Amadeus Hospitality Is a Tough Sell Despite Progress With InterContinental Hotels Group

Amadeus continues to be powered by its airline distribution business. But the Madrid-based technology giant has been eager for years to diversify its business lines — with hotel software services a top bet. The company reported second-quarter 2018 earnings Friday. Amadeus netted $1.45 billion (€1.247 billion) in revenue, up 5 percent compared with the same period a year earlier. It booked a profit of about $330 million (€285 million), a 10 percent increase. Amadeus's distribution business, its largest unit, earned revenue in the second quarter of about $892.6 million (€767.9 million), up about 3 percent. Amadeus doesn't break out the numbers for its hospitality unit. "We believe the hospitality industry has big potential and we are betting on that by making investments," said Maroto on a call with investment analysts Friday. "We aim to build a platform that combines different components that address the overall needs of the hotel industry." Overall, Amadeus invests above the industry average in research-and-development. In 2017, the company invested about $865 million (€744 million euro), or roughly 15 percent of its global top-line revenue of $5.67 billion (€4.85 million), into research and development — broadly defined as operating expenses for software development and the depreciation and amortization of related expenses. For its hospitality unit specifically, the company is spending "much higher than 15 percent" of unit revenue on investment, said Bill Sintiris, chief operating officer for the unit, in an interview. IHG on Time By early next year, Amadeus expects to finish the full deployment of its replacement of Holidex, the central reservation system InterContinental Hotels Group (IHG) built in-house and used for decades, with its bespoke new central reservation system. That would be in keeping with the companies' shared timetable. On Friday Amadeus said that more than half of IHG's properties have now been migrated to the new guest reservation system. First announced in 2015, the project has taken time to match functionalities, add new tools, and have a seamless cutover. The IHG deal highlights Amadeus' desire to appeal to full-service hotel groups. Investors on Friday's earnings call were eager to hear if any of the 19 of the other top 20 global chains had also decided to make the switch. But executives had no news to report, with no hint of anything coming on the near-term horizon. One-Off Service