The State of the Hotel Tech Stack 2018

by Rebecca Stone + Skift Team - Jun 2018

Skift Research Take

In today’s environment, hoteliers can no longer sit idly by, complacent with the tech systems and hardware that they have been using for decades. Those that focus on tech in terms of the overall customer journey will not only delight guests, but also outpace competitors in sales and ROI.

Report Overview

Categories of hotel technology are blending together while hoteliers are still using more tech systems than they know what to do with. Nevertheless, a lack of integration and data fragmentation remain the biggest challenges for the industry. What should be done to overcome the tech challenges and make the right tech investments? Hoteliers should update their technology roadmap to focus on the customer journey — from planning, searching, and booking, to the actual stay at the hotel, and through the post-stay experience. They need to think about technology in terms of how it can enhance the ultimate business goal: provide a wonderful customer experience for guests.

What You'll Learn From This Report

  • The hotel tech stack mapped by the customer journey
  • Views on hotel technology from Skift Research’s Tech Vendor, Online Travel Agency (OTA), and Hotel Company Focus Groups
  • Top challenges and areas for improvement in hotel technology
  • Key reasons why the hotel industry is behind from a tech standpoint
  • Estimated market share for major property management systems
  • Hoteliers’ financial budgets and objectives for hotel technology
  • Future expectations for the mapping of the hotel tech stack
  • Practitioner views on data privacy and security
  • Investor areas of focus in the hotel tech space

Executives Interviewed

  • Andrew Arthurs, Chief Information Officer and Senior Vice President, Two Roads Hospitality
  • Michael Bennett, Senior Vice President, Global Marketing and Business Development, Cendyn
  • Marco Benvenuti, Co-Founder, Chief Marketing and Strategy Officer, Duetto
  • Pierre Boettner, Founder and Chief Executive Officer, hospitalityPulse
  • Jeff Bzdawka, Senior Vice President of Global Hotel Technology, Hyatt
  • Susan Spinney Corlett, Vice President, Owner Relations, Expedia Group
  • Mike Ford, Managing Director and Founder, SiteMinder
  • Jos Schaap, Founder and Chief Executive Officer, StayNTouch
  • Brian Kirkland, Chief Technology Officer, Choice Hotels International
  • Daniel Krisch, Senior Director, Oracle Hospitality
  • Terri Miller, Chief Executive Officer and Co-Founder, Concilio Labs
  • Pablo O'Brien, Vice President, Marketing, DerbySoft
  • Toni Portmann, Chief Executive Officer and Executive Chairman of the Board, DHISCO
  • Connie Rheams, Vice President, Hospitality, Beekeeper
  • Jeff Robertson, Vice President of Marketing, NAVIS
  • Geoff Ryskamp, Global Head - Hospitality, Travel and Leisure Practice, Medallia
  • Scott Schaedle, Founder and Chief Executive Officer, Quore
  • Alex Shashou, Co-Founder and President, ALICE
  • Max Starkov, Founder and Director, HEBS Digital
  • Maximilian Waldmann, Founder and Chief Executive Officer, Conichi
  • Scott Watson, Executive Vice President, Sales and Marketing, M3
  • Glenn Wirick, Executive Vice President, Sales and Marketing, Pegasus
  • Anonymous, Ace Hotel

Executive Summary

Categories of hotel tech are blending together as tech providers such as Oracle and Sabre attempt to be all-in-one solutions offering the most bang for the hotelier of today’s buck. At the same time, hotel brands and online travel agencies are also coming out with solutions daily to offer the most value to hotel owners.

Nevertheless, a lack of integration and data fragmentation remain the biggest challenges in the industry. We believe this is occurring for several reasons. For one, the hospitality industry is, first and foremost, a service industry, not a tech industry. Branded properties are using legacy and outdated systems based on agreements made, in some cases, 30 years ago. Hotel owners also have so much choice when it comes to tech that they end up working with 20 different vendors. In addition, budgets are tight and guest-facing issues like renovations generally take priority. Finally, there seems to be an element of general complacency with systems that work just adequately, but still aren’t ideal.

What should hoteliers do to overcome tech challenges and make the right tech investments? Hoteliers should update their technology roadmaps to focus on the customer journey — from planning, searching, and booking, to the actual stay at the hotel, and through the post-stay experience. They need to think about technology in terms of how it can enhance the ultimate business goal: provide a wonderful customer experience for guests.

As part of our research for this report, we conducted numerous interviews with key industry stakeholders — representatives from tech vendors and online travel agencies (OTAs) to hotel brands, hoteliers, and hotel management companies. We have bucketed these interviews into two focus groups — our “Tech Vendor Focus Group,” which includes 18 tech vendors and one online travel agency (OTA), and our “Hotel Company Focus Group,” which includes two major hotel brands, one independent hotelier, and one hotel management company.

