The Hotel Property Management Systems Landscape 2020

by Wouter Geerts + Skift Team - Jan 2020

Skift Research Take

Legacy PMS vendors have for too long reaped the rewards without truly pushing the boundaries of what they could offer hoteliers. Now technology has passed them by, and they are playing catch-up. Cloud computing, open APIs, marketplaces, and middleware layers are shaking up this stale corner of hotel tech, and it’s crazy exciting.

Report Overview

The start of a new decade always comes with a collective expectation that the upcoming decade is going to be very different from the one left behind. In many ways this will be the case, but the track record of hotel technology is one of slow progress rather than radical innovation. There is no hotel technology solution that illustrates this better than the property management system (PMS).

But maybe we do actually find ourselves at a truly seminal moment in the history of the hotel PMS as we know it. The disruptions to the incumbent players have steadily increased over the past years, so much so that we are starting to see this coming to a boil now, resulting in some considerable changes in the PMS landscape.

Cloud computing, open APIs, marketplaces, and middleware layers are shaking up this stale corner of hotel tech. This report discusses the history, present, and future developments in the PMS landscape.

What You'll Learn From This Report

  • The history of the PMS vendor landscape.
  • What the PMS should and should not do according to industry experts.
  • How different PMS vendors build features in-house or integrate with third-party vendors.
  • Market shares of the largest PMS vendors in terms of hotels and hotel rooms.
  • How technology is changing integrations with PMS vendors through open APIs, marketplaces and middleware layers.
  • How much PMS installation, maintenance, integrations, marketplaces, and middleware layers cost.
  • What the future of the PMS might look like.

Executives Interviewed

  • Ari Andricopoulos – CEO at RoomPriceGenie
  • Rafael Blanes – Vice President of Sales at Cloudbeds
  • Steve Bliekendaal – Business Development Director at Clock Software
  • Ronny Burchhardt – Vice President In-Hotel Experience at Accor
  • Laura Calin – Vice President of Strategy and Solutions Management at Oracle Hospitality
  • Evan Davies – Founder at Channex.io
  • Ingo Dignas – Co-Founder and CEO at Protel
  • Jeff Edwards – Senior Vice President Global Hotel and Owner Solutions at Intercontinental Hotels Group (IHG)
  • Nadim El Manawy – CEO at Arise
  • Omara Fuks – Former Information Systems Manager at Selina
  • Jordan Hollander – Co-Founder and CEO at HotelTechReport
  • Lukas Hughes – Product Lead at Pace
  • Jong Yoon Kim – CEO Online Business at Yanolja
  • Dmitry Koltunov – Chief Technology Officer at ALICE
  • Thomas Landen – Director of Global Partnerships at Revinate
  • Jean Noel Lau Keng Lun – Vice President Product Management at Accor
  • Gautam Lulla – CEO at Pegasus
  • Maria Macree – Sales Manager UK and Europe at RMS
  • Jim Mattson – Senior Partner Technology at ICF Next
  • Andrew Metcalfe – Chief Technology Officer at Guestline
  • Mukund Mohan – Vice President Product Strategy at Infor
  • Alan O’Riordan – Co-Founder at Apaleo
  • Ulrich Pillau – Co-Founder at Apaleo
  • Nick Price – CEO at NetSys Technology, and former CIO at CitizenM
  • Iain Saxton – Senior Vice President Strategist CRS and PMS at Amadeus
  • Jos Schaap – Founder and former CEO at StayNTouch
  • Luis Segredo – CEO at Data Travel (Hapi)
  • Alex Shashou – Co-Founder and President at ALICE
  • David Sjolander – Chief Operating Officer at Hospitality Technology Next Generation (HTNG)
  • Kevin Smith – Senior Director Product Integrations at IDeaS
  • Ben Stephenson – Founder and CEO at Impala
  • Mark Struik – Commercial Director at Postillion Hotels
  • Erik Tengen – Co-Founder at Oaky
  • Krasimir Trapchev – Co-Founder and CEO at Clock Software
  • Linda Vallner – Vice President Business Development at Protel
  • Patrick van der Wardt – Head of Product Strategy PMS at Amadeus
  • Matthijs Welle – CEO at Mews
  • Dai Williams – Chief Growth Officer at SiteMinder

Executive Summary

The PMS is the most integral piece of tech any hotelier uses. It is vital to the efficient operation of hotels, but this importance has meant that a few major players have been able to dictate the direction of the sector. Advancements in technology are now shaking this up, with new vendors being able to enter the market and offer true alternatives to legacy systems. The latter have been forced to innovate accordingly, which is pushing the entire sector forward.

It is hard to know how many PMS vendors there really are worldwide, as there are many small regional players, but estimates range from 700 to 1,300. Skift Research estimates that the largest player is Oracle Hospitality with its OPERA suite. The company has a 16% share of available hotel rooms globally.

For newer players, scaling rapidly remains difficult due to the core function a PMS plays in the hotel, as well as the extensive feature list players like Oracle have built up over the past decades. The nature of the hotel industry, where owners, management companies and brand operators all have their own priorities, also stifles the uptake of new technology.

The biggest talking points in the sector are the move from on-premise systems to cloud-based systems, and the benefits cloud computing brings in terms of costs and improved infrastructure. Integrations to other tech systems have become a main reason for anything from despair to anger amongst hoteliers and integration partners.

The sector is adopting open APIs to make connecting two systems easier, and it is on the verge of a move towards API-first, to further benefit connectivity. APIs facilitate the communication and the transfer of data between two systems, and companies are making these APIs increasingly publicly accessible and integral to any development, in an effort to benefit innovation and greater connectivity.

Furthermore, marketplaces are launched by a number of PMS vendors to better serve hotel clients looking to improve their tech stack, and middleware providers are taking the arduous process of one-off integrations out of the hands of hotel IT departments and tech vendors.

There is also a more fundamental question around the central position of the PMS in the hotel tech stack. A survey undertaken by Skift Research shows that core functionalities of a PMS include individual and group reservation functionality, room and housekeeping management, guest profiles, and folio and invoicing features. Revenue management, reputation management, and channel management are most often integrated through integration partners.

It is expected that PMSs will become more focused, stripped back systems, while closely integrated with customer relationship management (CRM) systems, and central reservation systems (CRS). Middleware providers like SiteMinder Exchange, Impala, and Hapi are likely to become more important as central hubs for the distribution of data between tech systems.

Moving forward, the hotel tech standards for integrations, as produced by the industry body Hotel Technology Next Generation (HTNG), are in need of upgrading, as these are increasingly bypassed. This results in less standardization of integrations. PMS vendors need to continue innovating to make their systems less rigid and allow for greater customizability and a mobile-first approach.

We find ourselves in an exciting time where the sector is rapidly transforming. While the major legacy players are playing catch-up, they have the financial backing to remain relevant. There is finally, however, an opportunity for new players to enter and disrupt the sector. This can only be a good thing for the PMS and hotel tech space in the long run.


The Evolving Role of the PMS

It is 2020. With the start of a new decade always comes this feeling that we are in some way at a significant point in time, a seminal moment when major change is about to happen. Not just in the world of hotel technology, but in general there is a collective expectation that the upcoming decade is going to be very different from the one left behind. In many ways this will be the case, but the track record of hotel technology is one of slow progress rather than radical innovation, more evolution than revolution. There is no hotel technology solution that illustrates this better than the property management system (PMS).

The first iterations of PMSs started coming on the market in the 1970s, and at their core, quickly evolved into technology solutions as we still know them today. The history of today’s market leading PMS, OPERA, can be traced back to 1987, and OPERA has been the top system with a largely unchanged solution for many decades.

In many ways, then, it is business as usual as PMS vendors continue to innovate, which for many companies means adding more features and integrations, like they have done for the past years and decades.

But maybe we do actually find ourselves at a truly seminal moment in the history of the hotel PMS as we know it. The disruptions to the incumbent players have steadily increased over the past years, so much so that we are starting to see this coming to a boil now, resulting in some considerable changes in the PMS landscape.

Cloud technology has been the instigator of major changes, and has left legacy systems that are mostly based on aged on-premise technologies scrambling. It has allowed new players to enter the market, and has boosted new business models including marketplaces and middleware providers.

More fundamentally, the discussion of the role of the PMS, of what it should do and importantly what it should not do, continues and is gathering pace. The PMS has always been the first system a hotel operator buys, and it sits at the center of the hotel tech stack with most other systems reliant on the data captured in the PMS. Today, however, discussions on the PMS’s centrality to hotel operations are becoming more frequent, especially as other systems seem better adapted to cloud technology and the increased focus on the customer journey.

The PMS at the Core of Hotel Operations

Talk to any PMS vendor, and eventually they will pull out a diagram of their positioning in the hotel stack. Unsurprisingly, the PMS is always at the center of a hub-and-spoke style visualization. Skift Research, as well, has visualized the hotel tech stack in a similar fashion in previous reports.

Exhibit 1: The hotel tech stack visualized, with the PMS at the center

For most hotel operators, this is an accurate visualization of their tech stack. Small hotels might only have a PMS system for all their requirements, while larger and more full-service properties are likely to have additional systems like a customer relationship management (CRM) system, a central reservations system (CRS), a revenue management system (RMS), a channel manager, or sales and catering system amongst others. Beyond these largely distribution-oriented tech systems there is also a growing range of “service-tech” available, like guest-facing technologies and staff-enabling systems which all engage and interact with the PMS.

The importance of the PMS to hotel operations also becomes clear from survey findings published in the 2019 Lodging Technology Study. According to the report’s findings, the PMS received the single highest budget allocation among surveyed hoteliers, with 26% of hotel IT software budgets going to the PMS.

Exhibit 2: The PMS received highest tech investment from hoteliers in 2019

While the importance of the PMS is generally not questioned, what is more debatable is the central positioning of the PMS, in effect dictating all interactions with other systems and what data other systems have access to. As the PMS collects some of the most valuable data for hotel operations, like guests names, reservations dates, room bookings, and other spending in the hotel, many systems need and want to tap into the PMS to operate more efficiently and help the hotelier make better business decisions.

