer-generated land in order to build a virtual hotel that people cannot stay in may sound odd, but Millennium is part of a wave of companies – from McDonald's to Coca-Cola, Nike and Gucci – that are investing in this new space, part of what is called the metaverse.

It may not have a set definition yet, but the metaverse has been creating a considerable amount of buzz in Silicon Valley and beyond, and is already presenting new avenues of business for the hospitality sector. "The opportunities are huge," says Piers Zangana, director of Susa Comms, a PR company that is advising a number of hospitality businesses on how to launch in the metaverse.

"A lot of companies are already realising its value. Every brand will soon need to have some sort of visibility in this space."

In March, investment bank Citi issued a report saying the metaverse could have a digital population of as many as five billion people with an economy by 2030 of $8t-$13t (£6.4t-£10.3t). "We believe the metaverse is the next generation of the internet," Citi said.

Zucker punch

But what actually is the metaverse? Although the term has existed in science fiction since the early 1990s, the word really shot to prominence in October last year thanks to Mark Zuckerberg. The 38-year-old multibillionaire announced he was changing the name of his company from Facebook to Meta to reflect the company's new ambition to build the technology and infrastructure necessary to create a functioning metaverse. Thousands of employees at the social media giant would be assigned to this new venture and billions of dollars poured into it, he said.

Although there are still some disputes about the finer points of what the metaverse actually is, tech executives broadly claim it will become the third iteration of the internet, or Web3, as some are calling it. First, there were fixed desktop computers, then society moved onto mostly using mobile, and now we are about to experience an embodied internet in which we will feel we are ‘in' the websites and apps we are visiting rather than simply viewing them.

"It's the next generation of the internet – a more immersive, 3D experience," says Nick Clegg, Meta's president of global affairs. The former UK deputy prime minister wrote an essay on the metaverse in May: "Its defining quality will be a feeling of presence, like you are right there with another person or in another place."

A key question still being determined is how we will access this immersive 3D universe. On one end of the spectrum there is the opportunity to don virtual reality goggles, such as the Oculus Quest headsets designed by Meta or the PlayStation VR by Sony. In this scenario, users will be able to appear as 3D digital avatars of themselves and visit various virtual worlds. They can meet friends, take work meetings, attend concerts, visit art galleries or nightclubs, go shopping and play games. Sometimes, those virtual moments may contribute to real world events. For example, someone might visit a virtual café, order a flat white and a sandwich, and then have that arrive at their actual house, delivered by a courier.

The only way you're going to learn to do well out of these things is if you start doing it

"We believe that the metaverse will eventually help us find new and enhanced ways to do all of our current activities, including commerce, entertainment and media, education and training, manufacturing and enterprise in general," Citi said in its report.

At the same time, the metaverse is also expected to seep into our physical world. Companies including Microsoft, Apple, Snap and Meta are designing augmented reality technology, where digital images are overlaid on a real-world setting via gadgets such as smart glasses. This could allow someone to see giant virtual arrows on a street offering them directions to a restaurant, for example. Eventually, augmented reality is likely to evolve to the point where someone can conduct a conversation with a hologram of their best friend as if they are in the same room.

That's the idea, anyway. Experts say it will be several years, perhaps decades, before we have such rich experiences as perfect holograms. The metaverse is also made up of lots of technologies and trends that may change and adjust over time. Just as people making predictions about the internet in the 1990s couldn't have begun to see half the ways we use it now, no one really knows what the metaverse will offer to us in 10 or 20 years.

Social capital

However, just because the metaverse is still in its infancy, that does not mean businesses should not be looking for new opportunities, according to Zangana. "If you look at social media when it first came on the scene, people at restaurants were saying, ‘How is this going to work? If you can't taste the food, what's the point?' But just like social media, the people who get on it early are going to do really well. The opportunity for brand presence perspective and brand awareness is massive.

"At the moment, people are just exploring what can and can't work, but the only way you're going to learn to do well out of these things is if you start doing it," Zangana says.

One way in which companies are making themselves known to customers in the metaverse is through the growing number of platforms that give access to virtual worlds. Fashion brand Gucci has built an entire town on Roblox, an online platform where users can create their own games and digital worlds. The town features a virtual store where users can purchase digital clothes for their Roblox avatar with the platform's own robux currency (it costs about £4.50 to buy 400 robux). In May last year a limited-edition sale of Gucci's digital clothes, bags and jewellery on Roblox generated $3.5m (£2.8m) in sales over two days.

Gucci is not the only fashion house getting involved in this space. In March a Metaverse Fashion Week was held in Decentraland with brands including Dolce & Gabbana and Estée Lauder, and Vogue covered the event. Users could buy digital items of clothing or beauty products that could then be Photoshopped onto an image of the person on social media or worn by the buyer's avatar. These products are sold as NFTs (non-fungible tokens), which are essentially unique codes written on a shared digital ledger known as a blockchain, and act as certificates of ownership for physical or virtual assets. NFTs are normally bought with cryptocurrencies and enable people to show they are the true owner of a virtual item of clothing, even if other people copy that image, and therefore they are the only ones who can sell or trade the item in the future.