Throughout this report, we provide their answers to key questions with regard to hotel technology. The number of responses in each chart provided may vary based on interviewees who gave multiple responses to a given a question. Full details and a summary of our focus groups members’ answers to key questions are provided in the appendix of this report, “Tech Vendor and Hotel Company Focus Groups Answers to Key Questions Regarding the Hotel Tech Stack.”

Current State of the Hotel Tech Stack

Four Categories of the Hotel Tech Stack and the PMS

The current hotel technology stack falls into four major buckets, with the key central system being the property management systems (PMSs) that tie everything together.

1. Sales, Distribution, and Revenue Management.This bucket relates to technologies dealing with booking rooms and group events, distribution, setting room rates, and analyzing revenues. This would include anything from booking engines that help customers buy rooms online; central reservation systems (CRSs) to manage all room rates, available inventory, and reservations; and channel managers to handle bookings from all different distribution channels. Also included is revenue management software (RMS) and market analytics and business intelligence tools which can be used to help analyze and optimize rates in order to maximize revenue and return-on-investment.

2. Marketing. This bucket includes all technology related to marketing and providing general accessibility to potential customers. This includes tech such as websites and mobile apps developed to help market a specific property, and also includes content management. Customer relationship management (CRM) software falls in this category, which is used to store customer information and data to facilitate personalized experiences and loyalty building. Finally, this includes traditional marketing tools such as digital marketing software, merchandising and upselling platforms, loyalty and rewards programs, as well as any marketing analytics tools.

3. Guest-Facing Tech. This includes guest messaging and concierge platforms as well as guest room entertainment services such as TVs that connect to the guest’s Netflix account, in-room Amazon Alexas as voice assistants, and smart alarm clocks that can connect to all of the guest’s devices. In addition, this would include guest review management systems that guests can use to provide immediate feedback.

4. Operations and Administrative. Finally, an important category is anything to do with operating the hotel. This would include finance and accounting, inventory and procurement planning, payroll, labor planning, facilities and IT, event planning and management software, and food, beverage, and spa software.

Central to Everything: Property Management Systems (PMSs). This is the key system to which all other systems should be connected, handling everything from check in to check out, while also managing housekeeping and labor management, distribution and revenue management. The PMS should also understand current demand and forecast future demand. The PMS ties everything together and should integrate with everything to provide a smooth, seamless hotel operation.

All categories are interconnected and should work with each other.

Traditional Product Categories are Merging

You may have seen images of complex webs attempting to map out the entire hotel tech stack. These schemes attempt to visualize a complex ecosystem showing how each technology interacts — or doesn’t interact — with the others.

Throughout our interviews for this report, something about these visualizations became apparent: So many of the technologies available today fall into so many of the different categories, that many of the categories of hotel technology are blending together. For example, a tech vendor that does marketing and upselling and merchandising may also do guest messaging and concierge services. A revenue management system may also include a channel manager and provide market analytics and business intelligence. As Mike Ford of SiteMinder explained, certain individual “categories are no longer relevant for the simple reason that hotel technology platforms like SiteMinder today span a number of traditional ‘categories.’”

In addition, many of the large tech players and major hotel brands are increasing their tech offerings to offer the most value to individual hoteliers.

Sabre doubled down on hotel tech in April 2018 by announcing a new property management system to complement its enterprise software solutions for hoteliers, which include its central reservation system and booking engine. The move helps the company compete with Oracle, the major market share holder in the hotel tech space, and helps it lessen its dependence on the airline industry.

The online travel agencies (OTAs) are also becoming increasingly involved with hotel operations. Expedia offers a number of tools for revenue management, marketing, and operations through its Expedia Partner Central, Rev+, and Travel Ads Direct programs. It also offers in-stay experience tech through its $26 million investment in ALICE and provides Guest Review Insights. Susan Spinney Corlett, vice president, owner relations, for Expedia Group noted that the company has “invested in technology to the tune of $2B across the past three years.” TripAdvisor offers marketing and analytics tools for hotels via its Business Advantage and its recently launched Sponsored Placements.

Hotel brands are realizing that, in order to be competitive, they have to invest in and offer better, more seamless and integrated, technological capabilities for their franchisees and owners. Choice Hotels developed an entirely new, cloud-based, global reservation system, choiceEDGE — the first from a hotel company in over three decades. Three years ago, Wyndham Hotels began to change its central reservation system to Sabre and now has 17 of its brands on the platform with three more expected in June 2018. In addition, the company is focused on adopting cloud-based systems. Scott Strickland, chief information officer for Wyndham Hotels and Resorts highlighted the benefits on a May 2018 special corporate call following the separation from Wyndham’s timeshare and vacation rental business: “Once you’re [a franchisee] on the cloud, you get monthly updates, or quarterly updates, depending on the partner … You also receive one of the best security infrastructures in the business,” Strickland said. “… and, finally, it’s cheaper. Our central reservation platform costs us 62% less now that it’s in the cloud than it did when we were maintaining it internally.”

