The hotel tech group that Jonas Hospitality has put together through acquisitions of Leonardo, MSI, Springer-Miller, and BookAssist is admittedly small. But its creation says a lot about the pressures to consolidate in hotel tech. Experts debate the pros and cons of such roll-ups.
Jonas Software, a Toronto-based holding company for software providers across multiple verticals, recently decided to go big in travel.
Last June, it created Jonas Hospitality, a tech provider to more than 5,500 hotels, resorts, and spas in North America.
It built the company through acquisitions. In November, Jonas acquired Leonardo, which helps hotels manage their digitized visual assets to market their properties online. In 2017, Jonas expanded to Europe when it acquired BookAssist, a Dublin-based provider of digital marketing and direct booking hotels primarily to European hotels.
Jonas and some of its subsidiaries didn’t respond to several invitations to speak for this story.
Yet it appears that Barry Symons, CEO of parent group Jonas Software, has begun to group some of the smaller tech vendors that have grown up to serve independent and other smaller hospitality players with property management tools and online marketing and distribution expertise.
“Barry appears to be picking up distressed assets, or at least those at the bottom of the shopping lists of more preferred suitors, in a bid to own the long tail,” commented Sundeep Chanana, CEO of technology investment bank Horatio Partners. “It’s hard to believe what he’s cobbling together can compete with the likes of Sabre, Oracle, and Amadeus in building hospitality enterprise services.”
In 2016, Jonas acquired two hotel property management systems: Multi-Systems International (MSI), which focuses on mid-tier, economy, and extended stay segments, and Springer-Miller Systems, which also has a property management system Atrio, a customer relationship management platform for mostly upscale hotels, resorts, and spas.
More such roll-ups are likely. “Benefits include back-office synergies as well as complementary technology solutions addressing a more holistic solution set that touches hotels, alternate lodging, booking and distribution systems, and channel management,” said Toni Portmann, the former CEO of DHISCO, a hotel distribution tech company that last year she sold to travel tech company RateGain.
“There often exists terrific economic benefits to buy and integrate, such as taking advantage of economies of scale and lower the unit cost of customer acquisition,” Portmann said.
Many hotel tech vendors, such as Alibaba-backed Shiji Group in hosptiality tech , are pushing in the strategic direction of uniting under umbrella groups for shared efficiencies. Some are outright building “full stack-native platforms,” like Amadeus, Sabre, and Oracle are attempting.
“A lack of integration among tech systems remains one of the key challenges for the hospitality industry,” said Skift Research’s senior analyst Rebecca Stone. “That’s what we found in our tech vendor focus group in our report, The State of the Hotel Tech Stack 2018.”
Tech Roll-Ups Are Risky
Jonas’ strategy fits in line with experts’ expectations for ongoing consolidation in the space. This might translate into a few major players running the core systems at properties.
“No matter the impetus, offering a full stack platform doesn’t guarantee commercial success,” said Chanana. “Ultimately, hoteliers will select the headache-inducing option of stitching together disparate systems, over a bundled solution, if it has the performance edge.”
Stone agreed. “There’s still room for niche, independent tech players to develop capabilities that are more “plug-and-play” — meaning that hotels can easily incorporate the tools into their overall IT systems.”
Smaller players vary by category and market. For example, Cloudbeds has one of the fastest-growing adoption rates for its property management systems in North America, where its used by tens of thousands of hotels and other properties. Hotelogix leads in India.
“So while a turnkey solution does allay vendor fatigue and reduce integration costs, hoteliers still need to be compelled by a superior offering relative to best-of-breed point solutions and of course by generous bundled pricing programs, which can be fraught with price and margin erosion risk,” said Chanana.
“Software providers attempting to cover all tech solutions for multiple industries run the risk of offering subpar performance in all areas rather than being really good at one capability,” said Stone.
Profitability may be a struggle, too.
“Hotels are typically operated as pure service businesses, so their vendor selection process for technology is usually based on price alone, just like it is for procuring television sets or bibles,” said Ephraim Spiro, CEO and founder of BookDirect.com, a startup company aimed at driving consumers to book direct with its partner hotels.
“At the same time, hoteliers are actively seeking solutions to stem the flow of bookings from their direct channel to third-party channels, but most technology vendors have not been able to deliver on this and justify premium pricing,” Spiro said. “This makes it exceedingly difficult for technology hospitality businesses to reach profitability, which will drive consolidation in the sector.”
Jonas Looks Ahead
Jonas has its roots in software markets for construction and fitness club management. Its ownership philosophy has been to let the companies they buy continue to operate as independent brands but with the adoption of best business practices learned from dozens of other software companies. At Leonardo, it has promoted the chief revenue officer Mark Charlinski to become CEO, rather than make an external hire.
Another case in point: Jonas plans to support Leonardo, founded in 2001, in building a new content management platform to replace the one the company has offered for a decade. The planned upgrades are intended to help it be better able to handle the exponential growth in large images, videos, and other rich digital content online.
Jonas’s plans seem to acknowledge the rising demands hoteliers face in managing their businesses online, as Skift noted in a deep dive on the evolution of the hotel front desk. Leonardo, for example, has helped hotels store the visual content they need to market their properties online accurately and to update the imagery across third-party channels on behalf of the properties.
“As the hotel world becomes more and more dependent on digital distribution, rollups of PMSes [property management systems] and other tools will intensify,” said David Brillembourg, CEO and founder of Brillembourg Group, which includes private equity and consultancy functions for hospitality and technology.
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Photo credit: A photo of the lobby of the Bobby Hotel in downtown Nashville. The property uploaded this photo for distribution to online marketing channels via the tech platform Leonardo, which was recently bought by Jonas Software, which has put together a hospitality technology company through acquisitions of Leonardo, MSI, Springer-Miller, and BookAssist. Lisa Diederich / Bobby Hotel