This has historically resulted in a slightly skewed relationship where the PMS was placed on a pedestal, not least by the PMS vendors themselves, with hoteliers and other system and tech providers reliant on the PMS to grant access to this data. However, the hotel tech industry has moved on and a number of forces have changed this elevated position of the PMS.

Hotel distribution has become significantly more complicated with the dawn of online channels, and collecting data about consumers has become more important, resulting in hoteliers increasingly looking at technology to help with these issues. Meanwhile, tech development has become cheaper, resulting in start-ups being able to offer sophisticated and specialized services, often better than what a PMS could provide.

PMSs continue to hold some of the most important data on consumers, but as tech has penetrated all areas of the customer journey, other systems provide equally important opportunities to collect data and subsequently deploy this. The question is increasingly asked whether the PMS is still best positioned to host all customer data, or whether other systems like the CRS or CRM should take a more prominent role.

To better understand the shifting role of the PMS in the hotel tech stack, let’s take a look at the key functions of the PMS. There are many ideas of what a PMS should or should not do, and with a highly fragmented market like the hotel industry, there is no one-size-fits-all solution.

Core Functionalities

The term ‘property management system’ highlights the key function of the system, namely the proper management of the hotel property. This, however, is too bold a claim, as the PMS actually has a rather narrow focus on guest room management. Nick Price, CEO at NetSys Technology, therefore, refers to it as a “room inventory system.” Most PMSs don’t have solutions for building management, event and banqueting facilities, meeting facilities, and restaurant management, even though these are clearly important revenue centers in many hotels.

All PMSs consist of a few key modules, starting with operational modules that allow for room allocation, check-in, check out, as well as at minimum some housekeeping and room maintenance features. PMSs also have guest profile modules which track guest details, past and present reservations, as well as guest spending (referred to as guest folios). Finally, all PMSs have distribution modules which look after the sale and pricing of rooms.

Another way of thinking about this is through the data collected in the PMS. Thomas Landen, director of global partnerships at Revinate, explained the different types of data found in the PMS as follows. Firstly, the PMS captures guest profile data, for example, “name, address, age, preferences, email, phone number. Everything around that particular guest that stays in the hotel.” Secondly, reservation data is captured in the PMS, with a single reservation potentially containing more than one guest, and one guest possibly having multiple reservations at any time. Reservation data includes check-in and check out information, booking channel, rate, and room type. Finally, ARI data which stands for availability, rates, and inventory, tracks the availability of rooms, amenities, and their pricing.

In many cases there are other vendors that replicate or extend the functionalities of the PMS in a specialized fashion. Customer relationship management systems, for example, can handle guest profiles and use these for marketing purposes, and can operate more effectively multi-property. Central reservations systems and channel managers are specialized in distribution, while revenue management systems can push more advanced pricing data to the PMS. Housekeeping apps like ALICE take some of the operational functionalities of the PMS to the next level.

These systems, however, come at a cost, and for many independent or small hotel operators this is not attainable or desirable. We therefore see differences between PMS vendors and the services they offer. We categorize them in three ways:

  • At one end of the spectrum are pure, or core, PMS vendors which focus on the core functionalities of room management. They integrate with other vendors for the rest of the functionality, and tend to target larger and chained hotels which require a more sophisticated tech stack.
  • At the other end are integrated, or expanded, PMS vendors that attempt to offer a more all-in-one solution and tend to focus on the medium, small, and independent hotels.
  • In-house systems, built by hotel chains in accordance with their own specific requirements and existing tech stack are a third, wildcard category.

 

Feature-Rich or Integration-Heavy

The third-party PMSs that have come up over the past decades were largely built on the assumption that the PMS needs to have an endless list of features. As hotel managers found shortcomings with the PMS for their specific hotel, they would request a solution to be built, and with enough demand, PMS vendors would oblige. Over many years, PMSs like Oracle OPERA, Protel, and Guestline have built up a huge array of features they can offer their hotel clients.

In the past few years, however, we have started to see the rise of integration-heavy PMSs. This is not to say that players like Oracle and Protel have few integrations, they have probably the most extensive lists of integrations built up over many years, but their emphasis is on offering both in-house and integrated solutions. With the rise of cloud technology and the ability to have better and faster integrations, younger players like Mews and Apaleo are instead focusing increasingly on offering only the core functionalities of the PMS as in-house features, while spending a lot of time and effort in optimizing integrations with third-party providers, often in the form of marketplaces, which we will return to later.

Skift Research contacted 193 PMS vendors to better understand which features they produced in-house, where they integrated with third-parties, or where they offered the option of either using an in-house feature or a third-party integration.

The 193 vendors were selected based on their inclusion on three hotel tech websites: HotelTechReport, Capterra, and HotelHero. HotelTechReport provides a list of 75 PMS vendors, while HotelHero provides a list of 90 players. Capterra, after filtering out results for vacation rentals software, had a list of 137 hotel PMS vendors. After duplicates between websites and companies that were no longer operational were removed, 193 vendors remained. These companies were contacted using an email address or online form on their websites, and we asked them to fill in a short online survey. A total of 62 completed surveys were collected. These PMSs operate in just short of 150,000 hotels and just over 11 million hotel rooms.

The results of the survey show that the core functionality includes, as set out above, room management, reservations and accounting, as well as guest profiles. The vast majority of PMS vendors offer these modules as core features of their PMS offering. After this there is a significant drop off in the features offered as core modules.

Revenue management is outsourced most often by PMS vendors, with 76% of PMSs offering third-party integrations to RMS vendors, while only 39% of vendors offer their own revenue management system. Channel management tools are also often left to third parties, with 61% of PMSs providing integrations. Reputation management and point of sale (POS) systems are also highly specialized systems which the majority of PMSs offer third-party integrations for.

Spa, golf and activities modules, event management modules, and sales and catering modules were the largest fringe modules, and were most often not offered by PMS vendors, either as a built feature or a third-party integration.

Exhibit 3: PMS features by in-house built versus third-party integrations

With the requested property and hotel room information from the PMSs, we were able to correlate the features of PMSs with the hotel size they were targeting. This shows that PMSs for which the average hotel size was over 50 rooms tend to have a more feature-rich offering, as well as a much higher focus on third-party integrations, than those PMSs that service smaller hotels.

Exhibit 4: Small-hotel PMSs have less functionality and integrations

We will return to the survey data later when investigating the vendor landscape and making distinctions between different PMS vendors.

Hotel Chains: Build It or Buy It

Earlier on we made a distinction between core PMSs, extended PMSs, and the proprietary systems built by major hotel chains. Hotel chains’ own systems were not included in our survey, which focused solely on third-party property management systems, but it is worth discussing these systems briefly here.

Having a PMS which is completely customized to business needs, and which ensures that all data collection and distribution remains in complete control of the hotel chain, at first glance makes complete business sense. The problem most hotel companies come across is the need for continued investment to keep up with the latest technologies and features launched by PMS specialists.

There is also the element of multiple stakeholders with their own interests which stifles adoption and innovation. For many hotels, there are two, and in many cases three, main stakeholders with their own priorities and expectations. These are the brand owner, which means the hotel chain like Marriott and Hilton, and the building owner. In cases where the owner or hotel chain does not manage the operation of the hotel, a third stakeholder, the management or operating company, also gets involved. While the hotel chain might want its hotels to use its proprietary system, hotel owners might have a history with a third-party PMS and be unwilling to invest in switching.

Jordan Hollander, co-founder and CEO of HotelTechReport also believes that “the hotel chain brand value proposition is changing in the minds of owners.” He notes that “rapid flag growth has led to brands saturating their own ownership groups, ” and so “the main value proposition today is distribution,” but here there is direct competition from online travel agents (OTAs). “Brands don’t have the same variety as OTAs so they compete on other vectors like offering advanced proprietary tech, which in theory can be a powerful draw.”

Offering advanced proprietary tech can be attractive. For Oyo, the Indian budget chain, for example, its proprietary tech has been a strong marketing ploy, although major doubts are surfacing about the true sophistication of its tech stack.

Exhibit 5: Many hotel chains build their own PMS tech

Hilton is often mentioned as having the best proprietary system of the major hotel chains. Hilton Hotels Corporation launched its PMS, OnQ, in 1997, and in the early days spent $135 million on technology annually in a no-legacy mentality. When in 2005 Hilton Hotel Corporation, which only operated in North America, acquired Hilton International, which operated the Hilton brand outside of North America, Hilton also started rolling out OnQ in international properties. Up to then Hilton International had run on OPERA predecessor Fidelio. A source told Skift Research that still today, around 200 Hilton Hotels run on Oracle OPERA as OnQ does not support country-specific requirements around fiscalization. Hilton declined to comment further on its use of OnQ and current investment levels.

Choice Hotels has its own system called ChoiceADVANTAGE. In 2013, Choice launched a subsidiary called SkyTouch to sell the ChoiceADVANTAGE tech to non-Choice hotels, but it struggled for many years to make this profitable. In 2014, SkyTouch had a net loss of $20 million, and it took until Q1 2019 before Choice CEO Patrick Pacious could finally say that SkyTouch was “essentially breakeven,” operating in 750 non-Choice hotels, although he admitted that SkyTouch was still “not really a material contributor to the business.”

Best Western is currently working with 17 endorsed PMS vendors, but in August 2019 it acquired Autoclerk PMS to start building its own solution in-house and integrate it closer with its CRS. The company has indicated that it will continue to endorse the other PMS vendors as well as its own system in the future, but it is likely that it would like to see more of its properties migrate to its proprietary system.

Marriott was one of the pioneers in adopting property management systems in the early days. Let’s take a look at the inception of some of the biggest brands on the market today.

PMS Vendor Landscape

The Origins of Today’s PMS Vendors

According to the Hospitality Upgrade magazine, in 1969 the Atlanta Marriott took the global accolade of being the first hotel to install an electronic room management system, basically a set of lamps at the front desk connected to the guest rooms indicating whether a room was clean or dirty, vacant or occupied. This was arguably the first iteration of the PMS as we know it now.

Micor, EECO, and Computerized Lodging Systems (CLS) were all early movers in the PMS space. Micor was acquired by GHS in 1982 but went bankrupt only two years later. EECO saw a few name and ownership changes before it got purchased by Starwood, where it was renamed Galaxy. Starwood eventually built a new PMS named Lightspeed, which is still being used in many former Starwood properties today.

