The Strategic Guide to a Modern Hotel Technology Stack

by Jeremy Kressman + Luke Bujarski + Skift Team - Jun 2016

Skift Research Take

The world of hotel technology software, or the “tech stack” as it’s often called, has long existed as a fragmented puzzle of competing platforms, competitors and solutions. Now, growing signs of consolidation loom as big players from both inside and outside the category vie for a bigger piece of the pie. What solutions and strategies will be most important to help hotel owners stay competitive, and profitable, in the years to come?

Report Overview

The world of hotel technology software, or the “tech stack” as it sometimes known, exists as a fragmented, piecemeal set of solutions aimed at optimizing hotel functions like operations, revenue management, marketing, and guest services. Now there are growing signs of consolidation as big players inside and outside the category vie for a bigger piece of the billions of dollars spent each year by hotels. Traditional online travel agency heavyweights like Priceline and Expedia have spent the last five years acquiring companies that position them with the business-to-business services space. Meanwhile enterprise software giants like Oracle and SAP are spending billions to buy their way into hospitality services and integrated property management solutions.

Yet, even as more companies eye an entrance into the lucrative hotel tech space, many hotel owners are sitting on the sidelines. The biggest challenge for hotel executives is figuring out what types of software solutions are right for their business. Hotels can now choose from a wide range of technology solutions to assist with virtually any task, from on-site property management, to reservations to setting consistent prices on different online travel websites.

In addition, challenges like limited IT budgets, questions about measurement of ROI, and worries about how systems actually impact the guest experience all complicate decision-making. Changes in consumer behavior and ever-rising guest expectations in technology also make the task of finding the best hotel tech solutions even more challenging.

According to senior-level hotel executives interviewed for this report, the right way to proceed in such an environment is by keeping a laser focus on defining the right business goals, before going after the solutions.

Hotel IT solutions tend to fall into four buckets: Marketing and distribution; hotel operations; real estate development; and finance & accounting. The scope of this report focuses on the first two buckets. These are the intersections between the hotel and travel consumer.

chart1

Property Operations: These are the types of systems that help hotel staff manage guest requests, handle maintenance issues and oversee front desk operations like check-in and check-out. Typically (though not exclusively) these tools are best used to improve the hotel’s efficiency. A “property management system” (PMS) is one of the best examples of property operations technology.

These PMS platforms serve as a crucial linchpin to help streamline all aspects of the hotel experience, from more cost-efficient operations to the delivery of guest services. The below graphic offers a great overview of just how deeply connect the PMS platform is to all other aspects of the hotel experience, from booking to guest management to customer relationship management and reservations.

Property Management Systems in Hospitality Technology

The back-end technology that powers property management systems often serves as the foundation for a variety of other hotel initiatives from mobile apps to booking software. (source)

The back-end technology that powers property management systems often serves as the foundation for a variety of other hotel initiatives from mobile apps to booking software. (source)

While there are a wide variety of companies that create PMS solutions, some of the market’s top players, particularly for larger hotel chains, are represented in the below graphic, with enterprise IT firms like Oracle and GDS player’s like Amadeus’ Itesso controlling much of the market.

Marketing and Distribution: A wide variety of other tools fall into the bucket of marketing and distribution. The tools related to marketing and distribution help the hotel manage a variety of services, including keeping track of current and upcoming reservations, managing where and how the hotel sells its rooms online, and maintaining the profitability of the prices charged for rooms based on current market demand.

The types of software solutions connected to these disciplines typically include everything from central reservation systems (CRS) to channel manager products, CRM (customer relationship management) and revenue management systems.

Executive Summary

The world of hotel technology software, or the “tech stack” as it sometimes known, exists as a fragmented, piecemeal set of solutions aimed at optimizing hotel functions like operations, revenue management, marketing, and guest services. Now there are growing signs of consolidation as big players inside and outside the category vie for a bigger piece of the billions of dollars spent each year by hotels. Traditional online travel agency heavyweights like Priceline and Expedia have spent the last five years acquiring companies that position them with the business-to-business services space. Meanwhile enterprise software giants like Oracle and SAP are spending billions to buy their way into hospitality services and integrated property management solutions.

Yet, even as more companies eye an entrance into the lucrative hotel tech space, many hotel owners are sitting on the sidelines. The biggest challenge for hotel executives is figuring out what types of software solutions are right for their business. Hotels can now choose from a wide range of technology solutions to assist with virtually any task, from on-site property management, to reservations to setting consistent prices on different online travel websites.

In addition, challenges like limited IT budgets, questions about measurement of ROI, and worries about how systems actually impact the guest experience all complicate decision-making. Changes in consumer behavior and ever-rising guest expectations in technology also make the task of finding the best hotel tech solutions even more challenging.

According to senior-level hotel executives interviewed for this report, the right way to proceed in such an environment is by keeping a laser focus on defining the right business goals, before going after the solutions.

Hotel IT solutions tend to fall into four buckets: Marketing and distribution; hotel operations; real estate development; and finance & accounting. The scope of this report focuses on the first two buckets. These are the intersections between the hotel and travel consumer.

chart1

Property Operations: These are the types of systems that help hotel staff manage guest requests, handle maintenance issues and oversee front desk operations like check-in and check-out. Typically (though not exclusively) these tools are best used to improve the hotel’s efficiency. A “property management system” (PMS) is one of the best examples of property operations technology.

These PMS platforms serve as a crucial linchpin to help streamline all aspects of the hotel experience, from more cost-efficient operations to the delivery of guest services. The below graphic offers a great overview of just how deeply connect the PMS platform is to all other aspects of the hotel experience, from booking to guest management to customer relationship management and reservations.

Property Management Systems in Hospitality Technology

The back-end technology that powers property management systems often serves as the foundation for a variety of other hotel initiatives from mobile apps to booking software. (source)

The back-end technology that powers property management systems often serves as the foundation for a variety of other hotel initiatives from mobile apps to booking software. (source)

While there are a wide variety of companies that create PMS solutions, some of the market’s top players, particularly for larger hotel chains, are represented in the below graphic, with enterprise IT firms like Oracle and GDS player’s like Amadeus’ Itesso controlling much of the market.

