Hotel Technology is Poised for a Major Correction: Here's What You Need to Know

A version of this article was first published in Tnooz and Hotel Tech Report

In the 1920s DuPont and General Electric began to develop diversified organizations with business units that lacked cohesion. They were pioneers of what later became known as “conglomerate strategy”. These companies (and the many that followed) drew on modern portfolio theory to build businesses that could weather any economic climate. If one business unit was in a trough, the other could pick up the slack — or so they thought.

During the 1980s this theory crumbled destroying billions in enterprise value. The problem that unraveled the conglomerate craze was simple: diversification creates strong investment portfolios, but weak products and confused organizations.

Creating great products takes a maniacal focus on singular problems. It takes rallying a team who’s passionate enough to work on those problems every day. Each milestone is just one step closer to proverbial perfection. Yet it’s incredibly more challenging to deliver in today’s fragmented and competitive landscape. One has only to look at recent restructurings to see that there’s more twists and turns to come in travel and hotel technology.

 With Rapid Innovation, There's Always a Risk of Massive Correction for Incumbents

Thirty years ago there were two main technologies that powered hotels: GDS and property management systems. Today, the ecosystem has sprung thousands of niche players delivering innovative products with incredible ROIs.

Direct booking tools (e.g. Triptease), guest messaging platforms (e.g. Kipsu and Whistle), revenue management software (e.g. Duetto and IdeaS), digital marketing platforms (e.g. Cendyn and HeBS), email CRM (e.g. Digital Alchemy), website optimizers (e.g. Voyat), reputation managers (e.g. Revinate), Staff collaboration tools (e.g. ALICE) the list goes on and on.

As incumbents watched these players grow they adopted conglomerate strategies but for them it was less about diversification, it was about buying and developing products to increase spend amongst their existing customers. GDS companies bought up sales management software businesses, developed property management products, central reservations systems, booking engines and more.

In some cases, the core products produced by these conglomerates are great but even for them not all of their products are great – they can’t be.

Don’t believe me? How often do you login to Google’s social network? Would you use Apple’s spreadsheet tool just because you have a Mac? Sure, it’s easy and pre-installed – but if your business relies on spreadsheet wizardry you’re going to need Microsoft Excel. So why would you use a property management system just because it’s provided by the same supplier as your booking engine?

There's Too Much Noise in the Market & It's Hurting Everyone

Challenges like customer education, industry structure, and fragmentation have forced even small companies to merge as evidenced by Porter & Sail’s 2016 acquisition of Guest Driven and Go Concierge buying Gold Keys in 2012. This has made it incredibly difficult for hoteliers to understand hotel technology let alone find and adopt the right solutions for their properties.

Take channel managers. There are over 150 in the market and many suppliers also advertise other products like website development, apps, pricing tools, market intelligence, booking engines, etc.

Choosing the wrong channel manager can be insanely costly – down time means that your rooms aren’t being sold on 3rd parties, parity bugs cause you to lose high margin direct business, this is mission critical software. Go to each of those 150 supplier websites and you’ll find raving testimonials alongside claims of market leadership.

The question becomes: how can hoteliers find the best solution for every business need and build a tech stack that drives efficiency, profits and guest satisfaction?

It’s no secret that hospitality is currently facing unprecedented pressures from OTA commissions and home-share platforms that continue to disrupt the industry. If the industry is to survive and thrive, tech stacks need to rationalize and evolve faster than ever before.

The hotel industry is at a critical inflection point. Today’s zeitgeist is plagued by disruption yet enabled by the same technologies that threaten the very existence of traditional hotels. SaaS business models have lowered switching costs and accelerated innovation.

By embracing this wave of technology the industry can thrive like never before. The first step towards modernizing our industry is isolating the signal from the noise, consolidating data and eliminating information asymmetries.

Collecting the knowledge of hoteliers in one place is essential to realize this vision of a modern hotel industry. We are aligned towards an improved world with happy guests, fulfilled hotel staff, and satisfied investors.

At Hotel Tech Report we’ve been hard at work bringing together a global community of digitally native hoteliers to fight unprecedented industry threats like the OTAs and homesharing.   Hoteliers in our community don’t need hundreds of hours to find the right booking engine (or worse just pick one that’s convenient). With our platform they can compare hundreds of solution providers instantly based on feedback from verified hoteliers and users.

By reading unbiased feedback from real users, hotel technology buyers can make better decisions and avoid costly mistakes. More educated buyers means shorter sales cycles and lower cost of acquisition for solutions providers, too. Everybody wins when we work together.