Amadeus' hospitality division is creating a back-end booking system for InterContinental Hotels Group. But it's not a foregone conclusion that the tech colossus will win over a swath of other hotels.
In 1992, then-college sophomore Lee Horgan did an internship at a hospitality services company, Newmarket Software, that his uncle had created in the mid-1980s.
After college, Horgan returned to what later was called Newmarket International and began doing work in sales and rose up the ranks to become chief executive. In late 2013, he helped to sell the company for $500 million to Amadeus, the travel technology colossus based in Madrid.
Since 2016, Horgan has been chief executive of Amadeus Hospitality, the hotel software division — a collection of businesses, such as Hotel SystemsPro, Itesso, Libra, MeetingMatrix, and MTech, that Amadeus has acquired in the past half-dozen years.
Horgan is aiming to do for hotels what Amadeus has done for airlines in providing a full suite of solutions for running their operations.
But he and his team face potential pitfalls. The type of platform Amadeus Hospitality hopes to sell to the industry hasn’t necessarily been successful before. Horgan’s background has been in only one segment of the hotel industry, while the strategy requires an appeal to hotels of all types.
Critics also say there are also still several gaps in Amadeus Hospitality’s software suite.
Skift spoke with Horgan last week to get an update on the status of Amadeus Hospitality, a year on from its debut as a new platform.
IHG switch is on track
The most visible brand that Horgan’s team has signed up has been InterContinental Hotels Group, which is Amadeus Hospitality’s first customer for a new guest reservation system.
In the third quarter of this year, IHG will begin testing a multi-year move away from its in-house system, Holidex, to Amadeus’s new one. IHG says the rollout would happen in 2018.
Horgan says things are on track to meet the target date.
“Our team and the IHG teams are working well together. I think as far as where we are right now. I couldn’t be happier,” Horgan says.
That would be welcome news for management at Amadeus headquarters in Madrid.
In May, Amadeus IT Group CEO Luis Maroto told Skift, “IHG is admired in the industry. The moment we implement this reservation solution for IHG, it will represent a breakthrough. It will become our reference customer.”
The new platform is designed to make it easier for IHG to upsell customers based on their profiles and past behavior throughout a trip and would help the company get more adept at “yield management,” or getting top dollar from a potential guest.
Today, IHG’s IT systems have data scattered across databases that can’t communicate with each other. This “siloed” approach to data hampers the hotel group’s ability to make offers that are personal and relevant to guests.
In theory, Amadeus’s new reservation system would be able to recognize if a customer is a millennial who is a member of the loyalty program. If based on IHG’s research, such a person would be more likely to pay a premium for a particular hotel chain brand, then IHG can offer a promotion that may be more relevant to the customer.
IHG anticipates that the new reservations system would make it easier for its staff to categorize its inventory better, such as by describing rooms that have different configurations more helpfully — what is a “deluxe” room, anyway?
These categorizations matter in that they allow accurate searching by online and corporate travel agencies. IHG brands currently lose some business because computer filters don’t know that the chain has the amenities that some shoppers are looking for.
First of more deals?
For Amadeus, a follow-up reservations systems deal in due course with a big name hotel group such as Marriott, Hilton, or AccorHotels would raise confidence in Amadeus Hospitality’s strategy.
Investors seem to think it will take up to a year from now to sign another global deal.
Horgan says it’s hard to gauge when another major chain would be ready to replace one of its major IT systems. All Horgan would coyly say is: “The engagement level with prospects has been high for us.”
Given that IHG was the first chain to create a guest reservation system in 1965 and took a half-century to look for a new version, the sales cycle can be long.
IT replacements can be expensive for hotels. Controlling costs is why Marriott is downgrading newly acquired Starwood to its old customer relationship management system instead of upgrading its portfolio to Starwood’s more up-to-date one.
Guilain Denisselle, the Paris-based editor of hotel technology trade publication
TendanceHotellerie.fr, says: “Oracle Hospitality, formerly Micros, is the leader in property management systems in North America and Europe, and when you see how deeply it is implemented in hotel chains, you realize that it will take ages to take Oracle out of hotel chains.”