Marketing and Distribution: A wide variety of other tools fall into the bucket of marketing and distribution. The tools related to marketing and distribution help the hotel manage a variety of services, including keeping track of current and upcoming reservations, managing where and how the hotel sells its rooms online, and maintaining the profitability of the prices charged for rooms based on current market demand.

The types of software solutions connected to these disciplines typically include everything from central reservation systems (CRS) to channel manager products, CRM (customer relationship management) and revenue management systems.

Introduction: Today’s Tech Savvy Hotel Exec

Operating a modern hotel is complex, high-tech, and high-stake as new management solutions spring up across the ecosystem. Responsibilities like customer service, food and beverage service and property maintenance are already enough to keep many hotel executives on their toes. But thanks to the growing influence of technology, a dramatic shift is now underway in how hotel owners think about their job responsibilities, and the tools they need to be successful. At the same time, implementing technology to solve existing challenges can sometimes create new challenges.

“To say that today’s hotel GM has had to evolve is an understatement,” said Steve Van, President and CEO of Prism Hotels and Resorts in a recent opinion piece. “In part, the change in the GM’s role can be attributed to technology, but it is also due to the growing needs and expectations of travelers.” (source)

On top of the basic hospitality functions essential to running a hotel, many executives now find themselves wearing a variety of new “hats,” involving a range of new functions like reputation management, public relations, online hotel distribution, customer relationship marketing and technical trouble shooting, just to name a few. How does a hotel executive stay on top of it all, let alone prosper in such an environment?

The answer, for many, has been software. A wide array of integrated “tech stack” applications and solutions providers are coming online, helping hotel owners automate and manage everything from property operations to distribution channels to profit margins and real-time guest requests. But as some hotel owners can likely confirm, finding the right solution from the swelling list of options is easily a job in and of itself.

How can a busy hotel owner or executive make sense of these choices? What signs should they look for to ensure the choices they make match with their specific property needs and limited budgets? Skift’s report on the future of the hotel technology stack underlines the growing importance of technology to the hospitality industry, reviews key challenges facing hotel executives with technology software, attempts to summarize the most important types of solutions available and provides examples of best practices other hotel executives are using to thrive in this complicated environment.

Current State of Hotel Tech: Big Players and Bigger Deals

Just how big is the hospitality technology sector? Accounting and advisory firm Grant Thornton estimated the global hospitality IT market was worth $29.7 billion as of 2015. (source) From the looks of recent merger activity, the space is on a path to get much bigger. Recent startups, investments and deal-making in the way of mergers continue to reshape the landscape.

For online travel agencies (OTAs) like Expedia and Priceline, hotel technology has grown into a key area of interest, as these organizations diversify into business services for accommodations providers with offerings across website building, booking engines and search marketing.

Take for instance Expedia’s majority-stake acquisition of European hotel search site Trivago for $632 million back in 2012. One of the benefits of the acquisition was in helping Expedia build out its hotel software service offerings for independent hotels, using a program called Trivago Direct Connect, which offers customizable booking engines and analytics tools to hotel owners. Expedia’s more recent $9.5 million investment in hotel services firm Alice is another such example of OTA interest in the space.

Priceline Group’s nearly $100 million dollar purchase of hotel marketing platform Buuteeq in 2014 is just one sign of wider consolidation and interest in the hotel technology space. (source)

Priceline Group’s nearly $100 million dollar purchase of hotel marketing platform Buuteeq in 2014 is just one sign of wider consolidation and interest in the hotel technology space. (source)

Meanwhile, Expedia rival Priceline Group acquired software companies Buuteeq and Hotel Ninjas for $98 million in 2014, using them to form the basis of a new range of business-focused hotel services called BookingSuite (source). “The ultimate goal of BookingSuite is to have a whole suite of products that meets the needs of accommodation partners in the cloud, and that’s what we are building towards,” said then Priceline CEO Darren Huston during a 2015 earnings call. (source)

Priceline’s Booking.com subsidiary has further expanded on these hotel services, launching a toolset called WebDirect aimed at providing a full suite of online services for hotel owners, including cloud-hosted websites, analytics, SEO tools, along with integration with property management systems (PMS), central reservation systems and booking engines. (source)

For now, these moves appear largely confined to helping smaller hotel properties figure out how to fill rooms by selling to more guests online. Indeed, at their most basic level, the website tools offer independent and boutique hotel executives an opportunity to get a well-maintained, low-cost website that helps boost their online conversions. Other hotel executives believe these B2B software services are in fact a “Trojan Horse,” offering a tool for the online travel agencies to further embed themselves into hotel booking and operations.

As hotels push to move more bookings toward direct channels (their own websites), the OTAs will still be able to generate revenue from these direct-to-consumer transactions (Booking.com makes a +/-10% commission for every customer that makes a reservation on a hotel site using its booking tool). In addition, some speculate that Booking.com is also able to make money off the advertising and re-targeting data that’s gathered when a consumer visits a hotel website, encouraging them to ultimately make their booking back on the OTA website.

On top of these moves by the OTAs, other travel technology players and enterprise software firms are also expanding their own capabilities. Global distribution software company Amadeus paid $500 million for hotel and events IT company Newmarket International in 2013 (source), while Amadeus competitor Sabre acquired hotel reservations firm Genares in 2014.

Enterprise software giant Oracle further bolstered its own hotel IT services group with the $5.3 billion purchase of MICROS Systems, a company that provides property management software and point of sale services for the hotel and retail industry. (source). German enterprise firm SAP made its own strategic hotel tech acquisition in 2014 with the purchase of Concur Technologies for $8.3 billion.

The importance of hotel technology to the industry is further underlined by hotel owners’ expectations regarding their expenditures on tech stack systems moving forward. According to a 2015 report on the state of hotel tech by Hospitality Technology Magazine, 54% of hotels plan to spend more on technology in 2016 as compared to the prior, while another 41% suggested they would maintain current spending levels. Only 5% of respondents expected to spend less this year than in 2015. (source)

Interest in hotel technology is ramping up as hotels look to increase their investments in 2016 (source)

Interest in hotel technology is ramping up as hotels look to increase their investments in 2016 (source)

Fragmentation: Understanding the Hotel Tech Landscape

Even as travel’s biggest players like Priceline and Expedia are doubling down on solutions and services targeting hotels, many hotel owners still struggle to understand the potential solutions available in such a complex space. “Our space is one of those that lends itself to a lot competition,” said Fig Cakar, manager of the Americas for hotel channel management and marketing platform SiteMinder. “There’s a lot of choice from a [hotel] customer’s perspective.”