In 1982, Marriott was looking for a PMS for its brands, and made the decision to go with two systems: Lodgistix, another early mover, for its full-service properties, and CLS for its new Courtyard concept. Dave Berkus, the owner of CLS, subsequently sold the rights for CLS for $3 million to Marriott in the understanding that they would build around 50 Courtyard hotels. Berkus had no idea that Marriott would rebrand it as FOSSE (Front Office System Select and Extended) and start distributing it to other brands including Springfield, Fairfield, and Residence Inn, with at its peak more than 3,500 hotels on the system.

Lodgistix was renamed FS/PMS (FS stands for Full Service) by Marriott after the company paid a one-off license fee and wrote its own interface for its central reservation system MARSHA. Still today, around 500 hotels are using FS/PMS.

CLS continued to make systems, and in 1990 was purchased by MAI, another PMS vendor. In 1993, MAI also acquired HIS and combined the different parts of the business as HIS. SoftBrands bought HIS in 2005, being bought itself in 2009 by Infor to turn into InforHMS, which still is a big player today.

Meanwhile, in Germany Keith Gruen and Dietmar Müller-Elmau founded Fidelio in 1987, initially to build management software for opera houses. As this product drew little interest, and because Dietmar ran a family hotel, they decided to swivel towards hotel software. After a few customers in Germany, the company became the Swiss Hotel Association’s software of choice, and gained support from the renowned Lausanne Hotel School. Expansion into neighboring countries meant that the company was forced to offer multilingual and multi-currency options early on, as well as respond to a wide range of demands for functionality. This would put it in good stead for future expansion.

Fidelio’s big break came in 1992 when Hilton International mandated the use of Fidelio for all its hotels. As more brands, including Radisson and Shangri-La, signed up to the system, MICROS bought a 30% stake in the company in 1993. Two years later, MICROS bought the rest of Fidelio, and moved the development efforts of the new system the company had started working on a year earlier, OPERA, to Naples, Florida. OPERA was initially predominantly popular in the U.S., while many European hotels continued to run on Fidelio. For this reason MICROS decided to develop its Suite8 product, which even today is still only sold in Europe. MICROS was purchased by Oracle in 2014, and OPERA, Fidelio, and Suite8 fall under the Oracle Hospitality brand umbrella today.

Competition has been increasing for Oracle. Protel was founded in Germany in 1994 and has made steady growth especially in Europe. Today, Oracle and Protel are widely seen as the two main players for large hotels and multi-property chains with the most extensive feature lists. These are also often mentioned as the hardest and most expensive to integrate with.

Two other noteworthy players that entered the space are global distribution system (GDS) behemoths Sabre and Amadeus. Sabre acquired SynXis, a central reservation system, in 2005. It included some basic property management functionalities, but the company launched its own cloud-based SynXis Property Hub in 2018.

Amadeus, meanwhile, acquired hotel technology company Optims in 2004, and doubled down in July 2015 with the acquisition of Itesso, a Dutch property management system. One of Itesso’s biggest partners was Intercontinental Hotels Group (IHG), with Amadeus and IHG only months earlier announcing a partnership to build a new guest reservation system together.

The Move to Cloud

It is not just the big travel behemoths that are interested in the hotel tech space though. With the dawn of cloud computing came a host of new challengers for the traditional PMSs, with the latter originally built for on-premise infrastructure.

For legacy systems the move to cloud has been hard going. Oracle has built a new cloud-native system called OPERA Cloud, but today only a couple hundred of its 38,000 customers have migrated to this system. Protel has its cloud product called Protel Air, but it continues to support on-premise connections and currently two thirds of its customers still use the on-premise product.

Sabre is looking to move all its customers to its new cloud-based Property Hub system in the first quarter of 2020, but this excludes its largest client, Wyndham Hotels and Resorts, which is still in the pilot phase.

Clock Software, already a successful on-premise PMS provider in Eastern Europe at the time, decided in 2010 to start a subsidiary which would build a comprehensive, cloud-native PMS, which has since provided the company with much wider success. The company still runs both systems. Guestline, a predominantly UK-based legacy player, meanwhile has discontinued its on-premise operations and has migrated all its operations to the cloud.

For the legacy players, one of the inhibitors is the rich features their systems often have. All these systems need to be rebuilt, and clients expect to not lose any features when migrating. This is one of the major reasons why PMSs have seen some of the slowest migration to the cloud of hotel IT systems, as illustrated by research from the Hospitality Technology magazine.

Exhibit 6: PMS is falling behind in move to cloud

Systems that have not had any of these issues are the systems built on the cloud revolution. These systems were born out of slow adoption amongst legacy systems, with in some cases a direct connection between frustration with the status quo and the inception of new companies. StayNTouch, for example, was one of the first cloud-based PMS companies, started in 2012 by Jos Schaap, a former MICROS SYSTEMS (now Oracle Hospitality) executive who became disenchanted with the conservative stance to innovation the company was taking.

Similarly, one of the rising stars of the PMS world, Mews, was started by Richard Valtr after he was helping build a Prague hotel and could not find a PMS that provided the mobile applicability he was looking for. He decided to start developing an app himself, but to get access to guest data he reached out to Oracle about API integration (we discuss integrations in-depth later). “He reached out to Oracle, and they quoted him €50,000 for the API access, and he didn’t have that money. So he went to the owner of the hotel and said: ‘give me €50,000 and I’ll build you a PMS for that money.’ So the company was actually built on the budget of Oracle for one hotel, and the frustration of getting to that data, and that is when we pivoted [to building a PMS],” said Mews CEO Matthijs Welle.

The history of PMS infrastructure can be broadly divided in three stages, as illustrated in Exhibit 7. At its origin, operating systems were aplenty, and hardware was large and clunky. Before IBM introduced its first PC in 1981, there were over 50 different computer types according to the Hospitality Upgrade magazine, and the hardware needed a special air conditioned room in the hotel and two full-time IT staff on hand 24/7. Hardware costs came down drastically with the advent of the PC, and HIS was one of the first PMSs to write to the new MS-DOS operating system. Still today, DOS-based Fidelio 6 systems are used in hotels around the world, although the majority of hotels are using Windows-based OPERA v5, which requires an on-premise database.

Exhibit 7: Three stages in the evolution of PMS infrastructure

On-premise remains the most popular approach to hosting the software and databases for legacy players. For the initial installation of the PMS, or for upgrades, the PMS vendor sends out an engineer and/or representative to visit the hotel to install the software and train the staff. According to documents seen by Skift Research, the Choice Hotels Comfort Inn brand, for example, charges a hotel a one-off fee between $10,750 and $14,750 for a PMS software license and training, which includes a trainer visiting the hotel and training staff for a week.

In the 1990s, hosted systems started to gain popularity. These were in essence similar to on-premise installations, but rather than having the physical hardware in the hotel, these worked with application service providers (ASPs). The hotelier will pay a data center to host the PMS software, removing the need to have physical hardware at the hotel property. Hyatt is one major hotel chain that requires its hotel owners to use an OPERA hosted system.

It was not until the 2010s that cloud systems started to gain traction in the PMS space. Hetras was one of the first companies to offer a fully cloud-native system, swiftly followed by players like Clock PMS and StayNTouch. Hetras got acquired by Shiji Group in 2016, as was StayNTouch. Cloud PMSs are generally sold using the software as a service (SaaS) model, where hoteliers subscribe to the use of the software, as well as data storage in the cloud. The PMS vendor hosts the data and software in the cloud, and there is no need for physical hardware at the property.

Hybrid models continue to exist where hoteliers can have some aspects of their software and data storage on-premise, with others in the cloud.

Does Cloud Promote Integrations?

With the move to the cloud also came an increased focus on simplifying integrations. We will discuss integration in more detail later, but it is important to note this here, as it is a major feature of the growth of cloud-native players. It is hard for young startups to compete with behemoths like Oracle, Protel, or Infor in terms of features, simply because these companies have had a head start of many decades. This has thwarted serious competition in the past, but with improving reliability and speed of connections, integrations offer today’s startups with an opportunity to add features quickly by integrating with other specialist vendors.

It is too simplistic, however, to say that younger players are predominantly integrating, while older players are predominantly building. Using our vendor survey, we correlated the in-house built features with third-party integrations to compile a ‘build-integrate ratio’ for the 62 PMS vendors that took part in our survey. The results are shown in Exhibit 8.

Vendors were asked about 22 different modules (as already shown in Exhibit 3), and a ratio score of 100 indicates that a PMS player has an equal amount of built modules as integrated modules. A score lower than 100 indicates a greater focus on building features in-house, while a score over 100 highlights a focus on integrations over building features.

PMS vendors like Easybooking, Roomsy, or ONDA have very few integrations, while at the other end, Apaleo stands out for its focus on third-party integrations over building proprietary features. Market leaders Oracle OPERA and Protel are clustered together around the midpoint, both offering a strong proprietary feature list and extensive integrations. Another interesting cluster includes PMS vendors eZee Technosys (recently acquired by Yanolja), InforHMS, and RMS, having a relative focus on building over integrating, with a score of 47.

Exhibit 8: Integrations more about company vision than cloud?

 

Sizing the Vendor Landscape

Beyond considering the module coverage of the different PMS providers, Exhibit 9 provides a ranking of the largest PMS vendors on the market today. The rankings include some estimates made by Skift Research for vendors which did not respond to the survey request.

Exhibit 9: Oracle is the clear leader in hotels and rooms operated

The top hotel companies account for just under 160,000 hotels and almost 11 million rooms. In earlier reports, Skift Research has estimated that there are 600,000 hotels and 30 million rooms in operation worldwide. This leaves a massive 441,000 hotels and 19 million rooms with other PMSs, and a small percentage likely without any PMS, instead relying on Microsoft Excel or pen and paper.

There are different estimates in the sector of how many PMSs there truly are, ranging from 700 to 1,300 when taking all local players into account. This means that there will be a very long tail of PMS vendors which have a small customer base.

