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When Oracle acquired Micros six years ago for $4.6 billion. it gained virtually overnight the largest share of the hotel operations software market worldwide. Yet the merger faltered. So the company has looked to a series of leaders to help the unit regain its mojo.
In November, Oracle drafted Alex Alt to be the top boss of its hospitality unit. It wants Alt to revive the division’s momentum and hone its execution. Alt, in turn, wants to add functionality in distribution and customer relationship management to the Oracle portfolio.
“Oracle has been growing both the top-line of the business and the footprint of installed customers,” said Alt, whose title is senior vice president and general manager. “Part of the reason I’m here is to step on the gas.”
Oracle’s signature product is its hotel property management system, or PMS. This is a central database that keeps a master record on guest data.
Skift Research estimates that Oracle Hospitality is the largest player. Oracle’s various property management systems have a 16 percent share of available hotel rooms globally, according to a report this week titled The Hotel Property Management Systems Landscape 2020. Oracle has a 6.3 percent share of hotels by property, though that figure underplays its high penetration among the best-known brands.
In an interview ahead of Oracle Hospitality’s customer conference next week near its San Diego headquarters, Alt discussed the unit’s long-term prospects, how his background relates to solving technology and business strategy problems, and what he considers the weakest points in the product suite.
New Boss, Old Problems
Alt knows both technology and operations. Alt led Sabre Hospitality Solutions, a division of North America’s largest travel technology company. Alt also worked for a half-dozen years at Rosewood Hotels & Resorts.
Alt is Oracle Hospitality’s third boss since 2014. He replaces Greg Webb, who led Oracle Hospitality for a year after having been a top executive at Sabre. Webb left to become CEO of technology company Travelport.
A wave of smaller rivals have been wooing hoteliers to cloud-based services billed via a subscription. Some say Oracle Hospitality has been slow to adopt that model because it cannibalizes its profitable sales of hardware and upfront license fees.
Portfolio Gaps to Fill
Alt said Oracle Hospitality needs a better offering to address distribution issues.
“Having a background in distribution is one of the reasons I ended up at Oracle,” Alt said. “I know that market and competitor set extremely well.”
Alt defined “distribution” as “how a hotel company gets its inventory onto the right point-of-purchase at an optimal price with technology that doesn’t need heavy amounts of integration and that has real-time synchronization of data.”
What about hotels that want to sell directly to consumers?
“We need to do better at helping hotels take information that resides in our property management system or point-of-sale system and enable the hotel brands to differentiate their offers on their hotel websites, apps, and call centers from other channels.” Alt said. He clarified that he meant taking real-time rates and inventory and putting more information behind them. A hotelier can then use the combined information to make their brand stand out, rather than sell rooms by lowest price.
Alt said the other area Oracle needs to enhance is its ability to help hotels improve the guest experience.
“We’ve got some great partners in CRM [customer relationship management software],” Alt said. “But there’s an opportunity to embed more CRM capability inside our applications.”
Plugging these gaps will demand multi-million dollar investments a year.
Head in the Cloud
“I could distill my vision for Oracle Hospitality to three words, I’d say cloud, reference-ability, and growth,” Alt said.
By “cloud,” Alt meant that he wants to get tens of thousands of hotels using Oracle Hospitality’s property management system and related applications via the cloud.
That’s a hill to climb. Less than 15 percent of Oracle Hospitality’s customers, such as hotels and restaurants, have some sort of cloud product from Oracle — though not necessarily the property management system.
By “reference-ability,” Alt referred to word-of-mouth marketing. “When people ask the question, ‘Would you recommend to another operator or owner that they use Oracle Hospitality solutions?’ we want the answer to be yes.”
Alt said he felt great about the pace at which his unit’s product development team is adding features and functions.
As for growth, Alt cited his five years at Sabre, where he tripled the size of the company’s hospitality services unit, as a signal that he grasps how to drive growth.
Alt declined to disclose a growth target. But he said, generically speaking, that there’s no reason a business like this one shouldn’t be growing at a double-digit percentage rate.
Complaints about service and customer support abound. Gripes about interoperability with other hotel tech systems continue to be a staple of conversation at a few industry conferences.
“That’s an outdated story,” Alt said. “Whether it’s metrics like first-call resolution, first-day resolution, the average speed of answer, backlog, and so on, we’ve seen massive improvements.”
The executive said that, while the work isn’t done yet and remains a big priority, support levels have improved a lot.
“Our unit is gaining autonomy and control over things that had been central at the Oracle parent level to give me more end-to-end ownership of a customer’s experience,” Alt said.
Oracle faces competition on a few fronts. Among pure-play competitors, Protel is the largest rival and appears to be faster at adopting the cloud and new ways of exchanging data with hotel tech vendors.
Dozens of startups have sprung up that claim they can help hotels with a cloud-first approach, touting faster integrations with third-party hotel tools. Some, such as Cloudbeds and Hotelogix, tend to target the low end of the market, while others, like Apaleo, iReckonU, and Mews, claim early traction with independents and regional chains. In August, for example, Mews raised $33 million in funding from Battery Ventures, a top-tier Silicon Valley firm.