Denisselle adds: “The only chance Amadeus has to convince hotel CFOs is to cut the price significantly on all parts of its offering, and if they do that Amadeus will have to cut costs on R&D and profitability.”
If Denisselle’s argument is prescient, then Amadeus Hospitality’s forecasts for revenue growth may be ambitious.
The long-term Amadeus bet is that over the next ten years, hotels will gravitate toward grouping more of their technology elements together with a single vendor because it is easier to deal with just one company.
That’s a risk, as historically hotel chains have not bought their technology that way.
Until now, reservations systems have been separate from property management systems and customer relationship management systems and other operational systems.
Levie explains: “Hospitality tech systems — like a central reservations system, a property management system, and customer relationship management system — have been separate buys mostly, as the combined offer has never quite able to deliver the level of expertise offered alone by specialists in each of the categories.”
But Amadeus is betting that hotels want to move away from having to spend a lot of up-front capital on their tech systems.
It believes hotels will increasingly prefer a commercial model where they pay a consistent, ongoing fee, either via monthly subscriptions or on a cost-per-transaction-serviced basis. That model makes hotel group balance sheets look more predictable for investors, among other advantages.
Horgan says that subscription- and transaction-based models also incentivize companies like Amadeus Hospitality to maintain a steady growth in transactions for a hotel because their compensation depends on that ongoing growth and not on just a one-time sale of hardware.
Cloud-based services also allow for more constant improvements in service, just as an iPhone gets regular software updates.
In the past, hotels had to buy a server and other equipment that required on-site work to update. In contrast, cloud-based systems minimize the on-site work that’s needed.
Levie of CitizenM agrees with the argument that new and more flexible technologies are making a platform offer more appealing than in the past. He says, “The benefits of centralized data are making that combined buy extremely interesting.”
But Levie notes that he is only making a general statement and not a specifical comment on Amadeus Hospitality’s combined system offer as CitizenM doesn’t use a combined system offer.
In fact, CitizenM has continued to experiment with one-off, next-generation technologies, such as a test of the startup IreckonU’s operations and finance dashboard and revenue management system.
Such startups are among the competitors Amadeus Hospitality faces, not just giants like Oracle.
The fragmented structure of the hotel industry — split among the various interests of property owners, brands, and operators — is the biggest challenge Amadeus Hospitality faces, according to Ellen Keszler, who runs the Texas-based consultancy Clear Sky Associates and was formerly president of Travelocity and a one-time executive at Amadeus rival Sabre.
Keszler says, “In a perfect world, from a brand’s perspective, hotel groups could dictate the technology used at their flagged properties to ensure consistency of guest experience. However, the hotel ownership structure, where one company might own properties that fly multiple flags, is where most of these decisions are made.”
In short, Amadeus’ success depends not just on the quality of their new products, but also the receptiveness of their customers to significant technology and process changes, she says.
For his part, Horgan says he isn’t worried.
He acknowledges that the key decision for hotels in changing their core technology systems varies by company. For some, it is “Can they increase revenue?” For others, it is “Can they remove a cost, or can they improve productivity?” For still others, it is about managing risk and complying with privacy regulations worldwide as they enter new markets.
He concedes that most hotels today are not going to change out all of their core back-end systems at once. But he says the conversations his teams have had with hotel executives suggest that hotel groups are alive to the promise of platform-based technology.
“It’s hard to judge how long the sales cycle will take for a new product, which the cloud-based, platform approach is,” he says.
“But we believe hotels are coming around to the idea of integrating their PMS [property management system] with their sales and catering tools and with their service optimization tools for front desk and housekeeping and their reservation systems.”
“We think they’re starting looking at some of these solutions coming together as a platform, which is our sweet spot.”
Product gaps and delays
Since its formal branding launch a year ago, which saw Amadeus Hospitality replace the previous Hotel IT division name, the hospitality unit has focused on four elements: providing central reservation systems, property management systems, sales and catering tools, and hotel operations software.