With so many PMSs, it would be easy to see consolidation on the horizon, but it is more likely to see the market share of a small number of international players increase. It makes little sense for players to acquire other PMS players, as the cost of migrating existing customers is often as high as stealing share with increased marketing or aggressive pricing. When Shiji Group acquired Hetras, it looked to move its customers to StayNTouch, also owned by Shiji. Many Hetras customers simply abandoned Hetras for other solutions and very few customers actually moved to StayNTouch. Acquiring a PMS for its tech can work, acquiring a PMS for its customers often doesn’t.

New Entrants and Their Struggle to Scale

Despite their efforts and investment, there remains a major gap between the incumbent players like Oracle and Protel, and younger startups like Mews and Apaleo that are shaking up the sector. There are a number of reasons for this gap, and although the gap might be closing, it continues to be extremely hard for new entrants to compete and steal share from the large players. As David Sjolander, chief operating officer of HTNG commented: “Change is slow when it comes to PMS systems.” We discuss three reasons below.

Most Integral Tech System for Hotel Operations

Evan Davies, founder of Channex, and previously CEO of TheBookingFactory, a PMS focused on small and independent hotels, said switching a PMS is seen as “very risky for hoteliers”. Steve Bliekendaal, business development director at Clock said: “Changing a revenue management system is plastic surgery; changing a PMS has for a very long time actually been considered an organ transplant or open-heart surgery.”

According to the 2019 Lodging Technology Survey, 30% of respondents were looking to change PMS in 2019. It would be great to find out how many managed to do so. We would wager a guess that it is less than that.

Andrew Metcalfe, chief technology officer at Guestline said hoteliers need a strong reason to change their PMS, which is an integral part of their daily operations. “That [reason] could be that the PMS company is going out of business, or the fees are too much, or because of bad support, and lately it has been more around the operational side, functionality, and the access to the digital guest experience,” said Metcalfe.

Thomas Landen of Revinate added that talk about switching becoming easier is overblown. He said: “If you are a hotel and you are unhappy with the integrations that your current PMS is offering, there are two choices: accept it and move on, or you decide to go for another PMS, which is a huge operation. The industry makes it seem like it’s going to be easy, but it is still complex and hugely disruptive. Granted, it moved away from being a complexity level of 9.5 out of 10 to maybe a level 7, but you still need to retrain all your staff and make sure your bookings and operations keep going while your hotel is open for business. It is a costly thing and requires a lot of work.”

With the PMS being such an integral part to business operations, it is naive to think that hoteliers would switch willingly every few years, or because they do not like a few aspects of a given PMS. Added to the difficulty of switching is that it is not in the PMS vendor’s own interest to make this easier, resulting in players making the process of extracting booking and guest profile information from one system to input into the new system laden with barriers.

Linked to this is also the ingrained nature of especially OPERA in the educational system and job training circuit. Having to train and retrain hotel staff for another PMS is expensive, and could be a barrier to finding the best talent.

Features and Geographical Coverage

A PMS is not a one-size-fits-all product, and each hotel will have its own requirements. That being said, larger and chain hotels will generally need more features and functionality. Having an established company building the PMS also helps, as it provides more certainty and stability, although the flipside of this is longer lag times in innovation and getting less attention.

By nature of their longer history, legacy players like Oracle and Protel tend to offer a more extensive and integrated product offering. Next to its PMS tools, Oracle also offers extensive food and beverage, events management, and point of sale solutions, as well as things like a spa and wellness module.

Erik Tengen, co-founder of Oaky said that OPERA “may be big and not as nimble as their cloud-based competitors, but they have so much functionality off the shelf which is why hoteliers simply cannot switch until the same is offered elsewhere.”

It is hard to compete with this for new entrants. Hoteliers are unlikely to give up features when switching, even when these features might only be used sporadically. As Jos Schaap, founder of StayNTouch said: “The problem is that there are so many features, and every hotel needs their own different thing to make it really work for them, even though they rarely use some of these things.”

It’s not all just great for the incumbent, though. Oracle has grown on this extensive feature list, but the company now has major issues to move all this functionality into its cloud product, especially as its existing on-premise or hosted customers have come to expect customizability to their specific needs. For its Cloud PMS, Oracle offers its base-rate customers a choice of 55 features from a list of 150 features, as well as a number of third-party integrations. As many interviewees commented, most hoteliers will not need all 55 features, but like the choice and customizability this offers.

Another area where expansion is stifled for new entrants is the need to adhere to national and local regulations, and to offer systems with local currency and language functionality. OPERA can be used in 190 countries around the world, which is a huge driving force for expansion of the system.

Fidelio gained wide uptake because it was launched in Europe, where it was forced to focus on making its system multilingual and multi-currency capable. This has also been a driving force for Protel, and today applies to a system like Mews, which was started in the Czech Republic and quickly expanded throughout Europe. The plethora of regulations, currencies, and languages force European companies to build this into their systems from the start. This might be one of the reasons why startups from the U.S., like StayNTouch, have struggled to gain traction internationally.

The Hotel Business Model and Stakeholders

A third barrier, unique to the hotel industry, is the different stakeholders that are involved in IT investment decisions. It is easy to say that hotel operators are over-conservative in their technology investments, but the situation is more complicated than that.

Unlike the airline industry, or retail for that matter, most hotels have different parties involved, especially in the U.S. where the majority of hotels are part of a branded chain. As mentioned before, this means that there are two or three stakeholders involved in the operation of a hotel. Hotel owners, management companies, and brand operators all have their own priorities. While the brand operator might want its hotels to be on a single platform, it has little agency as it does not actually pay for the PMS software. This is done by the hotel owner. The management company might also have its own ideas on which PMS it prefers to use.

Nick Price of NetSys Technology explained the process as follows: “If you are a technology company and you had a great new product, and … went to Marriott and they like it, at best Marriott can take you onto a central roster of approved suppliers. From that point you still have to sell to each individual owner, so it is extremely hard for new entrants. The innovation always comes from the newer companies, but it has been extremely hard for those companies to bring new technology into our industry, because of the structural inhibitors.”

This has also impacted the way hotel chains operate. Many have extensive owner associations to attract new owners, but also keep existing hotel owners happy. A big part of their role is to convince owners to invest in new technology. Jeff Edwards, senior vice president global hotel and owner solutions for IHG, is good at speaking this language.

IHG implemented its technology platform Concerto, and as Edwards notes: “We believe the integration of our various systems is a requirement for us to provide our hotels. Our hotel colleagues access the various applications through IHG Concerto, a single user interface, which significantly reduces training time and makes the system operation much more frictionless for each guest interaction.”

But as Jean Noel Lau Keng Lun, vice president product management, and Ronny Burchhardt, vice president in-hotel experience, at Accor asserted, brand operators have to remain flexible. “Accor provides business to hotels with dedicated promises to the travelers. To enable hotels to receive the business and to fulfill the service promises, Accor requires hotels to use one of its two formally referenced PMS. One of them is built and operated in-house [FOLS], the other one is a customized variant of OPERA. However, with the acceleration of our development, we have created an API that allows hotels to be quickly onboarded with their current PMS, from a selected list of PMS partners, while they transition to our platform.”

Integrations: The Elephant in the Room

Talk about PMS with any industry insider, and the conversation will at some point touch upon the topic of integrations. It is such a contentious issue, that integrations have become a main reason for anything from despair to anger amongst hoteliers and integration partners, and a main driver of innovation by new entrants.

“For many years, the PMS has been the one system you have to have, … all other technology was optional. … Because PMSs were for so long closed legacy systems, and they didn’t treat integrations in an open and flexible manner, they were often a barrier to innovation in the industry. That is now changing,” said Alex Shashou, co-founder and president of ALICE.

Credit can again be given to cloud technology here. With the move to the cloud came an increased focus on simplifying integrations. “If the PMS works within a traditional physical deployment approach, it is more difficult to do an integration. The modern architecture players are moving towards a software as a service (SaaS) model, where features are automatically updated during scheduled releases, which is much more efficient and cost effective in delivering enhancements,” said Jim Mattson, senior partner technology at ICF Next.

This has arguably also resulted in a relative shift away from building features in-house, and instead relying more on specialized third-party vendors that can contribute to the overall tech stack of the hotelier. The ability to do this relies heavily on simpler, faster, and more stable integrations with these vendors.

Efforts to standardize integrations go back 20 years, when a workgroup of HTNG published a large library of standards to be used by the hotel industry for integrations. These standards are still used today, but have shortcomings and are actively ignored by some of the major and newer PMS vendors.

Instead of using standards, many of the new PMS providers are publicly publishing their APIs for third-party vendors to build towards. This concept of open APIs has garnered major buzz and even legacy players are working towards publishing their APIs, as is the case with Oracle, or have already done so, in the case of Protel.

Issues with integrations remain. To further simplify the issue for hoteliers, PMSs are increasingly promoting all the different integrations they have on marketplaces. Meanwhile, a number of startups have entered the market to act as aggregators of API connections and to function as a middleware layer between PMS vendors and other tech vendors, attempting to simplify the process of connecting to PMSs.

There is a lot to unpack here. Let’s start with the different types of integrations hotels need.

Three Types of Integrations

Iain Saxton, senior vice president strategist CRS and PMS at Amadeus, makes a distinction between three different types of integrations.

The first type of integrations focus on major components that sit at the core of the PMS. “Most of the new systems are service based, [which] allows you to actually build a solution with greater interoperability with third-party components,” explained Saxton. This allows for guest profiles, distribution, or the housekeeping module to be integrated rather than built.

The second type of integrations are those that need close integration and data communication, but are not integral to the system. This could be revenue management systems, which feed the PMS with improved pricing data, or upselling tools which help to offer relevant add-ons to the consumer based on reservation data.

The first type of integrations will generally involve two-way integrations. This is where the PMS provides data to a third party, and the third party can in turn write certain data points directly into the PMS. Think of a channel manager that receives availability, rates, and inventory data from the PMS, and pushes bookings back into the PMS.

The second type of integrations might, next to two-way integrations, also involve one-way integrations. This is where the PMS provides data to the third-party software, but the software cannot communicate back directly into the PMS. An upsell tool might be able to receive reservation and guest profile data, but after selling an add-on to a guest, might not be able to add this charge automatically to the guest folio.