Other executives confirm that the complexity of hotel technology is a significant obstacle for many hotel owners. “For the types of operations that hoteliers run, and how ‘lean and mean’ they are, they’re working with a lot of technologies,” said Kenny Lee of Revinate. “[Typically] anywhere from 10 to 20 different technologies like PMS, CRM [and a] channel manager. You might have a revenue management solution. An upgrade vendor. Someone’s doing your online reputation [management]. Your surveys and guest database. How do you determine what’s most important?”

For some hotel brands, particularly larger chains, there’s also the matter of supporting legacy software. For some well-known chains, individual properties get to choose which solutions they want to use, meaning the one chain might have multiple versions of the same type of solution. “In North America alone right now we actually support six (and it’s been as high as 10) different [property management system] vendors,” said Greg Adams, chief digital officer for Best Western. “Which is obviously a challenge because you have all the interfaces you have to build [to connect with other systems] like to CRM [customer relationship management].”

When hotel owners were asked about the most important technology solutions and where they spend money at their own properties, many refer to property management and guest room technology as two of the most critical functions. Referring back to the same Hospitality Technology study cited earlier in this report, 17% of hotel owners tech budgets in 2016 went towards PMS tech, the highest of any other category, while another 16% went toward guest room technology.

Technology Budget Allocation Trends

Many hotel owners prioritize property management systems, networking and guest room technology at the top of their tech budgets. (source)

Many hotel owners prioritize property management systems, networking and guest room technology at the top of their tech budgets. (source)

Beyond the problem of the complexity, there are questions about how to make sense of the data hotel tech provides, ranging from pricing to inventory to occupancy rates to online conversions, that each of these solutions generates. As some executives note, the data is not only overwhelming, but frequently irrelevant by the time they might get around to reviewing it. “You can’t expect one human to look at 25 reports. The reports are no longer fresh by the time the managers get around to them,” said Jeremie Catez, regional ecommerce manager for Novotel North America, in an interview with Eye for Travel. “The world is quicker and a lot of these things, even Twitter for example, influence the pricing.” (source)

For some, the natural response to this incredible complexity has been a move more towards better integration of the various systems into a single customer view. “We’re working on combining marketing, sales and revenue management all under one leader who has an overall understanding of these things. A common decision-making platform is critical,” said Tom Botts, executive vice president and chief customer officer for Denihan Hospitality Group. But getting to that point where each of these systems can talk to each other is incredibly difficult and expensive. “That doesn’t exist today in many cases and it’s going to have to change.” (source)

On the other hand, some executives at independent hotels admit that pushing too hard to create integration among systems can also create new unexpected problems. “It’s a double-edged sword. We…spend a lot of time, effort and money tying together [applications] in order to get a customized ‘umbrella’ [of services] for our guests and our teammates,” noted David Moth, of Virgin Hotels. “The other side of that double-edged sword is lack of flexibility when it’s all on one system.”

Owners Face Obstacles on the Road to Hotel Tech Innovation

In addition to choosing among complex hotel solutions, the actual hotel owners and managers responsible for buying and implementing these systems face a daunting range of limitations.

When asked by Hospitality Magazine about the biggest issues facing their properties when it came to hotel technology, 46% of hotel executives mentioned “measuring ROI.” The second biggest challenge was “keeping pace with guest expectations,” mentioned by another 43% of respondents. Current IT budget was also mentioned by 38% of hotel executives, coming up as the third-most popular response.

Challenges Facing Hotel Technology Adoption

Hotel owners frequently rank measuring ROI, small IT budgets and guest expectations as key challenges when it comes to hotel technology (source)

Hotel owners frequently rank measuring ROI, small IT budgets and guest expectations as key challenges when it comes to hotel technology (source)

Limited Budgets

Even though many hotels plan to spend more on hotel technology in 2016, many admit the amount of money they will spend is still quite small. According to Hospitality Technology’s report, the typical IT budget hovers somewhere between 5% and 7% of revenue. This is just a drop in the bucket when it comes time to evaluate the entire universe of potential technology solutions, not to mention the fact that older hotels and hotel chains in particular have legacy systems which can be difficult to replace.

The challenge, therefore, when it comes to the technology budget at most properties, is a question of not only how much to spend but also where to spend. First and foremost, how do you find the dollars necessary to not only maintain current technology systems but to test out new ones? Is it enough to simply maintain the current status quo? How do you invest in new technology to help innovate and grow?

A recent Skift Survey asked 100 hotel professionals (half independent and half chained) about their current budgets and spend intentions for hotel technology.  Over a quarter stated that they need to invest more, but currently don’t have the budget to do so. Half stated that they would invest more on operations.

Which option best reflects your tech spend objectives for the next 12 months?

Skift Survey: Skift surveyed 100 hotel stakeholders to better understand their technology needs.

Skift Survey: Skift surveyed 100 hotel stakeholders to better understand their technology needs.

This budget crunch bears out in other survey results. In Hospitality Technology Magazine’s study of how hotels were allocating their technology budgets, more than 50% of hotel spending went just to maintaining current technology systems, while just 29% went to growing the business and 18% went to transforming the business to allow entry into new markets or services.