One knock against Amadeus Hospitality has been its slowness to roll out a next-generation property management system that has broad appeal. It did acquire one when it bought Itesso. But both the work on it and the sales of it have been relatively quiet.
Selling a new property management system is ambitious because most hotels already have one. Amadeus has to make a case that its alternative justifies the time and cost of a replacement.
“From a future functionality standpoint, we’re spending a lot of time on the usability of the system,” Horgan says. “Making sure that we can cut down on the amount of training for the various folks that are users in the hotel.”
He adds that, unlike some legacy systems, Amadeus’s solution is cloud-based, which allows more flexibility in moving across connected devices. A hotel would link up all of the technology in the lobby, for example, such as a front desk PC, a tablet held in the hand of an employee, and a self-check-in kiosk.
“If a hotel customer wants to build their app or offer a digital checkout, we can do that while some legacy products can’t. These mobile-first approaches give new ways for hotel staff to engage with their guests.”
He adds: “We don’t think that the legacy systems will be able to move at the same pace we can because we are on the cloud system.”
That may be true, but companies like market leader Oracle have also been embracing the cloud with apparent fervor.
Another gap in the Amadeus Hospitality product suite is revenue management. Amadeus Hospitality doesn’t have a full-service revenue management solution for hotels like the kind provided by IDeaS, Duetto, Rainmaker, and LodgIQ.
That gap doesn’t bother Horgan.
He says: “The market is pretty well-served right now from a lot of different revenue management players. Depending on what somebody may be looking for, there are folks more focused on full-service hotels, ones on the mid-level, and also sole proprietors.”
“We’ve decided that a partner approach is where we want to be right now.”
As context, some hotels do revenue management in-house because they feel their competitive advantage is in how they skillfully package and price their products.
Horgan says, “That’s not something that we necessarily thought we would be in a position to displace and so that comes down to more of a partner and open integration versus trying to come out with our system that would have to be part of the core platform.”
Other gaps in the Amadeus Hospitality suite appear to be channel management and digital marketing.
Companies ranging in size from TravelClick to smaller digital shops help hotels optimize their websites, email communications with customers, mobile apps, and search engine marketing.
Given the importance to hotels of increasing direct bookings and loyalty program engagement, some might think Amadeus Hospitality would have more services more prominently addressing that.
Horgan says, “Certainly digital marketing is something that is an absolutely hot topic right now. Our approach is really making sure that we enable a hotel customer to interact with their guests in the way they want.”
“We don’t have to own the end-to-end process that supports direct booking. We don’t necessarily have to create that front end experience for a hotel group to feel like we’re adding value there.”
He adds: “From our standpoint, it may be, ‘How do we enable that direct booking to happen?’ So it could be by allowing somebody to book meetings online. Or it may be where we’re revamping the tech to allow a hotel to offer special pricing or packaging online.”
“Even though we may not be the final mile, if you will, out to digital search and book and marketing, we’re doing a lot as a partnership that supports a hotel’s digital strategy.”
While Horgan isn’t worried about the gaps, other professionals express a measure of skepticism.
Max Starkov, president and CEO of New York-based hospitality digital services firm HeBS Digital, says that hotel technology consists of three silos.
Amadeus Hospitality has focused on one silo that includes inventory management, distribution, and pricing. Its portfolio includes software for hotel operations, including a new property management system, some point-of-sales tools, and some sales and catering tools.
Starkov says, “What they are missing in this silo is revenue management tools and expanded connectivity capabilities with a better channel manager tool to help hotels with distribution.”
“Due to the complexity of today’s traveler digital planning journey, I envision that in the future there will be a single integrated customer relationship system, revenue management system, and a channel manager,” Starkov adds. He notes that these tools today are typically sold separately or are built in-house without much inter-operability.
If Starkov’s prediction of overall trends proves true, then he says Amadeus Hospitality has a decision to make: “Do they venture deeper into hotel operations by building such an integrated platform, or do they master inventory management, distribution, and pricing — which is their core competency to begin with.”
