Stayntouch CEO Aims to Defy the Odds in Hotel Tech Against Oracle Hospitality

You might think most hotels wouldn’t attempt to overhaul their travel technology during a pandemic that’s hurting revenue and shrinking staff. But that’s not the story for Stayntouch, a maker of hotel property management systems.

To learn more, I interviewed CEO Tom Underwood on Wednesday at the company’s headquarters in Bethesda, Maryland. Underwood said his company is growing.

• Hotels use Stayntouch’s full property management system to manage 65,000 rooms — up from 40,000 in March 2020.
• December marked the company’s best quarter for new monthly recurring revenue since its founding in 2013, though the company didn’t disclose the amount. 
• On Wednesday, the company announced it had signed up Mint House, a next-generation hospitality brand. It apparently stole the business from Guesty, another property management service provider.
• Other clients include First Hotels, Conscious Hotels, Margaritaville, Valencia Hotel Group, and Modus Hotels.
• Most rooms served by Stayntouch belong to traditional, non-boutique brands, such as Showboat in Atlantic City, Sage Hospitality Group, Village Hotels, and Innisfree. But the company expects a lot of growth with emerging hospitality players similar to Mint House.
• Google will use Stayntouch’s property management system to help run its hotel-style residences for employees at the company town it’s building on a campus near Mountain View, California. It’s for five properties, totaling 302 rooms. Given Google’s security requirements for working with partners, that’s an interesting endorsement.

Is Stayntouch a serious challenger?

• The company seems small. In 2020, Tyler Morse, the impresario behind U.S. hotel operator MCR Development — the owner of the TWA Hotel and other properties — raised capital through a fund to buy Stayntouch from Shiji. The price was $46.8 million, chump change compared to the $4.6 billion Oracle Hospitality paid in 2014 for Micros, which it turned into global market leader Oracle Hospitality.
• Underwood said the Stayntouch transaction price didn’t reflect the company’s full value because it was an unusual forced divestment.
• The fund championed by Morse raised extra capital at the time of purchase. That has given the CEO resources to expand. Underwood, hired a year ago, has hired 20 employees, including a chief revenue officer and a chief technology officer.

The company seems undercapitalized compared to Oracle Hospitality and other rivals. The landscape includes:

• Yanolja, a Softbank-backed Korean unicorn startup, which intends to spend on its cloud-based hotel software business to overtake Oracle Hospitality’s lead within a few years.
• Cloudbeds, another Softbank-backed unicorn, which raised $150 million in November and grew its revenue in the first half of 2021 compared to the first half of 2020.
• Treebo, a company based in India, which Accor backed a few months ago.
• Mews, backed by Salesforce Ventures, claimed significant customer wins in 2021.
• Protel, which has a significant market share.

Underwood said Stayntouch has an ownership structure that lends itself to further external investment, which could help fuel its growth.

• “We’re an independent company, with all employees having stock in Stayntouch, similar to a VC- [venture capital-] backed startup,” Underwood said. “We’re a prospect for additional investor capital.”

Underwood has, over his career, hopped between being an equity analyst and an operational decision-maker at online travel companies. So he has an analyst’s big-picture perspective on the hotel software sector.

• He was previously CEO of Room 77, chief financial officer at corporate travel agency Lola, a senior vice president at Orbitz, a leader of consumer e-commerce equity research at Legg Mason, a director of revenue management at Priceline, and an equity analyst at Morgan Keegan & Company.
• He said the two most critical metrics to evaluate hotel software companies are growth momentum and gross profit margins.
• He declined to disclose details. But he said he joined Stayntouch a year ago because he liked the numbers he saw and that the numbers have improved since.
• Underwood sees consolidation in the hotel tech sector over a five-year horizon. Tech categories, in general, tend to see a few players dominate thanks to economies of scale.
• “There will absolutely be fewer players with greater market share,” Underwood said.

Industry figures are debating about the right configuration for operational software in hospitality.

• “Twenty years ago, when I joined Priceline, the exciting change was in distribution with the arrival of internet-based online shopping,” Underwood said. “The exciting change now is in the content, so to speak. The product is evolving to new alternatives away from the traditional hotel, the traditional vacation rental, etc.”
• Examples include hotels now selling multi-night guest stays without housekeeping and hotels selling packages that bundle a stay with complimentary access to a co-working space or an off-site gym.
• “Hotel software has to be flexible enough to adapt to the evolving product,” Underwood said. “The PMS and the CRS [central reservation system] are converging to meet the challenge.”