Yet, There is Still Dire Need for Integration

At the same time, many hoteliers are still using more technology systems than they know what to do with — some have more than 20 different types of technology in place. “In fact, we often see tech and data overload within many companies that feel the need to outperform or outsmart their competition,” Scott Watson of M3 said. “Therefore, it becomes much less about increasing the ‘types’ or ‘categories’ of technology that the industry uses, and more about ensuring that the proper tools are in place to congregate and report on the desired data in an easily accessible and actionable manner. Technology for the sake of technology is simply a money pit if the industry cannot, for lack of better words, do something with it.”

This tech overload is further complicated by many technologies being siloed, with the revenue management department not necessarily always working in tandem with the marketing department, for instance. While both may have key data that could help the other make critical business decisions, because their technologies don’t “talk to each other,” or aren’t integrated, they aren’t even able to share data with each other.

“The typical hotel uses a myriad of vendors that do not talk to each other, and in many cases do not even know each other, ” Max Starkov of HEBS Digital explained. “Recently we encountered a boutique hotel brand that was using 28 different vendors for their digital marketing! The property’s teams … operate in isolation of each other and each team has its own technology tools, databases, vendors, and more.”

Lack of Integration and Data Fragmentation are the Biggest Challenges When it Comes to Hotel Technology: Focus Group Views

We asked our focus groups, “What do you think are the biggest challenges the hospitality industry faces from a tech standpoint?”

The majority of our interviewees noted a lack of integration and/or corresponding data fragmentation as one of the biggest challenges the hospitality industry faces. The second most common response was simply the usage of antiquated or outdated systems.

Both hoteliers and tech vendors are responsible for this dire issue of integration. From the hoteliers’ side, the way the tech ecosystem is set up is often at fault. With various teams at the property siloed and using different vendors, there is a lack of communication amongst teams as well as a lack of sharing data.

From the tech vendors’ side, many vendors don’t have the capacity for integration. As much as hoteliers desire to have simpler systems or all-in-one services for instance, they are hard to find and the products tend to result in subpar or average performance altogether. Property management in particular “is a tough category because one vendor controls most of the market share. There are some up-and-coming PMS companies, but they don’t offer the full range of interfaces that are used at the hotels,” Ace Hotel told Skift. Some tech vendors’ capabilities are so specific that they cannot connect with other vendors’ interfaces, or they can, but only with significant time and expense.

The resulting data fragmentation due to this lack of tech integration is a giant inhibitor to data-driven actions that are key to delivering meaningful guest services and driving sales. Hoteliers are using so many different technologies that it’s “challenging, at any given time, to more quickly and easily access the insights data provides,” Susan Spinney Corlett of Expedia Group said.

It currently requires “a mix of corporate proprietary tools and smaller apps to achieve a true customer 360 view …” Daniel Krisch of Oracle explained. “The industry is still in the early-adopter phase for data science.”

Budgets for Technology are Tight, but are Increasing

When it comes to tech budgets, a survey by Hospitality Technology magazine found that hoteliers spent 4% of total revenue on tech in 2017 on average. In 2017, half of hoteliers spent less than 3% of revenues, and 16% spent 6% or more.

While budgets for technology are low, they are increasing. Average budgets went from 3.5% in 2016 to 4% in 2017. In 2016, only 10% of hoteliers indicated they spent 6% of revenues or more, and 51% spent less than 3%.

In addition, the majority of hoteliers (61%) indicated that they expect to spend more on technology in the next year compared to the year before. This proportion of hoteliers has been increasing over the past two years.

Hoteliers will continue to invest more in tech adoption as they increasingly realize the central role technology plays in staying competitive and growing revenue. SiteMinder’s  Global Hotel Business Index 2018 found that Hotel Technology is one of the top three priorities when it comes to distribution of budget in 2018, just behind hotel renovations and digital marketing. “We’re seeing hoteliers realizing the importance of investing in technology and increasing their tech budgets,” Scott Schaedle of Quore said.

Nevertheless, the rate ofa budget increases isn’t keeping up with the times. “Budgets are not increasing at the rate that they should [in order] to close the gap and move forward,” Marco Benvenuti of Duetto noted.

The same Hospitality Technology magazine study finds the biggest bucket of expected spend in 2018 will be on software, and the largest bucket of software spend will be on property management systems.

When it comes to top objectives for technology in the year to come, hoteliers are focused on improving customer engagement and driving loyalty, improving analytics, and enhancing payment and data security. In our view, budgets should increasingly be more focused on moving legacy platforms to the cloud and on making sure data privacy and security is ensured.