Many hotels want to spend more on hotel technology, but they often find that more than half their budget goes to maintaining existing systems. (source)

Many hotels want to spend more on hotel technology, but they often find that more than half their budget goes to maintaining existing systems. (source)

Rising Guest Expectations and Changes in Mobile Consumer Habits

Also challenging for hotel owners are the ever-changing technological expectations of guests. “If you think about consumer facing brands like Uber, Netflix and Amazon, they are the ones that are setting guest expectations really high,” said Kenny Lee of Revinate. Whether it’s in the areas of on-demand delivery of services via mobile devices or personalization of an experience based on past habits, many brands both within the hotel industry and beyond are finding themselves subject to the same expectations created by these services. “How could people not expect that from other brand interactions in the rest of their daily lives?,” said Lee

Other executives in the hotel technology space also agreed with this assessment. “Now that consumers demand and expect that [a service] comes on mobile [devices] in other industries, those guest expectations are coming through into the hotel [as well],” said Alex Shashou, president of ALICE, a hospitality tech platform. “If you think about 20 years ago…back then a hotel was the most technologically-advanced [place you visited]. The room had a nice big TV, it had video on demand, it had a phone you could order food through. Some [properties] had fancy light systems. This was way before mobile. Now, if you think about it, a hotel room is almost the least tech place you stay. You’re much more connected at home, to services around you. You have complete control, from cars to food to transport to travel.”

Another source of rising guest expectations are well-known changes in how consumers find and book hotel rooms, a topic with relevance to the world of channel management software. As a now-famous (and frequently cited) Expedia study found in 2013, the average travel booker will visit 38 sites before completing their online purchase. This has vast implications for hotel tech decision-making when it comes to online distribution, as it can make trying to track such purchases ever-more complicated for hotel owners.

Average Travel Site Visits Per Week

Site visits in relation to time (source)

Site visits in relation to time (source)

In addition, the importance of mobile is also a key factor when it comes to consumer behavior. While this may not be as much of an issue for smaller properties that let other partners handle their mobile presence, it’s definitely a factor for executives at larger chains. As advertising technology firm Criteo noted in its Q3 2015 study of mobile versus desktop purchasing habits, the mobile share of hotel bookings as compared to those made with desktop PCs continues to climb, reaching 23% of all online purchases as of Q2 2015.

Increase of Mobile Share Since Q1 2014 (Index Worldwide)

Desktop usage versus mobile (source)

Desktop usage versus mobile (source)

In fact, mobile is not just changing the size of the screen consumers use to book rooms, it’s also changing the very nature of how services are requested and delivered at hotels. “People confuse mobile as just being an interface,” said Shashou. “Mobile is not an interface: anyone can put a pretty picture on a phone. What mobile really is is the service delivery underneath it,”

The end result of these rising guest expectations and changes in how consumer behavior adds even more complication to the hotel technology decision-making process, forcing hotel owners to make difficult decisions about where to spend already constrained technology budgets.

Measuring ROI and “Picking Winners”

Hotel owners also face challenges understanding which technologies are best-matched to their strategic goals and unique needs. The trick for hotel executives is not just finding the right tool that works for their business, but ensuring that said tool also delivers enough value to make the investment worthwhile.

“The question becomes, where do you focus first?” said Greg Adams of Best Western. This can be surprisingly tough to do when facing limited resources and virtually unlimited options. The challenge, therefore, is recognizing which of these solutions is worth a hotel executive’s time. “Everything is the next big thing,” said Greg Adams. “I always call it ‘chasing the shiny new.’ When you chase the shiny new, you can quickly run through your available resources and run into challenges that have an impact on your long-term ROI.”

This is to say nothing of trying to understand how to use such technologies to their fullest potential. Often times simply getting a software provider to give the proper level of guidance in using such tools is unexpectedly challenging. “One of the most frustrating things for hoteliers…is the fact that they want help,” said SiteMinder’s Cakar. “They want to be able to pick up the phone or send an email and say ‘How do I do this,’ or ‘Is there a better way that I can utilize this product.’”

Distinguishing between what’s merely “shiny new” and what’s truly valuable is easier said than done, particularly in the fast-moving, highly competitive, world of hotels.

How satisfied are you with your current Property Management System?

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Skift Interview: What It’s Like for a Major European Hotel Chain

Skift: You currently work with Oracle Micros as your current property management solution. How would you describe your feelings towards this piece of software?

Hotel: I think we are finding it challenging. I think to be fair to Oracle, they are also finding it challenging as well. I think if you compare OPERA to equivalent technologies in retail, things like Sterling or website commerce or Oracle ATG, OPERA has been heavily under invested so it’s quite old technology and, as a result, we find it quite limiting in what we can do and we can’t do, and we have. We are finding problems particularly here in the UK finding the right skilled people to help us get what we need out of the system.

Now, I know that Oracle recognize that and [they] very open about how much investment they need to make, but it is a risk to us as a business. As we are looking to try and innovate, not being able to easily plug other systems into OPERA constrains what we can do.

Skift: What other systems are you thinking of when you say you are not able to plug them in?

Hotel: Well, we have are quite fortunate in many respects in that we have quite a lot of direct traffic so about 80 to 85 of our business comes through our website. So we’ve built all of the website is Biz Quick. We are limited by what functions Oracle have made available to what they call the OPERA Web Services, it’s something called OWS.

What that means is being able to do things like remote tracking, being able to allocate rooms in advance. All of that is difficult to implement. Another area where it’s quite limiting is we do have quite a big GDS business. We are gradually moving into the OTA market. For us, we rely on being heavily automated. Although, we’ve got 500-odd sites our business is really quite centralized in terms of how we do our distribution.

Is OPERA a 21st Century platform in the full vein of things like micro services and all the other great stuff you hear from retail? No.

It’s really in that way and where companies like us who rely on that technology and innovation to try and differentiate ourselves in what’s quite a competitive budget market in the UK. There is not really anything that is as good out there at the moment.

One of the options we are now seriously looking at is whether over the next couple of years we take the plunge and look at actually building something that’s specific to how our brand operates.

Skift: You may build something from the ground up essentially?

Hotel: Yeah and I think part of that is a reflection on OPERA is built very much for a full-service hotel and we are not. OPERA has various points for all functions used inside it and we are using 20 or so points per day. We don’t need spa information. We don’t have really complex room types as it stands at the moment.

It’ll still be a huge jump to go from OPERA because of all of the skill sets that are out there in terms of users, but we need to see Oracle really stepping up with the technical support and the experts who can help us make the most of the platform.

Skift: I suppose I should take a step back for just a second and ask you what your title is.

Hotel: Yeah. It’s called head of business architecture. Effectively what my job is looking at where we are trying to go as a business, where our cost is so from channels through to hotel management, through to facilities management, housekeeping, distribution, and then working out how best to deploy the technology we have and what technology we should build in. In effect, I own all of the technical roadmaps across the business.