Especially for two-way integrations it is extremely important that connections are sound. As Ingo Dignas, CEO of Protel said: “You can imagine you can also do a lot of harm [with two-way integrations], so it is important to have a proper testing and certification process.” Certification has become a standard practice in the sector, which in the case of some legacy players can be a costly and lengthy process.

Finally, the third type of integrations, in danger of being overlooked in the cloud revolution, are the integrations to on-property devices. Hotels have many on-premise systems which will have involved significant investment, like the phone systems, in-room TVs, Wi-Fi, door locks, point of sale systems, or energy management systems. It is impossible for a PMS vendor to expect hotels to change these systems when they change their PMS, so while the PMS increasingly moves into the cloud, being able to connect to physical, and often old, systems on property remains important.

There are devices and companies that solve this problem. This generally involves a box placed in the hotel property to which all physical systems are connected. The device then translates the messages up to the cloud PMS. For Amadeus this task is done by its proprietary Orange Box, while many other PMSs outsource this to specialist companies.

Jos Schaap, formerly of StayNTouch said that his company “used a company called Comtrol, which was doing it for 20 years already. They are on old technology, but a perfect tool to connect to the thousands of legacy systems, which did not have an open API. They were very good at connecting to older systems in hotels, like older key systems, older phone systems, which are systems that are expensive for hotels to replace.”

Aging HTNG Standards

Even back when a cloud was just a natural occurrence in the sky, integrations were needed between on-premise PMS software and other vendor software or physical hardware systems. All these integrations tended to be one-off efforts.

Hospitality Technology Next Generation, better known as HTNG, was formed exactly to solve this problem. As David Sjolander, chief operating officer at HTNG explained: “The hotel companies got really tired of the time it took and the amount of money they had to spend on these interfaces, and so the organization was formed to solve that problem.”

Shortly before HTNG was started, the Open Travel Alliance (OTA) was formed in 1999 by a consortium of companies from across the different travel verticals to create electronic message structures which could be used for communication between the diverse systems used in the travel industry. When HTNG was launched in 2002, it formed a workgroup to narrow this broad set of structures down to a set of standards specifically for the hospitality industry.

The standards were adopted broadly, but HTNG’s Sjolander notes that “integrating systems is still too difficult.” Kevin Smith, senior director product integrations at IDeaS, is a member of the Distribution workgroup that helped formalize the HTNG standards for integration, and continues to be largely supportive of them. He said: “Whilst dependent on communication protocols and data messages that, by today’s standards, can be seen as antiquated, what HTNG standards do is they allow integration partners to establish a basis and standard for the integration discussion. Most, if not all, of the hospitality technology vendors I have worked with are familiar with at least one or more of the message types that IDeaS RMS are using. The requirements for our system are not dissimilar to what a CRS and PMS would exchange, so the already defined HTNG standards were ideal to base our data requirements [on].”

The issue with the standards no longer being cutting edge seems one major stumbling block. While Mukund Mohan, vice president product strategy at Infor referred to the standards as the “industry standards … that our partners have adopted”, others in the industry are less positively inclined.

Matthijs Welle, CEO of Mews, said the company “resist[s] the HTNG standards because it is from the early 2000s and they really need to rethink that standard.” It is a sentiment shared with other startups. Ben Stephenson, CEO of middleware provider Impala, also said that the standards are “highly out of date both technically and in terms of the things PMSs can do now.”

The discussion on using the latest technology revolves around different API protocols and data formats. Without going into this too deeply, there are different protocols that allow you to build an API, which stands for Application Programming Interface. An API basically facilitates the communication and the transfer of data between two systems. The main protocols used are SOAP (Simple Object Access Protocol) and REST (Representational State Transfer).

For web services, which indicate the transfer from one cloud system to another cloud system, SOAP has fallen out of favor, and REST has gained popularity. RESTful APIs are known to be more simplistic, lightweight, scalable and can deliver superior performance, whereas SOAP messages have the reputation of being “chatty,” “bloated,” and “slow,” according to Kevin Smith.

SOAP only accepts a single data format, or markup language, XML (Extensible Markup Language), which is the language used for the HTNG standards. However, XML is increasingly left by the wayside in favor of JSON (JavaScript Object Notation), which is more flexible and easier to parse. REST supports multiple data formats including XML and JSON.

What we are increasingly seeing, then, is particularly newer vendors wanting to code their APIs using the REST protocol and JSON data format, but the HTNG standards are based on SOAP and XML. This is a major reason why many APIs today are not in accordance with the HTNG standards.

Another major issue with the HTNG standard is its interpretability. As Lukas Hughes, product lead at revenue management system Pace explained: “The standard only describes the titles of the fields in a message type.” While for some fields this might not be an issue, other fields have no clear description and are interpreted differently by each PMS. “We receive exactly the same message, and the standard tells us that the content of the message should be exactly the same, but the content is defined by the PMS and no one is independently certifying this output” said Hughes.

This has meant that, while Pace expected to be able to write one integration to the HTNG standard and be able to replicate this across all systems that have adopted the standard, in actual fact each integration continued to be a one-off, as a process of checking how the PMS interpreted each field was still needed.

A final issue, for some system vendors, is the focus of the HTNG standards on integrations applicable to the distribution space. Distribution is of prime importance to hotels, as it allows them to sell their rooms, and therefore this has always been the main focus of integrations and of the HTNG standards.

But with the advancement of new technologies, non-distribution related technologies are increasingly looking to connect to the PMS as well. Dmitry Koltunov, chief technology officer at ALICE said: “There are two kinds of integrations: the first kind of integration is the distribution integration, which is the place where HTNG already plays a big role and it is fairly standardized, although it can get better. But then there is a services-oriented integration, and that, with all the recent technology innovation in that space, has not yet been standardized.”

The types of integrations Koltunov refers to include work order management systems, housekeeping systems, or guest messaging, but also in-room TVs, phone systems, Wi-Fi, or door locks. Everything focused on serving guests. An HTNG workgroup called Express PMS has been pulled together to solve this problem by writing standards for these types of services, and hopes to put out its first standards by the end of 2020, based on RESTful APIs and a streamlined integration process.

Some attempts, meanwhile, have been made to build upon the standards, but to little effect. There have been some isolated releases for the existing message set, without completely overhauling the standards and establishing a new standard using lightweight technologies. While there have been some conversations, there has not been a concerted effort from within the hospitality technology sector to push this forward. Kevin Smith observed that many players have expressed an interest in doing it, but that it is just “difficult to get to the point where we make a start.”

So where does that leave the hotel tech sector? Instead of waiting for better standards, some tech vendors are moving away from writing to the HTNG standards, and are making their APIs publicly available. This makes it easier for developers to write one-off integrations. It is far from the perfect solution, but it is a step forward in many ways, and is gaining widespread support.

Open APIs and API-First

An API is a product. It is written by developers using certain protocols, and possibly some standards. By its nature, every company will write its APIs differently, and so developers of partners that are looking to integrate will need to have access to the API to write towards it. Requesting a PMS’s API, however, can be a lengthy process.

“In the industry, finding someone’s APIs is borderline impossible. People put it behind non-disclosure agreements; they are physical documents, not digital documents; [or] there is no live documentation that you can interact with,” said Dmitry Koltunov of ALICE.

This is now changing, as newer players started to publish their APIs on their websites for easier access. Open API has become a major buzzword, but it may be better described as an accessible API. The term “open” conjures up references to open source, which would mean that the API would allow anyone to access all of the data without authentication. PMSs would never allow this for good reason. The term open API, however, has caught on, and even legacy players are working towards publishing their APIs, as is the case with Oracle, or have already done so, in the case of Protel.

Exhibit 10: Just one example of an Open API: RMS’s REST API on its website

Open APIs continue to have shortcomings according to some. Apaleo was the first PMS that brought the concept of API-first, widely used in other industries, into the hotel tech space. This was in response to the fact that integration partners are still not treated equal to the PMS by using open APIs.

“Apaleo flipped the entire thing on its head. Instead of taking the traditional approach of building the PMS first, then later adding APIs, Apaleo placed APIs front and center in its development process. We develop 100% of our PMS logic into the API, then connect our PMS front end to it in the exact same way that any third-party system would. That is what API-first is all about,” explained Apaleo co-founder Uli Pillau.

Traditionally, as PMS vendors add new features, these features are not available to integration partners or hotel IT departments until the vendor adds or enhances its API for connectivity. According to Pillau, this process can often take six months or longer, if it happens at all.

Some other players are also working towards this, including Clock and Oracle. Laura Calin of Oracle said that: “One sin of the legacy solutions is that we used to have a different methodology of how our user interface would be communicating to the database, versus how integrations would do this. This created scope limitations for integrations and increased brittleness. The principle of our new [cloud] solution is that it is API-first, meaning we first develop the web services for our user interface, and the same services are then available for integrations.” We would expect for other PMS vendors to follow suit.

As noted earlier, and with both open APIs and API-first, connecting to an API continues to involve physical work. Jos Schaap noted that: “there is a story on the internet now that you have APIs and you shake hands and off you go and it’s done. It’s not like that. There’s always some work involved.” It also means that a major part of HTNG’s mission, which was to resolve the one-off integration issue, has not yet been resolved, and might be getting worse again now PMSs are increasingly writing their open APIs without standards.

Oaky’s Erik Tengen described the early days of his company, where “you have to start cherry picking, and either you cherry pick in terms of the addressable market that these PMSs have, or you cherry pick in terms of synergies, where it’s easy to integrate and affordable for the hotelier to integrate. … The cloud-based PMSs changed the game for us, because the integration was faster to make.”

Tengen points to another change that newer PMS players have kick-started, and that is the easier and cheaper connection to integration partners for hoteliers. Many PMSs are following the Apple App Store concept, introducing marketplaces to boost visibility for system partners and to simplify integrating to these systems for hoteliers.

PMS Marketplaces

While still a relatively new concept in the hotel industry, PMS players are increasingly putting their integrations on marketplaces. Gautam Lulla, CEO of Pegasus referred to it as “platformization” and pointed to the success of Salesforce with the business model.