Much Work is Needed When it Comes to Hotel Technologies: Focus Group Views

We asked our focus groups, “What category or type of technology do you think the hospitality industry is most behind in?” We saw three buckets emerge in the responses:

A. Essentially everything needs an overhaul.

The most commonly noted response from interviewees was that the entire hotel tech stack is behind relative to other industries. Others identified key, traditional technological systems, such as the PMS, Central Reservation System, and Customer Relationship Management (CRM).

B. The industry needs to catch up with the times.

Respondents identified that current trends in general technology today — Cloud offerings and Software-as-a-Service, technology to support payments, privacy and security — are all behind. With society moving increasingly mobile (eMarketer forecasts adults will spend more time per day on mobile than watching TV by 2019.), digital capabilities are another area in which hotels are lagging. In addition, a couple individuals pointed out that while next generation technology exists (i.e. artificial intelligence, machine learning, voice capabilities, virtual reality, robotics, and more), the application or usage of these technologies will likely not reach full potential for some time.

C. It’s not about the hotel tech stack.

One interesting point raised by some respondents is that it isn’t really about the hotel tech itself. In fact, there has been a lot of innovation and creativity as of late, in areas such as revenue management, guest-facing capabilities, and more. Scott Watson of M3 noted, “We, at M3, do not feel that the hospitality industry is really ‘behind’ in any area of technology. You will always find companies hesitant to upgrade or adapt to a new platform, but that is their choice to make; the technology is there, should they choose to implement it.”

Key Reasons Why the Industry has yet to Catch Up When it Comes to Tech

First and Foremost, the Hospitality Industry is a Service Industry.

Companies in the hospitality industry didn’t start as tech companies like some others such as Facebook, Google, and Amazon. As a result, tech has been applied to this space in an as-needed, ad-hoc, basis.

“The problem is that this industry has been managed by service operators who understand incredibly well the service side of things … On the other side, if you look at the profile of the CEOs of the big brands or even of the middle ones, you have real estate guys who are really good at the real estate side of the equation.” Marco Benvenuti of Duetto highlighted. “All the technology, marketing, e-commerce stuff that has become incredibly important in the past 20 years … has been completely overlooked because in the end it’s not the strength of the people, and the industry is sort of lacking a lot of that knowledge.”

This lack of tech competence and mindset runs headlong into tech development, which is nimble and fast changing by nature. More than half of hoteliers surveyed by SiteMinder in 2018 are still uncomfortable with technology, saying “I use technology because I have to” or “Technology is still a scary concept to me,” rather than recognizing the considerable enhancements and efficiencies that can be achieved by use of technology in appropriate ways.

The Structure of the Industry Doesn’t Lend Well to Having Fully Integrated and Standardized Tech.

Unlike other industries, such as the airline industry, which are more commoditized and standardized, the hospitality industry is very fragmented. While the industry in the United States is close to 70% branded, the major brands work with tons of different property managers and owners. In addition, “the rest of the world is predominantly independent [and] family-run,” Max Waldmann of Conichi noted.

Another complication relates to differences among properties. Every hotel is in a different location and offers a slightly different service to different types of people.

When it comes to choosing technology at a branded property, the hotel brand will often dictate certain technologies that an owner or manager has to use, but not all. “Our brand standards require certain technology solutions or specs to ensure consistency and quality across the portfolio,” Jeff Bzdawka of Hyatt explained.

“Typically, the PMS is one of those non-negotiable things. Granted, the large hotel companies have a lot of [different] PMSs they work with,” Geoff Ryskamp of Medallia noted.

Nevertheless, there is still some flexibility in choosing technologies outside of the brand-mandated ones. Bzdawka indicated that, “on average, a full-service hotel typically works with 15 to 20 technology vendors, while a select-service hotel works with 10 to 15.”

Furthermore, many of those brand-stipulated technologies that are being used were decided upon in management and franchise agreements made 30 to 40 years ago. The second most commonly noted challenge for the hospitality industry from a tech standpoint by our focus groups was the usage of antiquated systems or slow adoption of new technology.

As a result, a lot of different people are making a lot of different choices about what technology they use in their hotels, and many times not all of these technologies talk to each other or work together.

General Complacency With Legacy Systems Has Resulted in Technological Inertia.

In general, the industry has been complacent with legacy systems, exhibiting the mentality, “if it ain’t broke, don’t fix it.”

Terri Miller of Concilio Labs explained, “Some [hoteliers] are comfortable with complacency — it’s the way they’ve done it for years despite any operational inefficiency,” Terri Miller of Concilio Labs explained. Brian Kirkland of Choice Hotels echoed this sentiment: “A thematic thing, at least from my own observations, it seems like it’s [just] been comfortable.”

Some don’t even think investing in technology is critically important to the success of their properties in comparison to other investment areas. The SiteMinder study found hoteliers believe investing in new technology will only bring them some success in 2018, whereas, categories such as “Renovating your property,” “Prioritizing guest personalization and experience,” and “Strengthening your brand image” would bring them the most success.

