CEO Interview: Distribution Firm DHISCO Tries to Bounce Back for the Post-Hotel Era

If you’ve ever searched for hotels through one of the major U.S.-headquartered online travel agencies, the results you saw were most likely provided with back-end technology assistance from a small Dallas-based company, DHISCO, which stands for the Distribution Hospitality Intelligent Systems Co.

DHISCO is known to many hoteliers simply as “the switch,” an outsourced partner that helps hotels distribute their inventory and process transactions across various platforms worldwide.

Today, it makes 107,241 properties available for distribution via 127 travel agencies and online travel sites.

In other words, it makes the rates, availability, photos and descriptions of more than 11 million rooms at 453 hotel chains, including AccorHotels, InterContinental Hotels Group, Hilton, Hyatt, Marriott, and Scandic, easy to distribute technologically to online travel companies such as the ones owned by Expedia Inc. and the Priceline Group.

For example, if you search for a New York City hotel on Priceline.com and Marriott and Best Western properties get displayed, DHISCO is the company that enabled Priceline to search that room inventory for both chains. It fetched the rates, the inventory, the descriptive content, and the pictures.

DHISCO also works with Expedia and other companies, such as Cathay Pacific Holidays, which uses the back-end tech company to offer hotels to consumers.

A case in point: DHISCO is a significant tech partner for companies like InterContinental Hotels Group.

While it doesn’t touch IHG’s transactions that come through its “brand.com” direct channels, DHISCO does facilitate more than half of IHG’s transactions that come through online travel agents, packagers, and wholesalers.

Since late 2014, the 85-employee business has been undergoing a turnaround under new CEO Toni Portmann.

DHISCO, which launched in 2014, traces its roots to Pegasus Solutions, which was founded in 1989. DHISCO was essentially the distribution division of Pegasus.

Pegasus fell on tough times during the 2008 recession. It had fallen behind on investing in its systems, resulting in those systems becoming brittle and prone to breaking.

The company was also distracted by trying to provide too many services to hotels and saw its various business face competition from rival hotel technology companies, such as DerbySoft, eRevMax, RateGain, SiteMinder, and TravelClick.

Some hotel groups began switching to other providers, or creating in-house solutions to distribute their content instead.

Portmann says now that, after two years of retooling and a $10 million migration over to new technology platform, DHISCO is becoming competitive again.

Portmann says the long-term trend that DHISCO needs to be prepared for is that consumers are increasingly going to want to shop for lodging of all types, side-by-side, and not think of hotels as being separate from vacation homes, serviced apartments or short-term rentals.

So consumer websites and agency reservation systems need to be able to present that information to compare the lodging products in a like-for-like way, which will require a lot of changes to how hotel content needs to be prepared and presented digitally.

Globalization also means that hotels need to increasingly make sure their room rates and hotel descriptions can appeal to visitors worldwide who have varying expectations and ways of shopping. DHISCO can be a company that helps hotels bridge that gap.

A company record of promises never quite fulfilled

Quickly, some backstory: The company is an outgrowth from Pegasus Solutions, a U.S. hospitality software company created by more than a dozen hotels in 1989. It briefly went public, but then was taken private again in a $275 million takeover.

The takeover didn’t work out well for investors as Pegasus struggled to become a scalable business that could return to the public markets.

In late 2014, new private equity owners HIG Capital re-launched the distribution unit as a standalone company under the name DHISCO.

DHISCO says it sent about $8 billion in hotel revenue through its pipes last year.

Despite its relatively small size, the 85-employee company’s services are important.

Why would a company like IHG need DHISCO?

Well, if a hotelier wants to distribute some rooms via one online travel agency while setting aside other rooms to sell through a distribution system used by an offline travel agency, DHISCO is the outsourced technology behind the scenes to handle it. Rather than try to develop the tech expertise in-house, a hotel group may shop it out.

There is competition for this business. Competition is increasing, as companies like Amadeus Hospitality and Sabre Hospitality Solutions try to get more into the market, with potential market entrants like Shiji waiting in the wings.

As noted, in 2015, DHISCO appointed Toni Portmann as CEO to lead the transformation. We caught up with Portmann to find out how things have been going. We edited the interview for brevity.