Oracle has over 5,000 integrations, and it is starting to promote its marketplace amongst its partners and hotel clients. Protel, with over 1,000 integrations, has built an integration platform called Protel I/O, from which the integrations are accessible on a marketplace.

Newer players like Mews and Apaleo are also pushing their marketplaces, with 300 and 100 integrations respectively. For these newer players, the marketplace is an issue of critical mass. Small PMS vendors do not have enough hotels to attract the most important integration partners, but marketplaces without important integration partners will result in little shopping by hoteliers. This is an issue that these players can only solve by continuing to grow at both ends in the hope of a snowball effect down the line.

The ultimate functionality of a marketplace is a platform where integration partners can showcase their products, while hoteliers can access the platform and pick the integration that suits their needs. Where the marketplace comes into its own is the capability for hoteliers to instantly switch on a system while on the marketplace.

These integrations are referred to as one-click integrations, and while again there is a lot of buzz around them, today this is still largely a pipe dream. As Thomas Landen of Revinate said: “The goal is that you will have a one-click integration directly from the PMS. I don’t believe we are there yet. Especially for the more complex integrations, there is still a lot of work involved in mapping the connections between the PMS and a vendor, which generally cannot be solved automatically just yet.”

Landen continued: “I believe it is an illusion that hoteliers are going to shop for software like an app store on your phone where you’re kind of bored and go browse and download some games. The process of purchasing software requires more attention.” Other vendors tend to agree. Erik Tengen of Oaky, a player which is available on many marketplaces, called the concept still: ”a bit tricky, as it’s bringing a b2c concept into a b2b environment. I don’t think most hoteliers are ready to purchase tech like this, but in the near future this will change.”

Jordan Hollander of HotelTechReport sees marketplaces as the way forward though. He points out that many Fortune 500 companies have taken the marketplace approach to good effect. “You need to be focused as a product. It is not going to be overnight that hotels are going to start using the app store, but over time the players that take on this strategy … can focus on being really good at what [they] do, and will connect you to the best of what [other vendors] do. It’s this kind of micro-SaaS specialist infrastructure that always wins out over the long run.”

Not everyone agrees. There are doubters in the sector. Some of the doubt is centered on the size of some of the newer players, which might need to focus on growing their PMS business before they can focus on the marketplace. Others referred to the fact that newer players are currently not charging for their marketplaces to boost their growth, but that support might wane once they do start charging.

Nick Price of NetSys Technology was more critical about the whole idea that PMSs are best placed to offer marketplaces in the first place. “It assumes that PMS companies are good at creating APIs and interfaces. Well, that is a really hard thing to do. And it equally assumes that not only are they good at doing it, but they can make those interfaces available for systems in the cloud and for systems on property, which is extremely difficult.”

These are all issues that PMS vendors need to work through to make the concept successful. Today we are seeing the first adopters (Apaleo, Mews) and second adopters (Oracle, Protel) expending considerable energy in making this a success, and this will likely put them in a good position when a few years down the line marketplaces really start taking off in the hotel tech space.

The Middleware Layer

While PMS marketplaces do not solve the problems around one-off integrations, there is another solution gaining popularity that does. Having an intermediary that sits in between the PMS vendors and other system vendors, allows the intermediary to focus on ensuring integrations are established and connections maintained, while each vendor only needs to connect once to this intermediary.

A few companies have entered this space, with the best known being Impala, Hapi, and SiteMinder with its Exchange.

Impala’s service became available at the beginning of 2019, and since the company has connected to 1,100 vendors, a couple hundred hotels with many more in the pipeline, and raised $11 million in a series A funding round. It actively sells its universal API to tech vendors, rather than hotels. Once a vendor wants to connect to a hotel, Impala can quickly move to get the hotel connected to its API. Impala currently allows companies to connect to Oracle, Protel, Infor, Guestline, Mews, and Clock.

Hapi is similarly connecting hotels to vendors. In April 2019 the company announced it had successfully established a connection between the major CRM Salesforce and its PMS vendors, which include Oracle and Infor. The company has built tools that directly integrate Salesforce functionality into these PMSs. Luis Segredo, CEO of Data Travel, owner of Hapi, said: “We want to be plumbers, not app builders, but Salesforce is different. With Salesforce, we have built the exposure for companies to build CRM applications or projects on the platform.”

SiteMinder is predominantly known as a channel manager, but it feels it can utilize the 35,000 hotel customers it has to become the middleware layer that vendors want. With its core business of connecting hotels to distribution channels, the company already has many of the connections in place it needs to take on this middleware position. The vast majority of its hotel customers connect to SiteMinder through their PMS, meaning that the company already has 300 PMS integrations in place, of which 80 are currently on the Exchange. It also has connections with 400 online booking channels. It is working to expand integrations to other hotel tech systems, and at the end of 2019 launched a marketplace feature called the Hotel App Store.

Another startup called Channex is trying to follow in SiteMinder’s footsteps by first offering a channel manager, before moving on to become a middleware player. Unlike SiteMinder, Channex’s CEO Evan Davies says the company will focus on the long tail of small and independent hotels with small budgets and limited needs, and small PMSs that do not have the means to integrate with many partners.

It is likely that some of the “well over $70 million” that SiteMinder recently raised, with BlackRock as a main contributor, will go into making SiteMinder Exchange a success. Its extensive customer base and existing integrations also gives it a leg-up compared to the newer startups, which have the same problem as the PMS marketplaces launched by new entrants. The most prominent need is to connect to the large PMS vendors, or maybe even more importantly to the legacy PMS vendors which are hardest to integrate with, as the demand is greatest here. Without these connections, other vendors and hotels will not sign up, but legacy PMS vendors are little inclined to cooperate if these middleware players have no potential business to offer.

Ben Stephenson of Impala, however, does away with the argument that his middleware solution is successful only because of the costs and hassle associated with integrating to legacy players like Oracle: “I would love it if Oracle was the most open PMS in the world tomorrow, because it would make our job to connect to Oracle easier, but still wouldn’t change the value proposition to our customers which is you don’t have to maintain [many] different connections. The movements towards more open PMSs is an advantage for us.”

Stephenson highlights a major benefit for middleware players, in that it is not only the initial access to data in PMSs, but also the continued maintenance of these integrations that cost vendors a lot of time and money. As open APIs will likely sweep the sector and integrating might become easier, the solutions offered by middleware players do not become obsolete.

This is seconded by Dmitry Koltunov of ALICE: “Connections go down and somebody has to be on top of it, and seeing if something is wrong, and following up with the hotel. … There is definitely a place for a company that says that’s all they do. “We make sure that the pipes are connected, and when they are not, we follow up and get it back up”.”

Not everyone agrees with this though. For some vendors, having a third party involved is a necessary evil. Erik Tengen said that Oaky would “prefer to have a direct PMS connection because two-way connectivity is complicated … If you do it all via middleware, you’re putting all your eggs in one basket, which can make you a bit anxious.”

ICF Next’s Jim Mattson said that using middleware providers might depend on the tech vendor’s strategy. “As a technology company, if you’re trying to integrate with as many companies and platforms as you can, intermediary players can help provide that scale much more feasibly and in a quicker fashion. On the other hand, focusing on an entire or more direct integration can differentiate your capabilities from the competition. I don’t think either path is right or wrong, it just comes down to strategy,” said Mattson.

As Mattson highlights, middleware integrations are generally not as customizable as direct integrations could be, and Jordan Hollander of HotelTechReport also pointed out that adding an “integration layer adds a third party to diffuse responsibility further,” although he went on to say that overall the middleware layer should make it easier to diagnose problems, and should lead to less downtime.

Furthermore, middleware players provide the pipes and the end points, but do not clean or validate any of the data. However, this is something the industry is used to. As Thomas Landen of Revinate observed, the data quality in most PMSs is not where it should be. “Because many systems work with default settings for guest profile forms, a very common birthday is January 1, 1750, and the majority of hotel guests are from Afghanistan because that is the first country in alphabetical order.”

What Impala and Siteminder do offer, however, is a type of verification that currently does not exist, and which is a shortcoming of standards like HTNG. “HTNG and OTA, nobody validates them, nobody checks if they are used correctly. Groups like SiteMinder [with its SiteMinder Exchange platform] and Impala, instead have created an interface where partners are certified and thereby guarantee a consistent data-stream. They are integrated with many PMSs and validate that all data matches the standards-based expectation. That is something I’m happy to pay a fee for,” said Lukas Hughes of Pace.

While middleware players have their shortcomings, their product should be seen in the context of the wider technology infrastructure they are working with. In that sense, middleware players offer an important service which will continue to gain uptake in the industry. It is currently mostly tech vendors that get excited and connected to these players, but soon hoteliers might switch on to their potential as well.

The Evolving Cost Picture

It is fair to say that high costs have been a major inhibitor of innovation in the PMS space in the past. This is slowly changing, as business models evolve and costs of acquiring technology go down.

As the major legacy PMSs grew over the past decades, their feature lists grew alongside, which resulted in greater maintenance demands. Unsurprisingly, with costs increasing, their price tag also increased. Likewise, as more and more tech vendors looked to integrate with these PMS systems, demand pushed pricing for integrations up. The sector now finds itself in a situation where, according to many, costs have gotten out of hand. This stifles innovation, and hinders hoteliers in running their business efficiently.

Oracle is often highlighted as the worst offender. Being the market leader, it clearly has a strong position to charge the highest fees. Because of its leading position, it is also likely to have the highest volume of integration demands. Not only does this allow the company to charge higher fees, if we give the company the benefit of the doubt, it could also be argued that the high integration fees are needed to deter even higher volumes of demands.

So how much does Oracle, or its main competition, charge? That is not an easy question to answer. The company sets prices based on hardware and software requirements, and pricing plans are not publicly available. However, there is a way to provide us with some insights: franchise disclosure documents.

The Cost of Installation and Maintenance

Franchise disclosure documents are legal documents produced by a franchisor, and presented to prospective buyers of the franchise. While these documents have been introduced as a legal requirement in many countries around the world, there are very few places where these are publicly accessible. In the U.S., however, a few states publish these documents.