Years and years of using the same legacy systems has resulted in considerable market shares for some of the major tech vendors in the hotel space, particularly when it comes to property management and operations. “A PMS replacement is a significant change management exercise and a disruption to property operations.” Andrew Arthurs of Two Roads Hospitality explained. “Properties are reluctant to take on the costs and risks of PMS replacement and they often will deploy new systems around the PMS to make up for gaps in legacy PMS functionality.”

Large market shares have also resulted in complacency on the vendor front. “Larger conglomerate PMS and CRS organizations are slower to innovate” Miller said. “They don’t deem it necessary to remain competitive due to the number of customers in their current portfolio.”

Notes: SiteMinder’s Global Hotel Business Index 2018 surveyed more than 550 global hoteliers from both independents and groups to “find out how they think about and approach challenges and opportunities in 2018 and beyond.” Market share estimates for property management software providers are based on the number of customers Capterra indicated for the 20 players included in their “The Top 20 Most Popular Hospitality Property Management Software.“

For all of these reasons, hotels have found it easier to tack on technological fixes in various places rather than develop a brand new tech ecosystem that is compatible with their overall business strategy. This is why you see so much data fragmentation and a lack of integration when it comes to hotel tech.

What the Industry Does Well in Terms of Tech: Focus Group Views

We asked our focus group what the hospitality industry does well in terms of tech. The answers generally fell into three buckets:

1. Booking capabilities and distribution.

Respondents mentioned different aspects of booking and distribution as areas at which the industry does well. Some specified traditional booking capabilities such as Global Distribution Systems (GDS), while others noted metasearch and online travel agencies (OTAs). We note that this appears to be recognizing that some of the booking and distribution companies that have come into play seem to be the ones who are doing well, and not necessarily the hotel’s technology, specifically. Nevertheless, when it comes to bookability, Max Waldman of Conichi explained, “if you think about booking a doctor’s appointment … you have to call and schedule an appointment, [and] It’s just a huge pain. If you look at hotels, OBEs [Online Booking Engines] and OBTs [Online Booking Tools] are functioning in more or less seamless manner.”

2. Traditional tech such as property management and revenue management.

Respondents seemed to think that the industry has mastered some traditional capabilities, despite also feeling like some of these systems are antiquated and outdated. Nevertheless, several noted that the industry has made leaps and bounds when it comes to revenue optimization just in the past few years. Connie Rheams of Beekeeper highlighted that the industry has “come a long way in terms of revenue optimization with revenue management software.”

3. Service and guest-facing technology.

Several respondents pointed out that some of the new solutions of guest-facing tech coming into play are very good. Jos Schaap of StayNTouch noted, “hospitality software vendors are catching up nicely. There are a good number of SaaS solutions with open APIs that have mobile capabilities and enable hotels to be competitive in today’s market (PMS, RMS, CRS, POS etc.).” Terri Miller of Concilio Labs echoed, “I don’t believe there’s a specific industry category that’s doing well or better than others. That said, I believe there are companies and their technology we should take note and follow in their progress. A few that quickly come to mind are ​ALICE​, ReviewPro​, ​Proxce​, and … our newest partner ​Rainmaker​.”

Future Expectations for the Hotel Tech Stack

Despite all the challenges, we believe great strides are being made and will continue to be made to enhance the guest experience, increase personalization, and drive operational efficiencies.

Like Scott Schaedle of Quore said, “The nature of the hotel business has allowed for the industry to fall behind when it comes to technology as a whole. The good news is that just in the past few years, the industry has recognized how far behind it is, and we’re seeing massive efforts being made to be a tech leader in this space.”

Hotel Tech Should Be Thought of in Terms of the Customer Journey

The hotel tech stack should be organized and thought of in terms of the hotel’s core business strategy: providing an overall seamless experience for the hotel guest.

What this means is thinking about what each technology’s role is in every step of the customer journey and how that technology should work with other technologies along the way so that the overall experience feels smooth and enjoyable to the hotel guest.

The overall mapping of the tech ecosystem will increasingly look more integrated, with more categories consolidating and connecting with each other. This will be done via a consolidation of core capabilities, an ongoing move to cloud and SaaS-based systems, and a recognition that all departments at properties have to work together to make the customer journey as seamless as possible. We expect this will likely translate into a few major players running the core systems aspects of properties, but also leaving room for ongoing innovation and creativity as niche tech players develop capabilities that are more ‘plug-and-play’ — meaning they can be easily incorporated into overall systems — making it easier for hoteliers to choose the best technologies without worrying about how the new systems will communicate and work with their other tech.

We expect the incorporation of next generation capabilities will become increasingly important, but nothing can be done with these technologies before fixing core issues first.