“A narrative exists around some newer companies that need to gain share, and given that Oracle Hospitality is the incumbent with a large install footprint globally, it’s only natural that we’re going to be a target,” Alt said. “For good or bad, I kind of operate in a constant state of paranoia when it comes to business strategy, and I know we need to be agile, innovative, and competitive.”
Similarly, some hospitality technology brands have acquired or developed property management system technology, with one of the largest being South Korea’s Yanolja and the U.S.’s Choice Hotels via its SkyTouch unit.
Alt rejected the oft-repeated idea that startups built from scratch for the cloud have the edge over Oracle Hospitality. He said the Oracle parent company is one of the rare entities in the world capable of moving and supporting the global hospitality industry at scale and with tight security in the cloud.
“Why would hoteliers buy from Oracle Hospitality? Because of know-how, patents, and security.” Alt said. “We have a daunting lead in helping hoteliers to offer a product that’s physically and legally compliant in hundreds of geographies, with tight security, and able to provide accurate information to governments on things like tax.”
Wooing Hearts and Minds
Yet some hoteliers still complain. Oracle’s new Cloud PMS product doesn’t seem as robust as its on-premise offering, according to interviews done for Skift Research’s property management system (PMS) report.
Only about a couple hundred of its 38,000 hotel customers have migrated to Oracle’s cloud-based property management system.
Alt believes the dynamic has changed and that the move to the cloud will speed up. “In the first few years following the acquisition of Micros, Oracle didn’t have the bandwidth to tap the hospitality unit into the mothership for capabilities,” he said. “Now that we’re past the integration phase, and we’re tapping into Oracle’s expertise in A.I. [artificial intelligence], which we means we can give hoteliers chatbot technology and data analytics and the best-available security.”
Among enterprise software companies with hotel services divisions, rivals include Infor, Sabre, Amadeus, and Shiji. These companies have approached the hotel tech market to varying extents. Examples include: Infor’s InforHMS suite, which serves about 800,000 rooms; Sabre’s 2018 debut of its SynXis Property Hub; and Amadeus’s 2019 completion of a reservation platform for the conglomerate Intercontinental Hotels Group (IHG) as a first reference customer. Shiji is now pushing the StayNTouch property management system.
Alt also rejected the notion that Oracle Hospitality doesn’t play nice with other tools vital for hotel operations, either on compatibility or pricing. He said the company has 5,000 integrations, and he noted the service’s extensive connections for food and beverage, events management, financial, and point of sale solutions .
The company continues to test a new integration platform. For example, it has approached revenue management software companies to do pilot tests. Oracle streamlined the technical integration work for faster onboarding, Alt said.
As for cost, Alt said he finalized this month a new commercial approach on integrations that will be different from how Oracle has made money off of the use of those data connections between hoteliers and vendors. But it won’t be until after pilot testing that the industry at large will sees this fresh approach.
Looking Down the Scale
So far, so upbeat. But hoteliers should mull some topics that might temper the optimism for which California technologists are famed.
One worry concerns pricing. Oracle Hospitality has mainly catered to large hotels and multi-property chains. As it has saturated the top end market, Oracle Hospitality has needed to look to the wider market for growth.
“We’ve got the greatest share of market close to the top of the pyramid,” Alt said. “There’s an opportunity for us to grow in every slice of the chain scale, particularly for the smaller groups and independents and the limited-service segment.”
Grabbing market share from Sabre and other rivals may sometimes mean targeting lower-value properties, which, in turn, could translate into lower fees. Will Oracle have to reduce its cost of servicing customers to a model that’s cost-effective to serve the mid-market and long-tail of hotel segments? Unclear.
Alt has familiarity with navigating the limited-service segment. His former employer Sabre Hospitality targeted it. Sabre’s flagship hospitality service is SynXis, a booking engine that hotels can add to their website or app. Tens of thousands of small groups and independents use it.
Sabre’s SynXis Central Reservations system also appeals to this market segment. The tool lets hotels distribute their rates and inventory to call centers and hundreds of online travel agencies, metasearch engines, and other third-party distributors. The system can also plug into digital services that range from web design and marketing, such as offering a chatbot for guests to use.
This context raises the question of whether Oracle might either buy or build a booking engine to replace its little-used offering.
Long Road Ahead
In brief, Oracle Hospitality faces a long haul ahead. It must shift its business from selling property management systems and point-of-sale systems to become a software and infrastructure provider for everything that connects in hotel technology. That’s a tall order.
Yet the company makes a persuasive case that it’s on the upswing.
“I feel somewhat lucky to have had the baton passed by Greg Webb now, rather than have been picking up the baton 18 to 24 months ago,” Alt said. “I’m not entering a turnaround situation by any means. I’d like to take some of the things Greg did that positively impacted customers and employees and take them to the next level.”
For more sector analysis, Skift Research put out a report this week titled The Hotel Property Management Systems Landscape 2020.