Skift Research investigated 34 franchise disclosure documents from the main hotel franchisors in the U.S. to get a better picture of the costs associated with acquiring and maintaining a PMS system.

Exhibit 11: An insight into PMS fees from Franchise Disclosure Documents

We have included the costs of initial purchase and installation of the hardware and software, as well as annual maintenance and support fees where this information was available. Excluded from this are further charges that most chains would charge, including for mandatory training, credit card interfaces, and additional integrations with third-party vendors. The costs could therefore be considerably higher for a hotel, but the cost picture we set out here should give a good indication of the sort of costs hoteliers are looking at when acquiring their PMS.

Exhibit 11 clearly highlights how costs for the installation and service of a PMS are significant. Caution should be exercised, however, when comparing the different systems.

Firstly, prices for hardware are customized based on hotel needs, and franchisors give a price range based on likely needs and likely hotel size. An average Marriott hotel might have 300 bedrooms, while an average Holiday Inn hotel has 150. This will change the hotel’s needs.

Secondly, the features and integrations included in each system are widely differing. Newer players publish their all-inclusive pricing plans on their websites, but as discussed before, these players often rely more on third-party integrations which will add costs to the hotelier which it might not have with more integrated systems like Oracle or Protel.

Integrated system Cloudbeds, which is tailored to small hotels starts at $93 per month per hotel, although for a 25-bedroom hotel the price ranges from $196 to $314 per month. On an annual basis this would mean costs starting from $2,350.

Installation costs for Mews start around $3,000, after which the company charges a monthly fee per room between $8 to $20 per month, which for a 100-bedroom hotel would give annual costs starting at $9,600 plus the initial $3,000 installation fee.

Apaleo promotes self-installation and online training, which is included in its monthly subscription, with plans ranging between $6.50 and $14.50 per month per room. Taking the lower end of that for a 100-room hotel would give annual costs of $7,800, with no extra fees.

While at first glance this seems lower than the cost picture set out in Exhibit 11, in the case of Cloudbeds, it tailors to small properties and could not offer the functionality that an Oracle does, and in the case of Mews or Apaleo, these players rely more heavily on integration partners which comes with additional costs.

The Cost of Integrations

Integrations have traditionally been costly. System vendors that want to integrate with a PMS, and hoteliers that want to use a third-party vendor, have to pay the PMS for the privilege.

Oracle offers different types of integrations, all with their own cost plans. One-way integrations (OWS) are the most simple and cheapest option. Two-way integrations include the HTNG Interface for standardized, low data volume integrations, and the OXI interface (OPERA Exchange Interface) for higher data volume integrations.

The franchise disclosure documents show that an OWS integration costs around $500, while an OXI interface license will cost around $3,000, and on top of that come monthly or annual maintenance fees which can add up to $500 per year.

On top of this comes a plethora of other costs. Consulting fees and certification fees will often be passed on by the third-party vendor to the hotelier. Vendors need to be a Gold member of Oracle’s PartnerNetwork, which comes at an annual fee of $2,995. On-premise integrations further need to be validated at a cost of $1,500 per integration. Cloud integrations also need to be validated, but no program fee is attached to this. An additional consulting fee for the entire process of between $7,000 and $15,000 will also be added.

The cost of integrations is naturally also reliant on the quality of the API. Well-structured open APIs will require less developer time than others. Drawn-out certification processes and the back-and-forth between vendors also adds additional indirect costs that need to be justified. While easy integrations could theoretically be completed in a day, most integrations take much longer. Oracle integrations can take months to finalize. Mukund Mohan of Infor said that the average integration takes between four and six weeks from start to finish, and that the timescale depends on both the PMS and integration partner. The time spent on integrations is a hidden cost that should be taken into consideration.

From the above description, it is clear that integrations with Oracle easily run into the tens of thousands of dollars, but Oracle is not the only one. Protel charges the hotel an activation fee that varies depending on the complexity of the interface, and vendor certification costs of between €3,000 and €5,000. Linda Vallner, vice president business development at Protel, however, said: “We are analyzing how we can make integrations free for the customer. This is a little bit tricky because nothing is free, all vendors still need to pay salaries, so we are working with different vendors to figure out together how we can make the end result as cheap as possible for the hotel.”

This change is again forced by newer players. In contrast to the legacy players, Mews and Apaleo do not charge vendors or hoteliers for integrations.

Oracle is also changing its business model, and with its cloud product is taking a different track. Laura Calin of Oracle said: “We don’t want hotels to feel limited on what other innovative solutions they can integrate into our platform, both from a technology perspective as well as cost. … Apart from offering full REST API coverage … we are also reducing and in some cases eliminating the implementation fees which were a major pain point.”

The costs associated with connecting to especially legacy systems has a real impact on the business operations of its integration partners. The cost of integration is often multiple times higher than the cost of the actual service hotels are trying to connect to. Erik Tengen noted that Oaky has “to make big sacrifices on pricing” to convince hoteliers to start using them.

Revenue management start-up Pace is forced to sign its customers on long-term contracts to ensure its investment in integrations is not lost, but this “goes against the philosophy we would like to drive, of open connectivity and proof of performance as the reason for customers to stay with a platform,” according to Pace’s Lukas Hughes, with the company foreseeing a future where hoteliers are free to test systems and switch more easily.

The Cost of Marketplaces and Middleware

We have discussed the costs associated with PMS installation and maintenance, as well as costs for integrations. A final point of interest are the costs associated with marketplace and middleware providers.

Marketplaces will generally be free to use for hoteliers, with costs of maintaining the marketplace included in the PMS subscription costs. Conversely, for tech vendors there will be costs attached to being on the marketplace. Oracle and Protel put their integration partners on their marketplaces, but as discussed before, charge for integrations in the first place.

Mews and Apaleo do not charge for the initial integration. Mews, however, is currently charging a 10 to 15% commission to the tech vendor on any sale this vendor makes through the marketplace. Apaleo does not presently charge any commission, but has indicated that it is likely to start doing so once more hotels and tech vendors start using it.

With regards to middleware providers, Impala charges a flat fee of $30 per connected hotel to tech vendors. Ben Stephenson said that the company gets very little pushback on this pricing, as the sector understands the value of its proposition. “If you look at any one of the vendors that wants to use the traditional OPERA OXI interfaces, they’re going to be charged in the tens of thousands for certification … so our costs compared to what they are paying at the moment is really low. And actually, what is more important for these tech vendors is that even once they’ve paid the PMS tolls, the hotel that they are connecting to is also going to have to pay for API access,” said Stephenson.

With Open APIs and PMS providers that increasingly offer free integrations, the middleware business might become more squeezed. Stephenson does not seem worried: “We actually get customers that want to access Mews or Clock even though they can get it for free by going to Mews or Clock. They don’t want to maintain another set of integrations, and $30 per month is much less than having an entire integration team to do this.”

The Future of the PMS

In this final section of the report we will pull together all that has been discussed before, and provide an outlook and some predictions for the future of the PMS.

The PMS Will Lose Its Central Role

Yes, the PMS will become less central in the tech stack. Let’s clarify this statement from the outset. The PMS will remain a vital part of the hotel tech stack. There is no question, we believe, that the PMS will continue to be the main operational system in all hotels, and possibly the only system used by many smaller hotels.

However, for those larger hotels that have multiple systems in their tech stack, it is likely that the PMS will become a more focused, stripped back system. The data collected in the PMS remains integral to the operation of any hotel, and there currently is no other system that could take on this function, but the data collected in the PMS will become easier available and better dispersed amongst other specialized systems which can utilize it better.

Talk of the CRS or the CRM becoming the central system, as the PMS is today, seems unlikely to transpire. The CRS is important, but mostly only for multi-property hotels. The CRM has grown in importance with the increased focus on the entire guest journey, but today it still relies heavily on reservation and guest profile data from the PMS, rather than the other way around.

Instead, middleware players can take on a more central role in the tech stack, like is already the case with Ireckonu for hotel owner-operator CitizenM, or a service bus like Protel I/O. This middleware layer is better equipped to deal with data streams and storage. It is ideally positioned to connect different systems, and its sole focus is on integrations and maintaining connections.

Having a middleware layer will mean that switching a PMS has less far reaching consequences than it does today, because it doesn’t involve changing all integrations and costs associated with that. Theoretically, middleware players could also make switching PMSs easier as the middleware provider could pull booking data from one PMS and input it into another, eliminating one of the major barriers to switching PMS vendors.

When asked about this, Ben Stephenson of Impala said: “We’re very focused on being the pipe that PMS data flows through to other applications and hardware. If someone wants to build great technology on top of that pipe that helps hotels switch then that sounds to me like a fantastic use case. It won’t be something that we build ourselves.”

One drawback of middleware providers is that they add another vendor to deal with, as well as the price tag that comes with it. While in the short-term this is definitely an extremely capable solution to push the tech sector forward, in the long run other attempts might be made to cut out the middleware layer.

A more direct integrated approach between different systems has been tried before in many guises, but this has so far generally failed. One of the best known cases is Pegasus’ attempt to produce its Next Generation Hospitality Engine in the early 2000s, which would have included PMS, CRS, CRM and RMS in a single product. It had 10 major hotel chains on board, but could not get off the ground.

The idea makes sense though. There is much overlap between data captured in the PMS and other systems like the CRS and CRM. This means that at present there is a lot of duplication of effort, bloated costs for hotels, and an unhealthy need for close integrations.

Different players have toyed with the idea of an integrated PMS/CRS solution for years, looking to sell the system as a single solution, although generally continuing to develop the systems separately. Laura Calin of Oracle said the company is working on a “single system of record for all pricing and availability capabilities, to enable connecting distribution and enterprise sales channels directly to the source,” and with that “the replication of data between the PMS and CRS [would be] a thing of the past.”

AC Project, a subsidiary of Shiji Group (which has been on a buying spree to acquire a full suite of hospitality technology), is rumored to be building an integrated CRS and PMS system, with the CRS at its core. Best Western acquired AutoClerk to work on an integrated CRS and PMS, while IHG has invested heavily in IHG Concerto where it attempts to integrate different systems into a single user interface.