Rivals with first-mover advantage
Some skeptics may say that Amadeus Hospitality is coming a little late to the hospitality IT game. In 2014, Oracle paid $4.6 billion to acquire Micros, the leading IT provider for hotels in North America and parts of Europe, and it has since kept investing in it.
Sabre Hospitality has been offering software solutions to hotels for a long time, claiming to have about 30,000 properties on its reservation system SynXis, in particular.
Horgan says he isn’t worried about playing a catch-up game. He notes the company has “25,000 unique installs, and we support more than 750,000 users across the various solutions we offer.”
He adds: “When we talk to customers, we hear that they have pain points not being solved today. What we’re hearing is a lot about wanting greater flexibility and about wanting to simplify the tech footprint.”
The company says that one of the ways it stands out from competitors is the emphasis it has put in helping hotels maximize their event space, which at some hotel groups can account for a third of revenue, on average.
“We excel at making sure that they are optimizing their meeting space by analyzing the patterns of historical demand and studying actually what’s happening in the marketplace.”
He adds: “We also can help in giving insight into their local market trends and giving actionable insight into how they may want to respond to those different requests for proposal from meetings and events organizers.”
Horgan says, “One trend we’ve seen lately is where event organizers want to have that different, almost an experiential, meeting. They want the room set in a different way than is traditional.”
“With the Amadeus diagramming solution, we’re able to help the customer and the hotelier partner on the vision of the meeting and to come up with a plan that is more creative and collaborative way with the hoteliers.
“It’s a really big focus of ours to enable ‘the next-gen of meetings’, if you will.”
One of Horgan’s biggest tests will be showing he can lead the company to a broader customer base than what Newmarket had.
Traditionally Newmarket did best in what was considered the larger hotel group, or the top mid-tier. Can it successfully sell to bigger global chains? And what about to somewhat smaller companies in the mid-tier with simpler needs?
Newmarket focused particularly on helping hotels with maximizing the sales of their meetings and events spaces, including services for optimizing sales of catering, conferencing, and banqueting.
Horgan says he’s especially excited about tackling the focused-service market, which doesn’t have much of an events business, but is growing comparatively faster than other segments domestically in the US but also internationally.
His approach is to follow a customer service emphasis. He has clients take satisfaction surveys via a third party provider, ConfirmIt, to make sure customers are happy.
“We also really invest a lot in the training of our employees,” he adds, “to make sure that they can be helpful on those sales and follow-up support calls. That’s a critical point to our go forward strategy as well, is never to take our eye off the importance of customer service.”
Another risk facing Horgan is, with so many different products, can he and his team maintain a high-level of execution.
The related point is that Amadeus Hospitality recently has been looking beyond hotels for sales opportunities in casinos, stadiums, golf clubs, restaurants, and amusement parks. Is there a risk that it will dilute its effort if it doesn’t focus on hotels?
Horgan says no. “From our standpoint, it starts with the fact that we’re building flexibility at the core of the systems. A lot of times where we may be going into an entertainment center like a casino, those transactions are very similar to when somebody’s selling a ballroom in a hotel.”
“We let customers customize their workflow to their unique venue. This is relevant because a lot of hotel groups have branched out into different adjacent markets.”
“Hoteliers have called us to say, ‘Look, I’m doing something fairly similar here from a sales standpoint, from a booking standpoint. I’d like to leverage this technology.’ And we’re able to go in and identify what their needs are and if we can meet them, we generally have a pretty good match.”
Horgan adds, “I would also say that some of our event customers have pushed us in new ways that we’ve been able to bring back improved functionality to our hotel customers because we’ve had to think through adjacent and similar problems in fresh ways.”
On a more personal note, he says the biggest surprise about life post-acquisition is that his workforce has become more global.
“We’ve got people in Europe that are coming over to Portsmouth,” Horgan says, “And one of my managers is very interested in moving to Europe, and we may have an opening for him. It’s really neat and not something that was happening to a New Hampshire-based company before.”
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Photo credit: Crowne Plaza is among the InterContinental Hotels Group brands that are slated to get a new guest reservation system from Amadeus Hospitality in 2018. Pictured are patrons at a Crowne Plaza property. Crowne Plaza