The Hotel Tech Stack Will Increasingly Look Like an Integrated Web

The responses from our focus groups were essentially unanimous — the hotel tech ecosystem has to increasingly shift towards a more integrated one. The mapping should eventually look like a well-connected, better-designed web — where all systems are connected to and work with each other. In order to do this, there has to be an increasing shift to software in the cloud, as well as consolidation in the industry.

1. Hotel tech must shift more to the cloud and in the form of software — away from data centers and hardware.

The 2017 Lodging Technology Study noted that “more than half of hoteliers will be running tech systems in the cloud by 2018,” but made no reference to this statistic in their 2018 study. While we expect many hoteliers are using some cloud-based technologies currently, it’s likely that not all of their systems are cloud-based. We estimate the majority of smaller hoteliers (such as family-run hotels) as well as major brands are still, for the most part, using a wide variety of hardware, on-premise tech.

Alex Shashou of ALICE pointed out that “Outside of hospitality, software reigns supreme. In order to absorb all the advances that are happening outside of the industry, there needs to be a mindshift in how software products can be owned and used to facilitate the experiences guests want.”

While the initial move will be costly, the amount of money saved from maintaining old hardware and the time saved from dealing with technical issues and figuring out how to share data throughout the property will far outweigh the cost. Jos Schaap of StayNTouch highlighted that “The good thing with SaaS is that features appear every couple of weeks with automatic upgrades, at no additional cost to the hotel.” Any updates that need to be made can be done easily and painlessly.

2. Consolidation must occur for better integration and better all-in-one solutions.

Currently, there are hotel tech vendors that are trying to be all things to all hoteliers by offering as many solutions as possible. However, this can sometimes mean that they offer subpar performance in all areas rather than being really good at one capability. “Some PMSs have taken the view that they can provide everything to the hotel,” Mike Ford of SiteMinder explained. “But often this results in a lot of average technology from one vendor.”

In direct contrast, some hotel tech vendors are so specialized at one thing that they end up being the best in that category, but also miss out on other potential sales opportunities by not having everything that a given hotel needs. Ace Hotel called out the issue in “finding tools that are an all-in-one solution. A lot of solutions tend to be focused on one discipline, they may dabble in other disciplines, but lose that business opportunity to vendors who are hyper-focused on the other discipline.”

Acquisitions might be key for vendors to improve their tech capabilities and enhance their overall offerings for hoteliers. There is no shortage of recent acquisition activity .  ALICE, a communications and operations platform, acquired GoConcierge, a concierge and task-tracking software platform, in September 2017 to enhance its overall guest experience. Nor1, an upselling and merchandising technology acquired Stay Delightful, a guest messaging platform in April 2018. And just in June 2018, the merger of Intelity and Keypr was announced, and will close in September.

We expect consolidation to continue until there are a few major key players offering best-in-class solutions, but with open applications so that additional vendors can ‘plug-and-play’ into hotels’ existing systems. At the same time, there will likely continue to be niche players that are the best in their respective categories, such as a specific PMS for bed-and-breakfasts.

Hoteliers Need to Invest in Next Generation Technology Soon, but Wisely

Despite challenges with hotel technology, we are seeing some recent introductions of next generation technologies that are interesting and exciting.

For example, Hilton’s new robotic concierge, Connie, uses artificial intelligence to assist arriving hotel guests, altering the guest experience. Google Voice and Amazon’s Alexa offer interesting ways that guests can search for information, ask for help, or control in-room experiences.

SiteMinder’s Global Hotel Business Index 2018 found that more than two-thirds of hoteliers are focused on some next generation technologies in 2018, whether that’s mobile technology, internet of things, in-room technology, virtual reality, artificial intelligence, or voice. Skift’s research and survey work have found that many travel companies see themselves incorporating next generation technologies into their digital roadmap in the next couple of years and most travel startups believe artificial intelligence and machine learning will most revolutionize the industry (See exhibit below).

With many travel companies either focused on or adopting new technologies, hoteliers need to invest in emerging tech sooner rather than later if they want to be leaders in the industry.

Nevertheless, any investment made in next generation technologies needs to be made wisely and in-line with business goals.

“Many people are forgetting that before we all jump on the AI, blockchain or robotics wagon, we need to deal with the hotel tech fundamentals first,” Max Starkov of HEBS Digital said. “Optimize the hotel direct channel, fix the six-year-old hotel website, get a better CRS [central reservation system] and WBE [web booking engine], improve the hotel SEO [search engine optimization], create the property’s Google AMP [accelerated mobile pages] presence, launch the property multichannel marketing, optimize the social media profiles, get better business intelligence and analytics tools, finally do something about CRM [customer relationship management software] to better engage and retain customers, etc.”

Michael Bennett of Cendyn added, “If we want to explore the opportunities we’re seeing in other industries, we’ve got to get what we’re doing now right.”

