The current state of hotel distribution, and the sector’s relationship with online travel agencies (OTAs), can tell us a lot about the current state of hotel technology. In 2017, commissions paid by hotels to OTAs shot up nearly seven percent, and this number is expected to rise, according to the 2018 CBRE Trends in the Hotel Industry report. Additional evidence of the imbalance comes from a 2018 survey of more than 1,050 hotel properties published by the Hotel Analytics Work Group of the Hotel Electronic Distribution Network Association, which found that nearly one-third of branded properties depend on OTAs for more than half of their room inventory.
There’s no doubt that this distribution predicament continues to create challenges. But the truth is that today’s hotels have tools at their disposal to reduce their dependence on any single channel. In fact, they have a clear opportunity to rebalance in favor of direct bookings, something that can be accomplished by thinking more strategically about their hotel “tech stack.” This suite of interrelated software solutions helps hotels generate data and insights that lead to smarter decision-making and streamlined operations, allowing them to rethink everything from revenue to inventory to online distribution.
Skift’s interviews with various hotel executives confirm a growing desire to evolve away from costly legacy technology systems to new solutions. These older systems are often expensive to maintain, difficult to upgrade, and put hotels at an information disadvantage, keeping insights locked inside siloed databases unavailable to different groups. The result of this overhaul will be broader access to data across all departments, greater control over revenue management, and greater ability to drive direct bookings and control their own destiny through an integrated revenue strategy.
But building the right hotel technology stack is not without complications. Many executives recognize that these systems, while worth it, can at times be expensive. In addition, there are a wide range of options on the market, and the consequences of making a poor decision can be magnified for years to come. How then should hotels think about the process of building a best-in-class technology stack? We examine some best practices below.
Versatile Applications for a Diverse Clientele
The cost of acquiring guests through non-direct channels is a frequent pain point for the hotel industry. But even though this challenge is similar for most hotels, the nuances of each brand or an individual hotel’s revenue management needs are as varied as the properties themselves. That’s why no matter what revenue challenges a hotel group or an individual property may be trying to solve for, agile tech stack solutions, which offer the flexibility to adapt to varying situations as they arise, should be the focus.
Consider the example of Amsterdam-based citizenM, a hotel brand that uses an innovative distribution strategy focused on selling by channel rather than segment. In order to execute this strategy, the hotel company needed to design the right IT architecture that was capable of accommodating this approach. This included both a cloud-based network capable of exchanging relevant data between different hotel software systems, as well as a revenue strategy system equipped to meet the demands of their channel-focused distribution strategy. “Contemporary brokering of inventory requires a different skill set, mindset, and system,” said Michael Levie, citizenM’s chief operations officer and treasurer of the international association of Hospitality Finance & Technology Professionals.
Another reason citizenM opted for a cloud-based solution is because such systems are better equipped to offer hotels the perfect combination of flexibility and scalability. Compared with the costs of traditional hardware-based hotel tech, this cloud arrangement helps reduce capital expenses typically associated with infrastructure operations and maintenance. On top of this, the data migration process tends to be more streamlined than it is with new hardware installation. It’s also easier and less costly to upgrade software applications when modifications are necessary.
In addition, this tech stack is better equipped to support citizenM’s sales approach, which demands real-time data from both internal and external sources. After implementing a new revenue strategy system, citizenM found a positive impact on both its occupancy rate and average daily rate (ADRs). Without it, Levie believes it would be harder to capitalize on the brand’s market differentiators. “Having a different shade of product inches you forward, but it’s not the rate capture you’re looking for,” he said.
Innovation Is Not a DIY Project
The quest for a more aggressive pricing strategy also drove Jenna Villalobos, Outrigger Hotels & Resorts’ corporate director, revenue optimization, to implement a third-party revenue strategy platform at several properties. Like citizenM’s Levie, Villalobos also sought the innovation that a third-party tech stack provider brings to the table, continuously evolving and enhancing the system for a better user experience. She noted that hotel companies usually lack the capital to hire in-house tech experts who can develop relevant algorithms. “If you think you can do it in-house, you’re kidding yourself,” she said.
Villalobos also places a premium on the benefits that an upgraded hotel tech stack can offer to her as a hospitality professional. For instance, the data Villalobos needs to feed her daily decision making is available 24/7 from any connected device. Even when traveling, she can use an iPad to conveniently access data and identify trends from a multitude of internal systems in one central location, together with third-party data.
But even more essential to Villalobos’ decision to implement a third-party revenue management platform in several resorts was the opportunity to dually leverage the provider’s industry expertise and consultative capabilities. “It’s a partnership. I wasn’t necessarily looking for the tech factors when I brought the platform to the other resorts,” she said.
Strategically Focused Hotel Revenue Directors
Similarly, Two Roads Hospitality (TRH) has found that a modern hotel tech stack benefits its business in ways that extend well beyond enhanced revenue performance. That’s because their upgraded hotel technology choices, which focus on a more integrated, automated approach, have allowed the company to adopt a more strategic mindset for decision making instead of drowning in the details.
Thanks to this new approach, the properties’ top revenue executives prepare for regular optimization meetings by gathering recent trends in the property’s booking, cancellation, group, and transient patterns. Kathleen Cullen, TRH’s senior vice president, revenue and distribution, explained that instead of carrying out repetitive tasks like pulling reports and data entry, the company’s hotel revenue directors strategically focus on identifying the property’s performance needs. If they see an opportunity in booking trends or a gap in budget or forecast expectations, they have the ability to focus on those issues instead of preparing information for meetings.
In an industry burdened by legacy systems, TRH’s decision to innovate its hotel tech stack has had unintended positive side effects on its human resources department. Better technology means a more competitive edge for attracting better revenue talent. “I’m regularly asked during interviews what our tech stacks look like. When I describe them, it piques the interest of the more experienced revenue directors who understand how this will make them more successful by driving more revenue to the hotel,” said Cullen.
Today’s hotel technology stack is commonly portrayed as a solution to diminish dependence on OTAs and improve room revenue performance. But focusing exclusively on any single benefit would be myopic. As the examples here demonstrate, upgrading hotel technology can also improve outcomes in a variety of other areas of a hotel’s business.
Each of these benefits on its own lends further weight to the argument that there is an urgent need for hotels to modernize and evolve their tech stack. But perhaps the most important argument of all is the high price of inaction. Those hotels that remain tethered to legacy solutions and status quo software risk even more costly and confusing decisions in the future.
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