Iain Saxton of Amadeus said: “PMS is reservations, rates, inventories, pricing, shopping. On top of that it is housekeeping, finance, folio, accounts receivable. When you look at that first half of the list, they are actually functions duplicated in a CRS.” Amadeus is therefore “very much structured to build upon the concept that PMS and distribution are the same approach.”

More integrated PMS vendors would argue similarly. Krasimir Trapchev, CEO of Clock PMS, an integrated PMS vendor with a lot of functionality in its core offering, believes that guest engagement, payment processing, and distribution automation should ideally be core features of the PMS, although he agrees that this can also be achieved by third-party integrations, while noting that “integrations do not always remove friction.”

Steve Bliekendaal of Clock gave the following example: “Somebody calls up a hotel, and says: ‘Can I have a hotel room for tonight?’ and the hotel responds with a relevant rate that they have on record. The person then says: ‘I’ve seen you online for less.’ At many hotels around the world today that causes a mild sense of panic, because they have absolutely no idea what rate is being displayed on Booking.com or Expedia. If you integrate the distribution and channel management into the PMS you remove this gap.”

While for smaller and independent hotels the integrated PMS can offer a solution, the fact remains that there are many large and chained hotels that need a fuller suite of systems to run their hotels. One vendor can never innovate at the same rate that specialized PMS vendors, CRM vendors, and CRS vendors could do separately. Harnessing the innovation potential of these different players into an integrated platform will, therefore, remain the best option for these hotels.

We will not hold our breath for a successful, fully integrated suite of tech systems. Instead, for now the middleware providers have the upper hand to provide a roadmap for the coming years, with the PMS likely losing some of its influence. PMS marketplaces might put up a fight, but on paper SiteMinder’s Exchange or Impala’s universal API are better placed to lead this shift than Oracle, Mews, or Apaleo with their marketplaces. This is not to say, of course, that what makes most sense will actually happen. Hoteliers have invested heavily in their PMS for years and many are attached to their PMS like no other piece of hotel tech, so the marketplace offering might be exactly what takes off in the coming years. If only we had a crystal ball.

Marketplaces Will Incubate New Tech

In many ways we are rooting for marketplaces to succeed, because we are already starting to see the power of these platforms to incubate new technology. There are billion dollar companies which have grown off the success of the biggest marketplace out there: Salesforce. DocuSign, for example, gained great prominence after a partnership with Salesforce, and was valued at $4.5 billion when it went public in 2018.

Dai Williams, chief growth officer at SiteMinder is seeing synergies with the hotel tech marketplaces. “You will get a bunch of business applications like Oaky that really latch onto a few of these platforms and really grow with them, rather than have to create their own ecosystem.”

“We are on every single marketplace there is, including probably a few you haven’t heard of yet,” said Oaky co-founder Erik Tengen. “It is a really interesting way for a company like us to specifically target the long tail customer, where the MRR (monthly recurring revenue) is a bit lower.” Oaky started selling its upselling tool in 2017 and has grown rapidly to service around 1,500 hotels today.

Pace is another example. The revenue management company, started in 2016, is taking a different approach than its main competitors by focusing heavily on hotel reservations data to run their analysis, instead of market stats and the hotel’s competitive set. Matthijs Welle of Mews notes how Pace benefited from the Mews Marketplace, and vice versa. “Pace really started as a platform on top of Mews in the early days, and they have now integrated with Protel and other [PMSs]. We need to support them because they are doing something really great for us. They are creating stability across our client base, and they make us look really good.”

Marketplaces can provide young startups with an affordable platform to market their product. The offering of free trials and simple integrations of these new products will convince hoteliers to try new technology. We have to remember that tech vendors will continue to operate within the confines of the current hospitality business model with three major stakeholders all with their own priorities when it comes to tech procurement, but marketplaces are definitely a good way to give oxygen to new and innovative tech solutions.

Hoteliers Will Become More Like Retailers

PMSs are relatively rigid systems. Case in point is the fact that most only allow the selling of “room nights”, which would be a 20-hour period starting around 2pm and ending the next day around 10am. There is some flexibility with early check-ins or late check outs, but there are no guarantees as this is generally not a bookable feature.

A second limitation of many PMSs is the focus on room types. Iain Saxton of Amadeus argues that PMS providers forced a shift early on in hotel room distribution. Distribution went from unique room specifications to room types, simply to accommodate different booking channels. When customers book a hotel room, they tend to pick from a few different types of rooms, rather than choosing the actual room.

This is slowly starting to change. Hilton was the first hotel company to allow travelers to book a specific room, just as airlines allow travelers to book a specific seat. Marriott and IHG — the latter in cooperation with Amadeus — have since gone a step further and added attribute-based shopping features to their reservation systems, so that travelers can book a specific room based on preferred features such as the view, the type of bed, floor etc.

Keith Barr, the CEO of IHG, said during the Q2 2019 earnings call: “The development behind attribute inventory and pricing is well underway, and we expect to pilot this by the end of the year.” The first iteration of this is already visible on IHG’s website with tabs for rooms with different bed setups. The next move will be to add another attribute, like for example room view or floor. The company will likely test this for the foreseeable future to establish the best attributes to use, and how many different attributes to offer.

Exhibit 12: Tabs show IHG’s first efforts into attribute-based selling

Expedia and Booking.com are also said to be interested and are looking into the concept. Patrick van der Wardt of Amadeus said that the latter sees it as a way to “counter the direct selling approach by the hotels”.

Attribute-based pricing is a step in the right direction when it concerns consumer choice. Take another example of the limitations of hotel selling tactics today. Many hotels currently create packages, where they bundle a stay with, say, a restaurant meal, a spa treatment, and a bottle of wine in the room. But this again is a rigid system, where consumers are limited in their choice to a few specific packages. This is far removed from the shopping experience on Amazon or in a physical store, where consumers can browse the isles and buy a unique combination of products.

This rigidity is largely down to the technology that is available to hoteliers, and the PMS is one of the worst offenders. As technology improves, we look forward to seeing some truly innovative solutions that allow hoteliers to think more like retailers, and allow consumers to book the exact experience they are looking for, rather than being limited by room nights, room types, or pre-determined packages.

Tech Savvy Customers and Employees Will Drive Innovation

The hospitality industry needs to step up to cater to consumer demands, and not only in terms of offering more flexible booking options as discussed above.

“Guests’ expectations these days are not set just by their hotel experiences, they are set by their experiences throughout their daily lives. When Google can figure out where I parked my car without me telling it, people’s expectations are very high in terms of how technology is affecting their day-to-day lives. … Why wouldn’t they expect the same thing from their hotel experience?” said David Sjolander of HTNG.

We see forward-thinking PMSs becoming more mobile, not just optimized for a Windows 98 desktop behind a reception desk, but with a user interface that can allow hotels to check people in on laptops, tablets, mobile phones, or kiosks. Or if the guest is so inclined, allows the guest to use self-service features.

And it is not just consumer expectations that push the sector forward. As Sjolander remarked: “We see a lot with employees who come to work in a hotel for the first time and they can’t believe how antiquated our technology is. Their job satisfaction depends on that ease of use.”

Why type on a keyboard or phone the front desk, when you have speech recognition software that allows housekeepers to tell their watch or mobile phone when a room is cleaned?

The times that hotels hired a night manager whose main function was to close the books for the day and run a myriad of manual reports, a process known as the night audit, should surely be consigned to the dustbin of history. There is enough computing power on offer today to completely automate this process.

Hotels will struggle to attract the best talent and tech-savvy consumers if their tech stack is not up to scratch. PMS vendors need to support hoteliers by making sure their solutions stay on top of the trends and harness the latest technologies, and not just those that stem from the hotel industry itself, but from all areas of consumers’ and employees’ daily lives.

Question Marks over the Future of Oracle

And finally, for a bit of wild speculation we turn to the market leader in the PMS landscape. Oracle bought Micros Systems and its Fidelio and OPERA systems in 2014 for $4.6 billion. It has benefited from its market leading position, and as switching PMSs is hard, it is a nice position to be in.

But what will be the next steps? Through its actions, Oracle is already showing that it sees its PMS products as a good way into selling its other products into the hospitality market. Oracle’s Laura Calin said they are currently building advanced integrations with its NetSuite ERP solution, and advanced enterprise resource planning solution, and the CX cloud, its customer experience suite of solutions.

As competition heats up, though, Oracle will need to continue investing in its hospitality solutions. It is investing heavily in cloud technology, which has resulted in its new Cloud PMS product, but this product doesn’t seem as robust as its on-premise offering, and might not be able to compete with players like Mews unless continued investment is secured.

For now OPERA is a cash cow for Oracle. In the future, as competition heats up, the company might need to decide whether to continue pumping considerable money in, acquire its main competition, or sell off its Oracle Hospitality arm.

Conclusions

For too long, the PMS space has been the stale corner of the hotel tech ecosystem. Legacy PMSs have come in for a lot of criticism on their lack of innovation, but it is unfair to lay all the blame at their door. These systems are operating within the confines of the hotel industry ownership model, as well as with hotel technology that could be decades old.

Having said that, PMSs have definitely contributed to the current situation, by turning integrations into a revenue stream, and making switching PMSs one of the hardest things in the business.

The hotel landscape is extremely diverse, with each hotel having its own unique needs, so different PMS vendors going about their business in different ways will always be necessary. There is no one-size-fits-all. It is likely that a select group of international players will grow their market share over the coming years, but regional players will remain relevant.

In the past decade we have seen major changes in technology, which have ushered in a new era of PMS infrastructure, functionality, and vendor collaboration. Cloud computing, open API connectivity, marketplaces, and middleware layers are shaking up the sector. PMSs now find themselves in a position where they can start offering hoteliers a system that truly works for them, allowing for a mobile-first and less rigid approach.

The HTNG standards need an upgrade. The standards have clearly done some good, but they are not working today and many players are bypassing them. While open APIs are a huge step forward, standardized and verified open APIs would be even better and true harbingers of innovation.

Legacy PMS vendors are currently playing catch-up, but have the financial backing to remain in a strong position. There is finally, however, an opportunity for new players to enter and disrupt the sector. This can only be a good thing for the PMS and hotel tech space in the long run.


Further Reading