Skift: Since the velvet divorce from Pegasus, how have things been?

Portmann: You always worry in these carve-outs about what’s on the other side of the rainbow. Is there a pot of gold?

We’re coming into our own now. It’s been two years, and the brand has taken traction in the industry. Now we don’t have to remind people so often that we’re no longer part of Pegasus.

When we did the carve-out, I would say we couldn’t even find the beans, let alone count the beans. Now we can start prepping sophisticated business intelligence tools.

We just finished a 30,000-person-hours data center migration.

We are on an entirely new technology platform. We went from 20,000 square feet of blinking lights and server racks in Scottsdale, Arizona to 500 square feet in Dallas, and the new setup is double the capacity.

Skift: Huh. How does that translate into functionality?

Portmann: At the time of the carve-out, we were doing about 9 billion transactions through the switch. Now we’re doing, on average, 11 billion transactions a month.

We probably went through the largest, most complex data center migration and transformation that the hospitality industry has ever experienced, and we made it a non-event for customers.

Skift: But you lost Orbitz’s business when that brand was acquired by Expedia Inc. Wasn’t that a blow?

Portmann: No. Although Expedia moved Orbitz onto their platform, we still maintain an important part of their long-ttail business and augment their content.

And our growth is even more amazing given that Orbitz moved to the Expedia platform. If you factor out Orbitz, we have doubled the incremental volume, year over year, through the switch.

Wooing back hotels and travel sites

Skift: When we’ve talked to some hotel groups they say that over recent years they lost confidence in the distribution arm of Pegasus that DHISCO has been an outgrowth of.

We are restoring confidence in hoteliers and alternative lodging specialists in leveraging our distribution solutions.

We’ve restored confidence with data and the efficacy of the infrastructure and the topology and the technology, we’re gonna take this and put it on steroids, and I think that’s what HIG is excited about.

Skift: But no real big new deals with major hotel groups yet. Some hotel groups have built direct connections to companies like Priceline.

Not true. We have now had a very important hotelier decide to switch back from a direct connect to a global distribution system which had connections to agencies and now they’re back going through us.

The company still isn’t ready to publicize this yet out of sensitivity to its other tech provider relationships.

But, yes, I take your broader point. It has been a fad among hotel groups to build direct connects. That’s a real trend.

But we’re hearing from executives, as I’ve gone around North America on a listening tour of customers, that they’re waking up and smelling the coffee about how the true, fully attributed the cost of direct connects is a bigger bill than working with a provider like us.

We hear positive traction on the demand aggregator side, too.

A CEO of a company that is really important on the supplier side said to me recently, “Toni, I wanna outsource you everything that I don’t have to do so that I can free my company up to serve guests and provide the technology that enables bookings. So I want you to handle all this other stuff for us. I can trust outsourcing to you because you are a business partner with aligned interests.”

Skift: What is venture firm HIG Capital’s goal? Is the idea to take DHISCO public again?

Portmann: No, I would not think that going public is a short term strategy. HIG is a wonderful financial partner, and it is investing for growth.

It supported our $10 million investment on this new technology stack, and they are continuing to invest in our product release plan, in our approach to content development, in our topology and go-to-market strategy.

Skift: How about international expansion? Especially in APAC. DHISCO is weak in China etc.

Portmann: Greg Berman, who became chief strategy officer when I became CEO, has been spending a lot of time lately in Asia Pacific, in China in particular.

We’ve got some very exciting new connections that are going to become live that are going to support both the Chinese traveler in country and Europeans and Americans going to the brands that they know and love in China.

So really excited about the add of that area of the region. Latin America has gotten a lot of our focus; we are excited about adding both some content and the opportunity for some new demand into the Latin American environment.

Long-term changes in hotel distribution

Skift: Historically DHISCO has been all about hotels. Still true?

Portmann: I would call it, people who have places where travelers want to stay. And that could include alternative lodging.

For example, we just launched RentalsCombined. They’re a hybrid, where they will partner with hotels for some of their allocation to be offered as rental property, and they also support individual properties for extended stay.

Skift: Back to hotels, still most of your business. Why would hotel groups outsource their tech to DHISCO?