My job is looking at where we are going, and the key systems we are going to need in the future. For example, our biggest development that we are looking at over the next two years is really how we spot the single-visit customer.

Skift: This point about integration is an interesting one. I’ve heard some people, some hotel executives, saying single view customer. It sounds like that’s something you guys are very actively looking to achieve and is something you guys would like to have.

Hotel: I think if you try and bunch up as one big project, you will fail because, as you say, there are so many different consumers of that information you end up with almost contradictory requirements and yeah, paralysis is a good word.

What we’ve done is we’ve taken very specific needs so, initially, it was around working out what the true cost of sale was, working out what our travel attribution was in terms of the marketing campaigns and digital dashboards so that we could actually see is our advertising buck actually having an impact on our sales. What we are now looking at is our business proposition, which is quite a growing area for us. It’s growing at 20% year on year. Actually looking at how we take that what was already relatively structured data and securing things up.

At the moment, our business teams struggle to be able to see how active their accounts are and what they are doing in the hotels, and how frequently they restay.

By just putting that information together with really focused questions, you start on that journey. What we are then finding is once you’ve built it then the people come along with questions and somehow they find a way to work through it. What started as something that was only between IT now has pretty much every major stakeholder going, “Isn’t it great? We’ve got this information.” One of the hardest conversations is trying to explain to someone this is information that we’ve had for the last four years, but we are only now surfacing it in a way that is accessible.

Skift: The sense I’ve gotten from a lot of different people I’ve spoken with is that having a very clear business goal is a much better way to decide what kind of solutions you need rather than trying to go out and grab a software solution and fit it into some kind of an existing framework you might have.

Hotel: Yeah, absolutely. There isn’t a panacea product out there that you go to and it answers all your questions. There are lots of tools that we’ve implemented. The classic one for us is Endeca, which is a website search engine. We’ve implemented it, but we haven’t really scratched the surface of what we can do with it yet, but we know it’s got all that capacity in there and the hope is over the next couple of years we’re going to see that help us fill our hotels.

Skift: What type of hotel would you say the OPERA product is best suited for? Is it a larger organization like your own that has a couple of hundred properties or is it something that’s better suited for a smaller, independent property perhaps?

Hotel: As it stands at the moment, it is best suited for a full service large hotel. It works well. There is a lot of capability in the platform. Where it doesn’t work for us at the moment is in effect so we have 530-odd hotels. In effect, I’ve got 530 databases that I try and manage.

If I want to introduce a new business rate, for example, somebody has to go in and enter that 500 times for us to be able to publish that rate. That’s just when you are running at our kind of scale, that doesn’t work particularly well. We can’t afford to have and we don’t have the people in the hotels who would pick that up. That’s one of our propositions. That’s all done centrally. OPERA struggles in that centralized model.

Skift: We haven’t discussed mobile yet.

Hotel: We are moving into what I would call second or third generation of mobile. The first generation was, “Here is my hotel chain. I am on a mobile phone.” The second generation was, “Now book your room.” I think we are now at the third bit, which is most hotels have a real problem with making their apps stick. In other words, you are downloading to book it, and then because you’re not going to stay in that hotel again in the near term, you detail it off your phone to make space for something else.

Look at what the airlines have done. EasyJet have built a fantastic app, which is still in my phone from every time I fly with them because all the way through my journey I use it. It helps me to the airport. It helps me when I’m waiting for the plane. It gives me alerts and then after I’ve stayed, it gives me feedback and it tells me the next sort of deals. It’s hotels of all price range working at how you placate that kind of experience where the mobile app becomes sticky throughout your stay in the hotel. It’s something that we have spent a good year and a half thinking about what we would do.

Our challenge at the moment is where it fits into our investment, but over the next two years I am expecting a lot of hotels to really go into that space of trying to make the app or the mobile phone becoming your partner throughout your stay and the hotel really augmenting your stay either with recommendations of where else to go, where else to eat, what to go and see, what’s available in the hotel. It’ll tell you where the bar or café, all of those features, I think Oracle are about to release their OPERA Mobile again. They had a half launch about two years ago.

That exposes a whole lot of new other functionality like that. That’s going to be really interesting. We are expecting there to be some really clever innovations in that space where, in effect, my entire stay, not just opening my door with my phone, but actually I can control everything in the room. I can be outside the hotel and be notified that the towel has been put in my room that I asked for, all of these things. Actually, it is kind of there, but I don’t think anybody has really bundled it into that one compelling experience that everyone is talking about.

I don’t think we are that far away from it.

Market Positioning of Key PMS Players

A look at some of the top property management solution providers in the hotel technology sector (source)

A look at some of the top property management solution providers in the hotel technology sector (source)

The Future of Hotel Tech Solutions

The mind-boggling complexity of the hotel technology stack is challenging, no doubt. Hotel executives face a variety of obstacles related to budget, measuring ROI and ever-more demanding guests. As it turns out, many hotel owners’ are responding to these challenges by asking the right questions and thinking strategically about how they will integrate with their business goals when assessing new technology solutions.

How to Think Strategically About “The Stack”

For many hotel executives, the most important step in evaluating and implementing hotel technology solutions is understanding what goal they’re trying to solve. It goes back to having a set of business objectives or goals that you define.” said Kenny Lee of Revinate. “Regardless of the technologies that are out there, I look at what are the goals for my company and what am I trying to achieve?”

Unfortunately, not enough hoteliers are asking themselves this question when evaluating potential purchases. “If you ask a lot of hoteliers, a lot of them don’t have clearly-defined objectives,” said Lee.

Other executives mentioned the importance of asking the right questions. “You have to identify the problem are you trying to solve. People get caught up in the ‘how’ and they don’t really consider the ‘why’ and the ‘what,’” said Best Western’s Adams.

He recalls a recent conversation with one Best Western hotel owner about installing check-in kiosks in the property’s lobby without really thinking about why the technology was needed. For Adams, the question was not whether the kiosk was the right solution, but rather what business objective the hotel owner was facing that made the kiosk necessary in the first place. “If you just focus in on that one delivery point [of the kiosk], you may miss out on some other questions you need to be asking yourself.”