Ultimately, the place for these emerging technologies will lie in how they are used to enhance the overall guest experience, improve personalization, and offer capabilities that guests are truly looking for. However, we expect a human touch will always be required.

Bzdawka explained Hyatt’s strategy when it comes to new technology: “At Hyatt, we focus most on what guests want, rather than get distracted by a new offering or shiny new object. ‘Just because we can, does not mean that we should’ is a motto we sometimes use in IT to help keep us focused on employing empathy to understand guests’ needs, and then evaluate the solutions to support those needs.”

Applications for Next Generation Technology: Focus Group Views

We asked our Tech Vendor and Hotel Company Focus groups, “What are your expectations for hotel tech going forward in terms of the future of hotel technology?”

Many respondents called out the fact that they could see explicit applications for a number of next generation technologies in the hotel arena.

We highlight a few things that individuals said with regard to different capabilities below.

Artificial Intelligence (AI).

“AI has the potential to greatly impact our ability to understand and personalize the guest experience. There is so much data in travel, and with AI we will be able to understand and use that data to create experiences that match our guests’ expectations and anticipate their needs. With this foundation, all the other ‘frontier’ technologies such as payments, robots, and our favorite, voice, will be much more powerful.”
– Alex Shashou, ALICE

Machine Learning and Chatbots.

“We use machine learning to understand sentiment and text analytics … The way I see this happening is that while the in-person interactions will continue to be important, we’ll start to see customers begin their interactions through some of these features [chatbots], [so] you get some of the basics answers right off the bat and that saves costs down the road.”
– Geoff Ryskamp, Medallia

Voice.

“I think voice will play a big role in the near future. Just think about how you use your smartphone today. I rarely type out a text message and almost always use voice. I ask my phone the weather, directions, to make phone calls. Why can’t I stand in front of a kiosk and asked to be checked-in, swipe my credit card and get my room key if that’s my preferred check-in method?”
– Connie Rheams, Beekeeper

“Voice, as a channel, offers a new way for hotels to interface with their guests … Voice technology also has a great future for the in-room experience as well, allowing guests to easily order everything from extra towels, to spa services and room service.”
– Susan Spinney Corlett, Expedia Group

Virtual or Augmented Reality.

“There are many exciting technologies that we expect will impact hospitality in the years ahead. Think about what augmented reality could do for booking more travel shoppers looking for unique experiences.”
– Jeff Robertson, NAVIS

Robots.

“There are some really cool products on the market … that can add value to hotels and, ultimately, guests. Take the example of a robot that delivers towels to guest rooms.”
– Scott Schaedle, Quore

Blockchain.

“It is still a bit early to predict exactly what it’s role will be, but blockchain technology holds a lot of promise in payments, identity, security and even possibly distribution technology.”
– Glenn Wirick, Pegasus

Data Privacy and Security Key Focuses for the Hospitality Industry Going Forward

Amidst all this evolution of tech, and given some of the recent regulation we are seeing such as the European Union’s General Data Protection Regulation (GDPR), a key area of focus for hotel tech going forward will be related to issues of data privacy and security. In fact, Andrew Arthurs of Two Roads Hospitality noted it as the “biggest technology challenge we face as an industry.”

In addition to regulations, consumer concerns over companies’ usage of their personal information are on the rise. Skift Research conducted a consumer personalization survey as part of our Skift Tech Forum 2018 magazine, “The Personalization Dilemma in Travel.” Over half of consumers surveyed felt that sharing basic information in exchange for personalized travel offerings risks violating their privacy.

There is likely a lot to be done in this arena, as almost a third (26%) of participants in Skift Research’s travel company personalization and marketing survey noted there were no process in place at their companies regarding data security and consumer privacy. Not even half of them (46%) review privacy compliance and only work with third-party data vendors that are in compliance with regulations.

Data Privacy and Security Becoming Critically Important: Focus Group Views

When it came to our Tech Vendor and Hotel Company Focus Groups, almost half of the executives brought up the issue of security and privacy explicitly during the interviews. Most of them noted this as an area needing increased attention, an ongoing priority, and critically important to the future success of hotel properties.

We highlight a few of these points below.

“This [privacy focus] is obviously being driven by macro shifts globally and pressure by governments on organizations to comply, so we have seen the emergence of things like payment systems built into hotel PMSs that reduce risk of exposure and shield the hotel from being the custodian of the credit card data. The hotel industry houses such rich consumer information, it’s an obvious target. So, providers of all hotel systems really need to pay attention to this on behalf of their hotel customers.”
– Mike Ford, SiteMinder

Skift Take: Hotels are not prepared for the lasting ramifications that can occur as a result of a data breach and need to start investing more in this area.

