For as long as the hospitality industry has fallen behind in technology innovation, hotel owners and asset managers have been forced into a very tough spot. I sensed at industry conferences this summer that they’re aggressively pushing back and calling for more engagement from their tech partners and their brands, and I’m hopeful that the industry will be better for it.
Owners, REITs and asset managers assume heavy costs to adopt new systems, whether to keep up with nimbler independents or lead new initiatives for their hotel brands. They’re also acutely aware of the problems caused by decades of underinvestment in innovation, namely aging technology that can’t execute new strategies. They bear the brunt of rising costs for acquisition and distribution that grow faster than revenue gains.
There always have been activist asset managers who recognized the value of revenue management.
But often that meant holding GMs and DORMs accountable for metrics like RevPAR and ADR. It didn’t necessarily mean getting involved in the push for innovation.
That’s all beginning to change.#Hotel brands, owners & asset managers finally agreeing on need for tech #innovation, @ptbosworth writes Click To Tweet
A Call for Better Hotel Technology
At RSS 2017 this past July, we heard hoteliers and technology suppliers call on brands to open up their technology platforms to greater connectivity or to migrate those systems and their data to the cloud.
Ashford Hospitality Trust’s vice president of revenue optimization, Chris Nixon, put it well at RSS, saying: “There’s always going to be a need for digital innovation, but as owners the cost always falls on our backs. … The CRS is the backbone of our tech stack, and it’s built on 1980s technology. A brand is nothing but a logo, a loyalty program and a CRS, and one of those three is extremely outdated.”
To their credit, representatives of the brands have admitted the limitations of their legacy technology.
“Part of it is on us,” Hilton Worldwide’s vice president of global business analytics, Jess Petitt, said at the Hotel Data Conference. “We’ve felt the pain of having legacy technology. I mean, the GDS is much older than I am, and how many people are creating the same reports in Excel? We need to start adopting the technology that gives us an advantage.”
A Sea Change in Advocacy
We potentially have all the key players in the hospitality industry — brands and independents, owners and asset managers, and suppliers — on the same page about the need to invest in new solutions and tech systems. That’s a very positive development.
You could argue that hotels and casinos went from being technology leaders in the 1960s, ’70s and ’80s to laggards ever since the biggest hotel companies spun off their management groups and sold off their real estate to go asset-light. From that point on, interests of owners and asset managers were misaligned with that of the brands.
Real estate investors and management companies were largely focused on the short term and made do with the brands’ legacy systems that performed well enough back in the day, before digital marketing and distribution or the consolidation of the OTA duopoly. That nearsightedness discouraged investment.
The major hospitality companies had a longer-term view of their value proposition for guests and competitiveness, so they were more willing to invest in innovation. Of course, much of that R&D spending was sunk back into legacy, on-premise technology, which has resulted in today’s complicated hospitality technology landscape.
But today, it seems like everybody is thinking long-term again. The brands and their owner and asset manager partners see their aging tech stacks as expensive and difficult to maintain. In particular, the operators are the most hurt by intermediation and runaway growth in OTA commissions and acquisition costs.
The hardest part is likely still to come. Brands, technology companies, and owners and asset managers need to come together to actually collaborate on solutions and design an industry structure and strategy that works for all and still creates value for the guest. But the emerging consensus on that vision is reason for optimism.
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Tags: acquisition costs, ADR, Ashford Hospitality Trust, asset managers, asset-light, Chris Nixon, cloud, distribution costs, DORM, GDS, GM, Hilton Worldwide, hotel brands, Hotel Data Conference, hotel distribution, hotel loyalty, hotel marketing, hotel owners, Hotel Revenue Management, hotel revenue strategy, hotel technology, innovation, Jess Pettit, legacy technology, on-premise technology, Online Travel Agency, OTA, REIT, revenue strategy summit, RevPAR, RSS