With this simple philosophy in mind,  focusing on how a specific technology will address a hotel’s unique business challenge, there is no “one size fits all” list of best practices. Instead, the most successful executives emphasize the importance creating the right framework for success, building technology solutions that are right for each property’s unique customer base and challenges.

The below examples, therefore, are not meant to be a comprehensive list of every potential category of hotel software solution. Instead, they highlight how different hotels have aligned their property’s business challenges with specific types of software solutions, ultimately improving the guest experience, boosting profitability and guest satisfaction and streamlining efficiency in the process.

Using Hotel Tech to Improve Efficiency

Hotel technology offers the promise of more seamless operations for hotel staff and management. But how might a smaller or independent hotel property put these types of back-office software solutions to work for a more efficient (and delightful) guest experience? Virgin Hotels provides one example of how a hotel executive might implement a property management system in a novel way to deliver a better stay.

The Chicago-based hotel property launched its mobile app, called Lucy, in January 2015, promoting it as a resource that would simultaneously differentiate the Virgin brand from other boutique hotel properties and allow mobile device-wielding guests to have a better hotel experience with more control over their stay and on-site services.

While the ultimate experience has indeed proven delightful to guests, making sure it matched with the hotels’ business goals, and getting it to work smoothly, has been a difficult but worthwhile endeavor for the hotel’s executives. “It’s never about just doing stuff because we think it’s savvy, it’s about achieving the result of communicating a request or a need for [a staff member] to do something.” said David Moth, vp of operations for Virgin Hotels.

Virgin Hotels has built a guest request system called Lucy that directly links its back-end property management system, offering access to amenities like room service, spa treatments and temperature control. (source)

Virgin Hotels has built a guest request system called Lucy that directly links its back-end property management system, offering access to amenities like room service, spa treatments and temperature control. (source)

Behind this consumer-friendly suite of services lies a sophisticated technology solution that helps Virgin Hotels staff quickly deliver on requests. “We use a system called Guestware which does a couple things for us,” said Moth. “It’s our CRM [solution] for customer recognition…but it also has a rapid response component. [Guest] requests are going into rapid response and then being dispatched out to whoever’s job it is to expedite those [requests].”

As Moth pointed out, getting this type of system to run seamlessly takes time and a strong commitment from the staff to help work out any unexpected technical issues. “When we opened up, we didn’t have the full integration of requests coming from the [Virgin Hotels] app going straight through and being distributed to, for example, guest requests for extra towels. [Instead] it would go to one of our guest agents who would then dispatch that through Guestware to the houseman on duty who would get a message on his mobile device that the guest in room 504 needs extra towels.”

Due to a concerted effort to integrate the app requests with the back-end PMS, the system now runs more or less seamlessly. “We’ve now completed the interfacing of that system so it’s directly connected [to the mobile app]. Those [customer] requests are going directly into Guestware and being dispatched to the relevant teammate,” said Moth. “There’s a lot of back-end work there, because literally there are thousands of potential requests. The classic ones are the toothbrush and the toothpaste and towels. But we’ve got it down to where we know what type of light bulb it’s going to be depending on whether it’s a light in the bathroom or a bedside lamp.”

Now that it’s fully operational, the advantage of this system also stems from the decision-making information it provides for hotel executives. For one, they have more insight into the time it takes staff to complete various maintenance tasks. “We’re able to track the frequency of requests and the time they’re being completed in.” said Moth. More importantly however, it also offers information that can ultimately improve the experience for guests moving forward. “If we get multiple requests for towels, we know we might not have enough towels in the rooms. If we get multiple requests for something in a certain room, like the lightbulb in the bedside lamp, maybe we know the lamp’s faulty.”

The benefits of a truly integrated property management system aren’t just limited to back-end operations either. The boutique hotel Eau Palm Beach, for example, uses this type of internal-facing PMS to rapidly identify and address guest complaints before they show up as gripes online. “Say something went wrong while the guest was on property and it was clear that they weren’t pleased,” said Michael Branch, the director of front office at Eau Palm Beach, a Preferred Hotels & Resorts member property in a conversation with Skift earlier this year.

“We would be tracking all that and would have already went ahead and called the restaurant where they have their dinner reservation to make sure the manager comes to greet them when they arrive and that they have a nice table. This new addition will help automate processes like that.” (source)

Skift Interview: What It’s Like for a Boutique European Hotel Chain

Skift: Can you describe your hotels and technology that you are using?

Hotelier: We have currently 16 properties and 4 more in Pipeline. It’s a small independent chain here in Europe. As for technology, there’s not a lot of multi-property options with what we call the front of the house is quite strong and they’ve been around for awhile. We’re not extremely happy with it, but also the other solutions that we have found in the market also don’t really bring any other value. We’re upgrading in a couple of months to the last version of OPERA.

Skift: Where would you say your main challenge is with the current solution?

Hotelier: Nowadays the world has changed and PMS solutions have really remained the same for the past 15-20 years. They’ve had some upgrades. Currently our challenge is that we’re looking for aggregators for different data sets. We would think that an integrated solution would’ve been developed. As an investment for hotels and for independent hotels, it’s always a challenge to have to invest in five different tools and also to have people understand that these five different tools are going to help you do your job better.

Skift: Are there any issues surrounding the cost of the tool or using it, the functionality being simple enough to understand from what you’ve heard?

Hotelier: The functionalities are simple to understand but I think that there is some idea in our hotels that, although the system probably has a lot more capabilities, we end up only using 10 or 15 percent of the capabilities that are currently in there.

It’s not simple and it’s not user friendly. The way we feel and the user perspective, is that they’ve added things and it’s a little choppy where you find them. Sometimes the integration is not very good. There’s always mismatches and revenue and rooms, room counts, and inventory management. There seems to be a lot of functionalities that have been added over the years that are not really integrated and not easy to use.

Skift: That makes sense. What type of hotel would you say this current solution you’re using is best suited for? Is it about right for a hotel of your size or do you think it was designed with a much larger chain in mind?

Hotelier: I think that they’re more friendly for the larger chains. We have different hotels here. It’s a small chain or small brand. It’s a multi brand. We have three-star, four-star, and five-star hotels, also different sizes. We go from 15 rooms to 340 rooms. For our larger hotels it seems to be a better fit than for the smaller hotels.