“How do I share the information that I have in a way that is respectful about a person’s privacy? I may not want the world to know that I’m spending a weekend in New York. I may not want you to share that information with other vendors that might provide an interesting customer experiences to me.”
– Pablo O’Brien, DerbySoft

Skift Take: Does data privacy and security conflict with personalization? It may not have to. Hotels might be best positioned in a situation where a loyalty member prefers to share information with only one hotel brand. This might open up new opportunities for hotels to engage with customers through direct channels rather than receiving information and data about an individual from an online travel agency, for example.

“It’s more and more thinking how do we bring the big tech giants like Microsoft, Adobe, Salesforce, Facebook, and Google into the hospitality space … with companies like us being a connectivity bridge versus trying to reinvent the wheel all the time. Let’s leverage what’s out there because, especially with these new privacy laws, unless you are a big tech giant in the space, you’re not going to survive. I think that [what] people have not seen coming with GDPR is that GDPR is actually going to kill a lot of startups, because GDPR is so complex that only a big tech giant can really figure it out. … If GDPR was in vogue when Facebook was starting, Facebook would have never started … Now, all of a sudden, they’ve put a big barrier to entry for anybody else, so the only way to go is to be to be able to partner [with] and enable these tech giants in the hotel space.”
– Marco Benvenuti, Duetto

Skift Take: The hotel industry will have to let some of the large tech giants in to handle the complexities of security and data privacy in today’s environment. Tech vendors will likely need to partner with large tech companies that have capabilities they lack.

Blockchain could be an “undisputable, decentralized ledger system which tracks the incoming and outgoing data in a seamless and easy fashion.”
– Max Waldmann, Conichi

Skift Take: Next generation technologies could be used to solve today’s issues. Though far from perfect from a performance and scalability standpoint, blockchain could potentially reduce payment security problems.

Investors Turning Their Attention to Hotel Operations Tech

In our report, “Venture Investment Trends and Startup Opportunities in Travel 2018,” we discussed a couple 2017 investments in consumer-facing technologies. Karlani Capital led a $19 million Series A for Keypr, which develops mobile-based guest messaging, check-in, and concierge services, and Accel Partners led a $37 million Series E for HotelTonight, a mobile-booking startup for consumers booking last-minute stays.

Expedia made one of the more interesting investments of 2017, in our view, leading a Series B investment of $26 million in ALICE, crossing over into hotel operations.

Thus far in 2018, there has been increasing interest in the hotel tech space. Revenue management strategy company, Duetto, has been the largest year-to-date with an $80 million Series D investment led by Warburg Pincus. In our view, this points to the considerable improvement in revenue management tools we have seen over the last few years.

Other interest has been in property management systems (Hotelogix and Mews), direct booking tools (The Hotels Network), as well as platforms for guest messaging and concierge services (Manet). There’s also been some acquisition activity. Nor1, a merchandising and upselling technology provider,acquired Stay Delightful, a guest messaging platform.

A seed round of $1.8 million for UK-based Impala hits home on a key theme and issues of tech integration:the company helps mobile apps integrate with property management systems.

We expect there may be more investments ahead as investors begin to realize the massive potential opportunities in this arena. General Partner Jos White of Notion.vc Capital, which led the round for Mews stated, “We think the hotel industry is at a tipping point in terms of the way it uses technology to better manage their operations and transform the guest experience.”

Conclusion

Skift Research believes the business strategy of the hotelier of today should focus entirely on the customer journey, and the hotel’s tech stack should be arranged so that it provides guests a seamless experience.

A hotel tech stack that is not integrated on the back-end will feel fragmented on the front-end. In addition, a smart hotelier tries to be wherever his or her guests are, and the hotelier that fails to consider new technological capabilities will lose customers.

Nevertheless, the hotel customer journey cannot be commoditized. There is no one-size-fits-all hotel tech stack. Each hotelier will have to choose the appropriate stack for their property and use the best technologies that suit the needs of that property’s guests.

Appendix: Tech Vendor and Hotel Company Focus Groups Answers to Key Questions Regarding the Hotel Tech Stack

We asked each interviewee the same five comparable questions in order to see general themes emerge and draw key conclusions. The five questions were:

  1. What category or type of technology do you think the hospitality industry is most behind in? Why?
  2. What do you think are the biggest challenges the hospitality industry faces from a technological standpoint?
  3. What tech categories or types of categories do you think the hospitality industry does well at? Why?
  4. What are your expectations for hotel tech going forward in terms of the mapping of hotel technology systems? Will there be more integration or consolidation?
  5. What are your expectations for hotel tech going forward in terms of the future of hotel technology, whether that is artificial intelligence, voice search, payment privacy/security, robots, etc.?

We then separated out explicit comments made with regards to data privacy and security from question number five.

We provide responses below for comparison purposes. The responses to the questions we asked each interviewee are subject to the discretion of and interpretation of the Skift Research team.

 

Endnotes and Further Reading