Hilton’s Investment in HotelKey Is an Investment in Tech Progress

Travel Tech Briefing

Editor’s Note: Exclusive reporting on technology’s impact on the travel industry, delivered every Thursday. The briefing will guide executives as they decide if their companies should “build, buy, or partner” to stay ahead.

When Hilton contracted third-party tech company HotelKey to provide the property management system for all 7,000 of its hotels, it made the choice because that’s what executives thought would be best for the company.

The hotel brand’s future was the company’s main concern, not necessarily the effect it would have on the greater industry, according to Michael Leidinger, Hilton chief information officer.

But as one of the top five hotel companies in the world, what Hilton does matters. The partnership with HotelKey is more than just a simple contract; it’s an investment into the next generation of hotel technology, and such a significant investment will have ripple effects in the industry. Those ripple effects are needed as the industry slowly moves toward modernization. 

The cloud-based system that HotelKey and its competitors — like Oracle Hospitality, Mews, Cloudbeds, and Stayntouch — offer comes with an open interface that makes for easier connection with hotel vendors. It could take months and a sizable investment to connect a vendor to the old on-premises systems that most of the industry still uses, which significantly limits what a hotel is willing to try. 

Modern open systems allow quick hookups with other tech products for virtually no upfront costs. That makes it easier for tech companies to sell to hotels. If a trial shows that the product is a good match, great, the relationship can continue. If it doesn’t work, the hotel can turn off the connection, and both parties can move on to their next options without too much of a loss. 

Technology in other sectors is advancing quickly, and consumers expect that to bleed into the travel industry as well. As customers demand more modern conveniences, hotels will want easy connectivity to their core systems so they can add more capabilities and services.

There are many vendors offering different types of hospitality services that hotels may want to tap. That could be capabilities for booking pet stays, paying for parking, in-room entertainment, booking local ticketed events, guest messaging, making restaurant reservations, submitting housekeeping requests, and many more options meant to offer a smoother and more personalized experience. 

The higher the quality of hotel, the more that guests likely will expect, the more vendors that those hotels may want to connect with. Or different hotels, such as those that operate restaurants or conference halls, may need different add-ons. 

As more investment is put into companies like HotelKey, the more that tech vendors can grow their own businesses, and the stronger these hospitality add-ons become. 

Many of the cloud-based property management system companies tout the open marketplaces and the many partnerships they have with other tech vendors. That model is needed because the hotel tech industry is highly fragmented, and there’s really no one-stop-shop for every capability a hotel could want. 

Richard Valtr of Mews likened the model to the iPhone, as if the property management system is the iPhone operating system, and the user can add any number of third-party apps according to individual needs. 

“You also want to make sure that you’re encouraging a flourishing of new applications and new innovations that can come to market, and I think that that’s what we’re super proud of,” Valtr said during an interview late last year. “And that’s what we want to kind of keep, keep doing, basically to drive that innovation forward for this industry.”

He said a number of partners have raised venture capital or completed other deals because of the growth they have experienced through the Mews marketplace, where hotels and tech vendors can connect and do business. He said one of those was Pace, a hotel revenue management platform that was acquired by FLYR last September. 

Oracle Hospitality is another that’s making a point of spreading the word about its marketplace. 

“We have seen an explosion of innovation, and all these lands in our marketplace,” said Laura Calin, vice president of strategy and solutions management for Oracle, during an interview in March. “This has a dual effect. For the innovators, it’s an amazing opportunity; they can essentially grow with us as we’re expanding the number of hotels. For our customers, it’s tremendous because they can look into our marketplace and say, ‘Wow, look at all the solutions I can pick.’”

None of the modern property management system companies hold a significant portion of the market, but their share is slowly increasing as companies small and large choose cloud-based options. But adoption is still low at this point, so when a company like Hilton makes such a switch, it’s a big deal.