Skift: Are there any things that this current solution has been really useful for you to help solve any issues with operations?

Hotelier: Obviously, being able to access information for all the hotels and compiling data is a key function. There’s not a lot of PMSs that offer it so we’re happy with that part. The system seems to be very good in terms of you getting more of the accounting side of the PMS, and also the front. The check-in reservation part seems to be very useful and the hotels are very happy. The gaps that we find are more in the CRM style module and also in sales and catering.

We’re looking into obviously upgrading our PMS. We looked in the market and there was really a lot of new technology available on this end. There seems to be a lot of technology happening on the other end of what’s online in terms of different data aggregators like Duetto. Snapshot is also coming up. All these aggregators on reputation seem interesting. It seems like the PMS is less in the forefront of what the new technology startups are doing.

Distribution: Using External Tools to Boost Revenue

In contrast to the “internal universe” of running an efficient hotel property are the growing external challenges hotel owners face in making sure their property’s rooms are listed for sale in as many places online as a travel consumer might look. As noted earlier in this report, with the typical travel-booking consumer visiting an average of 38 sites before making a purchase, making sure a hotel stays top of mind with indecisive travelers can be a huge problem for hotel executives, particularly for independent or smaller chains that don’t have strong brand awareness.

This is why many smaller and mid-size hotels have been turning to distribution tools and channel managers to help give guests the peace of mind that they are getting the best price. “Hotels use our product to ultimately give the customer the best user experience from the pricing and availability standpoint.” said SiteMinder’s Fig Cakar. “Whichever channels that [the hotel] is working with, it gives the customer the assurance that the rate that they check on Expedia or Booking.com or Priceline or Agoda…is the best available rate online.”

As Lee Buchanan, distribution manager for the UK based The Hotel Collection pointed out in a 2015 webinar published by SiteMinder, the channel manager solution offers the ability to simplify some of the complexity that results from publishing new room rates across these many travel booking sites. For Buchanan, the benefit of using a channel manager stems from its ability to offer his hotel chain’s guests more options. “Our preferred booking method would be directly, however, our aim is to enable accessibility to our customers through whichever channel they choose.” (source)

Beyond the boost in guest choice, the channel management tool also offers the benefit of scalable and simplified management, minimizing confusion among potential customers. Before using a channel distribution tool, much of the work of changing hotel room rates for The Hotel Collection happened by hand, a process which was agonizingly slow. “We had to update a number of channels manually, which took an entire day just to update a couple of hotels,” said Buchanan. “Now we’ve got 36 hotels, and the reality is, I can update the inventory for each of them within minutes.”

This ability to make rapid changes is also useful when it comes to the issue of “rate parity,” with hotels guaranteeing customers will receive the best-possible price when booking through a specific online source. “No longer do I have to worry that there’s a rate available on an OTA that’s not available on my own website,” said Buchanan. “It’s all seamless, it’s all flowing through from one central point.”

Deploying Customer-Facing Tech to Help the Guest Experience

In contrast to the internal tools like property management and external tools that help hotels with distribution, customer facing guest technology is perhaps the newest segment of the hotel tech stack. And, as it turns out, more hotels seem to be interested in having the conversation about how to implement such services on site, particularly as customers spend more time than ever with smartphones and mobile-native services like Uber.

In fact, many hotel executives have long recognized the need to integrate mobile guest solutions at their properties even if they haven’t yet done so. “When we started, it was very much an ‘if’ when you looked at guest and mobile tech. And then it became a ‘when’ conversation. The [hotel] ownership understood that it’s a matter of timing, not a matter of if it’s going to happen,” said Alex Shashou of guest services platform ALICE. “Now, with the evolution of so many different types of guest-facing technologies, we’re seeing a lot of the conversation turn to ‘how’ and ‘what’ are we going to do on the guest-facing side.”

But how can a hotel executive determine what guest-facing tech is going to offer the best way for hotels to improve the guest experience? Although a range of shiny new guest tech services from smartphone room keys to robotic lobby greeters have gained plenty of press attention, that doesn’t mean they are services that fulfill a genuine guest need or improve their stay in any fundamental way.

For ALICE, the goal is to provide a seamless communication platform between guests and staff over the entire course of a booking, from the moment of purchase until they leave. “What we enable for a hotel is to keep a digital connection with its guests from the moment they book all the way through checkout,” said Shashou.

As Shashou noted, the key with guest-facing technology is to provide a shared platform for travelers to communicate with hotel staff when they need to, and take a step back when they don’t. “It may be easier now for me to find my own restaurant, but there’s still a point where I’d like the hotel to do some of the work for me, whether it’s to book it or to help fuel the research,” said Shashou. “If I can’t easily communicate that request to a hotel, then I’m not going to.”

One example of how this type of guest technology can guest service is by giving travelers more control over when their room is cleaned. “How many times have you stayed at a hotel and had no idea when they were cleaning your room? Why would you want to go upstairs when they’re cleaning your room? And if you’re on your way back to the property, wouldn’t you like to let them know you’re on your way back, could you please clean my room before I get back? That control is what you get with technology, and hotels should want guests to feel that emotion.”

The format for these types of communication services varies depending on the technology provider. In the past year, mobile chat interfaces similar to text message conversations have gained in popularity with a variety of hospitality businesses. In fact, as noted in Skift’s recent report on the future of guest messaging, more hotels are jumping on chat platforms like Facebook Messenger and Chinese messaging tools like WeChat to handle guest requests. Hyatt Hotels is one brand cited in Skift’s other report that’s gotten more active on the service. “In 2015, we received and responded to more than 50,000 WeChat messages,” said Dan Moriarty, formerly the director of social strategy and activation at Hyatt. (source)

According to Moriarty, 60% of interactions were focused on the hotel’s on-site experiences, while the other 40% were related to hotel bookings. “Many guests find WeChat easy to use and a natural gateway to activities information or transactions,” said Moriarty in a recent interview with Skift. “We see high engagement with guests around account management, offers, and enrollment in our loyalty program. Some of the functions guests can enjoy on the Hyatt WeChat app also include on-site guest services.”