The metaverse is coming, one way or another

Digital property

Decentraland is one of several rapidly growing virtual world platforms that are not owned by large corporations such as Meta but are more or less self-governed. Other popular digital world platforms include Sandbox, Upland and Somnium Space, which can be accessed via a computer or virtual reality headsets. Decentraland is generating the most amount of buzz due to the huge amounts of money changing hands to buy ‘land' within this virtual space. It is divided into 90,000 parcels of land, each representing about 50 sq ft, all of which are bought as NFTs. The virtual blocks are bought with mana, Decentraland's cryptocurrency, with one mana worth $1.08 (85p) at present. In a sign of the burgeoning craze for digital real estate, plots in Decentraland cost about $20 (£16) in 2017 and are now worth about $11,000 (£8,760) each, while some plots have gone for as much as $2.5m (£2m).

It is also here where Millennium has opened the world's first virtual hotel – M Social Decentraland. Saurabh Prakash, group senior vice-president for commercial at Millennium, says: "We looked at the data and saw an opportunity." The company saw there were 800,000 registered users on Decentraland in December 2021, an increase of 3,300% from a year ago. "These data points really told us this is certainly a space that is exponentially growing," Prakash says. "We said to ourselves if this is how things are going, we've got to be visionary and be pioneers and be the first to get into it. For us, the biggest reason we are in the metaverse is finding new customers."

Once users arrive on the landing page of Decentraland, they can get a virtual tram for one stop to the M Social hotel. The hotel, a six-floor building covered in a giant ‘M' and ‘D', is designed to feel like a computer game, with a beast-like monster at the reception desk issuing speech bubble captions, as well as floating stairs and floors showcasing pictures and audio of the other four M Social branches in Auckland, Paris, New York and Singapore. Once a user has reached the top of the building, the beast from reception appears again to ask if they want a surprise, which will be granted once they have taken a screenshot and posted it on social media.

"That is how we connect the customer from the virtual world to the real world," Prakash says. "Because as soon as the customer does that, our loyalty team will engage with the customer's social media account and say, ‘Hey, you've just won 5,000 points. Here's the promo code to use in the real world.' So from a virtual world you get connected to the real world."

Breaking bandwidth

At the moment, the graphics within Decentraland are relatively basic, but Prakash is confident that as computing improves, users could have a virtual reality experience of the company's hotel in Paris or Singapore before booking a room in real life.

"Nothing is impossible. The big potential of this space is when we go into 6G, 7G, 10G. That's when this kind of space will absolutely skyrocket," Prakash says.

And it's not just hotels looking at the metaverse for new customers. Bank JP Morgan has opened a digital branch in Sandbox, while in Decentraland users can find a Samsung virtual shop or a giant Coca-Cola can that can be entered to buy items such as a customised jacket for their avatars. McDonald's has filed 10 patents around the intention of building a "virtual restaurant featuring actual and virtual goods". Even Sotheby's, the 277-year-old auction house, launched a digital replica of its London New Bond Street building to showcase its NFT art collection in Decentraland's Voltaire Art District. Meanwhile, on Roblox, Mexican fast-food chain Chipotle launched a virtual branch in April where users can play games to earn "Burrito Bucks", which can then be exchanged for a code to buy real food.

Zangana says such examples demonstrate the wide range of experimentation that businesses are trying in the metaverse. "It's very much in the early stages, with people trying to just gently find their feet and bring their customers and stakeholders on a little journey with them. From a hospitality perspective, there are direct sales opportunities, where companies sell directly through the metaverse, or there is a mixed-reality element, with a transaction done through the metaverse but with a real-life asset alongside it."

Events groups are also likely to be watching the developing metaverse keenly. Multi-player gaming platforms such as Fortnite, owned by the US company Epic, have gradually moved from just a place to play shoot-em-ups to wide-ranging social spaces. This has included Fortnite hosting music concerts with the likes of pop star Ariana Grande and rapper Travis Scott. This can be a major branding event if conducted in collaboration with a real-world venue. For example, British band Easy Life played at a virtual replica of London's O2 Arena within Fortnite in June last year.

Other hospitality companies have been bringing the metaverse into the real world. In California a burger restaurant named Bored & Hungry opened this year, themed around the Bored Ape Club, a hugely popular NFT art collection of 101 digital images of a cartoon ape. Customers can get a free meal if they show they are a verified owner of a Bored Ape NFT.

In the UK, chef Adam Handling announced he would be launching London's first NFT cocktail menu at his Eve's bar in Covent Garden, London, in February. Users can choose from 13 NFTs inspired by the bar's signature cocktails, where each come with digital recipe cards, a hand-painted illustration by London-based artist Zoe Zahava, and an undisclosed number of complimentary cocktails at the bar. The items will be sold on OpenSea, a marketplace for NFTs.

However, a spokeswoman for Adam Handling Restaurant Group says there is a delay in launching the NFT artworks. The spokeswoman did not give the reason, but a number of NFT projects from companies around the world have been paused after a drop in the value and size of the market. The average number of daily sales of NFTs fell sharply at the start of May, dropping from 225,000 in September to 19,000, according to data website NonFungible. Rising interest rates, a fall in the value of cryptocurrencies and concerns about the cost-of-living crisis have all resulted in a dampening of the hype and lower prices for NFTs. As ever, such volatility shows that businesses need to be careful about what investments they make in the metaverse and analyse what works for their company in the long term.

However, it is clear that when companies such as Meta and Apple are investing in building technology for the metaverse, this is not a trend that is going away.

"The metaverse is coming, one way or another," Clegg says. "Different technologies will enable different levels of immersion that suit the individual and their environment... All this has the potential to unlock new opportunities and spark new ideas we haven't yet imagined, and to have a huge positive impact, both socially and economically."