However interesting messaging platforms may appear, many executives also caution they are simply a means to an end. The key is to have a be flexible about using different communication channels depending on the situation. “The guest mobile side will become a platform. But messaging as it relates to Facebook is a toolset,” said Shashou. “Each individual messaging channel is just a toolset that all needs to come together in the same platform. For a guest, [messaging] is very situational. Timing, location, consumer segment and need [all] change the way in which you communicate. At one point, you may be on Facebook. Then when you’re at the front desk you’re asking them in person. When you’re on the beach you may be using an app. It need not be one channel.”

Another example of how hotels are utilizing guest-facing technology is as a tool to provide a more personalized, authentic experience for visitors. Austin’s Hotel Van Zandt, part of the Kimpton brand, is using specialized music software designed by a company called The Playlist Generation to reinforce the chain’s local Texas aesthetic and provide added customization for guests. Given the hotel’s location in the music mecca of Austin, home of SXSW and Austin City Limits, going the extra mile with appropriate music is all the more important.

As Hotel Van Zandt hotel staff noted, curated music was a key point of differentiation for the hotel compared to other Austin properties. “We’d have to have the playlists going 24 hours a day for about five days before we start to hear songs repeat,” said Lauren Bucherie, the property’s director of music and social programming. “Recently I heard a song come on in Geraldine’s that didn’t fit with the mood we’re trying to create, so I could go in and mark an X next to that song so that it will never play again after it finished playing that time. We give a lot of thought to what we want to hear at 6 a.m. as opposed to 10 p.m., for instance.” (source)

For Bucherie, the emphasis on this customized tech solution, rather than something off the shelf, has been key to hotel’s guest retention strategy. “If you’re just using Pandora or Spotify you’re not really going that extra mile to customize what it’s like to be in Hotel Van Zandt in Austin,” said Bucherie. “Guests have also asked what songs are playing and I’m able to instantly tell them their names. Guests appreciate a customized music experience now more than ever and having that quick access on my phone is really effective and I don’t think it’d work any other way.” (source)

Today’s hotels are also finding value in translation technology platforms aimed at driving efficiency in hotel content creation and management – particularly when entering new markets. Companies like Smartling and Translations.com are moving beyond traditional translation services and more into automation and enterprise-level management of multi-lingual content.

For instance, InterContinental Hotels Group maintains 5,000 different websites and offers all of its consumer-facing content (including mobile content) in 19 languages, and considers translation management software to be critical to its success in building customer loyalty and direct channels. According to Chad Westfall, VP of global direct channels for IHG, the brand significantly reduced the amount of time it took to introduce Arabic, Dutch, Russian, and Queen’s English to its digital properties in 2015. Whereas it previously took six months to introduce a new language, IHG was able to introduce Arabic—a particularly challenging language due to its script and the fact that it’s written right-to-left—in only a month.

“The need for travel brands to publish content in multiple languages has never been greater,” says Kevin Cohn SVP of Operations for Smartling. “As more investment is made in content and technology, it becomes increasingly important for global enterprises to view translation through a technology lens, and to invest in a system of record for managing translation, a process which ultimately touches nearly every department and team.”

Key Takeaways

  • Hotel technology is about the guest, not the tool: Fancy technology projects might look good in the industry press and in board member presentations, but they’re ultimately meant to deliver a better experience for hotel guests. No matter what type of technology solution is under consideration, from channel management to in-room guest tech, think about how guests will benefit.
  • Business goals matter more than hotel tech: Ultimately hotel technology is only as good as the business challenges it is designed to solve. Make sure to match any proposed hotel tech project to a clearly defined objective to avoid headaches.
  • Ask good questions if you want good answers: When facing tough challenges, it’s easy to assume technology is the “answer” to any problem a hotel might face. However, it’s only by thinking through the ultimate business goal or objective that hotel technology can truly deliver on its promise.
  • Look beyond the hospitality “echo chamber”: It may be tempting to install the same hotel software as your competitor. However, many of the best examples of how technology can solve customer problems aren’t actually found in the hotel industry. A hotel might not have the budget to create a service like Uber, Amazon or Netflix, but that doesn’t mean their best practices, like customization and on-demand delivery of services, aren’t possible to replicate.
  • Expect the unexpected: No matter how well thought-out in advance, rarely does a technology project goes as planned. The common rule of thumb is to double your budget and your timetable. Make sure to build that extra wiggle room into your timeline and financials to account for unexpected roadblocks.
  • Great is the enemy of good enough: Limited budgets, time and resources can prevent technology projects from ever getting off the ground. But even if a technology project or software solution seems out reach, think about how alternate solutions might still help move towards the ultimate goal. If a software solution is out of budget, consider asking if a “beta” test or if a modified solution with less functionality might work instead.

Endnotes and Further Reading

  1. “Today’s GMs wear many hats,” HotelNewsNow, March 2013
  2. “Marketing Technology Landscape Supergraphic (2015),” Chief Marketing Technologist Blog, January 2015
  3. “Hotels find opportunity in cloud-based PMS software,” Grant Thornton, 2016
  4. “Priceline Acquires Buuteeq and Gets Deeper Into Being Hotel-Tech Provider,” Skift, June 2014
  5. “Booking.com Wasn’t Powerful Enough: It’s Now Getting More Sway With Hotels,” Skift, April 2015
  6. “Amadeus Accelerates Hotel IT Business With $500 Million Acquisition of Newmarket International,” Skift, December 2013
  7. “This is Why Oracle Just Made a Huge $5.3 Billion Acquisition,” Business Insider, June 2014
  8. “2016 Lodging Technology Study,” Hospitality Technology, December 2015
  9. “Hospitality Software Solutions,” ITC Infotech
  10. “Effective Revenue Management in the Hospitality Industry Report,” Duetto Research, 2013
  11. “6 Charts That Show Mobile Booking’s Gain on Desktop Around the World,” Skift, September 2015
  12. “3 Hoteliers on the New Technology They’ll Give Employees in 2016,” Skift, December 2015
  13. “Q&A with The Hotel Collection: ‘Our connection with SiteMinder is seamless,’” SiteMinder, August 2015
  14. “Creating Next-Generation Hotel Operations With Messaging Technology,” Skift, February 2016