Portmann: A common reason is about handling the crushing volumes of data requests. In the vernacular of our business, we call it “looks-to-books.” Search volume is growing at 60 to 70 percent a year while bookings worldwide, outside of DHISCO, are only growing about something like 7 percent.

So, how many times is a traveler shopping or looking for rates via online travel agencies and metasearch? Every time someone runs a search on, say, Kayak and a hotel’s data needs to be pulled, that represents a call on someone’s server systems.

We have the sophistication to handle the demand. Unlike a hotel, we can invest in the best practices. It’s all about speed, stability, and accurate transactions.

Skift: What’s your tech secret?

Portmann: Well it’s not a secret, but we just do it well. A hotel may have as many as 10,000 calls for data from online and offline travel agency systems for every booking it receives.

So we cache, or store, a copy of the hotel’s data on our systems and answer a portion of the queries with that.

We cache about 65 percent of those shopping transactions, and then deliver from a cache, at a 95 percent accuracy.

That means the rates we show are accurate when the shopper moves from research to purchase mode, so to speak.

We can help protect a hotels’ central reservation system (CRSs) from crashing. Some hotels have legacy systems that cannot stand up to the shopping volume with real-time rates and availability.

We’ve adopted a brand new topology and infrastructure in the way that we shop, book and cache, and protect those big CRSs out there.

Skift: What’s interesting on your product release plan?

We’re working with a travel tech partner, Zumata, on putting alternative lodging and some business rules around, how, if we were to start over in hospitality and think about “places to stay” instead of just hotels, how might we structure data?

Some big, big hoteliers have agreed to lock themselves in a conference room with us and spend some time and money having this conversation and piloting some experiments.

Let’s say there were a dozen suppliers offering rates at a hotel in Beijing.

All of their data points could be different. Zumata maps all these data points to one common name, or identifier, and themes match every one of the suppliers so that the data can be easily read by the Pricelines of the world.

There’s a broader industry issue. Hospitality is changing, and we need all hotels to define things the same way and input their data the same way.

Right now, the way many hotels choose to categorize and classify data isn’t matching the evolutionary nature of the next generation of technology platforms and the next generation of lodging.

Skift: What else in consumer-facing hotel and lodging distribution makes DHISCO well placed to help hotels?

Portmann: Hotel content is a mess. Hotels aren’t presenting their information in standardized ways.

As their content gets syndicated and globalized, their rooms may not be appearing properly in agency computer systems and online travel agency and metasearch sites.

So we’re providing hotels with an audit on how complete their data records are for listing and describing amenities to maximize their searchability by agents and consumers.

We give the hotel scores. For example, if they have a wide range of good images, they get a higher score.

Our research finds that hotels with at least a dozen images of rooms and the property’s general areas and amenities perform much better in search. But many hotels have fewer than 12.

We’re trying to use automation to help with improving hotel content. We did a pilot with five hotel brands — sorry, not allowed to publicize the names right now — and we asked, do these hotels have important attributes that consumers worldwide are searching for and where, they have gaps, can we fill in the gaps automatically?

If the hotel doesn’t make clear it is compliant with Americans with Disabilities Act (ADA) regulations, we will add that because we know some people are searching for that.

Skift: What other hotel tech challenges is DHISCO taking on, Toni?

Portmann: So, we’ve done a lot of data-mining on what gets shopped for. Not necessarily what gets booked, ’cause hotels know what gets booked, but not what gets shopped for.

And we’ve come up with the key attributes, that, if you don’t have that in your content library, and if you don’t have it in your shopping engine, you’re just not gonna get booked.

We can then help hotels update how they describe their products or the kinds of products they sell.

Skift: I have no idea what you’re talking about.

Portmann: Ha! So… we know the most searched for amenities, such as airport shuttles. It turns out some hotels have these amenities, but they don’t properly enter the data or tag their data in a way so that the computers can find it.

A classic example is that, at some U.S. hotels, when they give us their rooms to distribute, don’t even fill out “non-smoking” as attributes for their rooms because it’s assumed their rooms would be non-smoking in the U.S.

But a lot of European and Chinese travelers search for smoking. If you did had smoking rooms but don’t include them, your hotel won’t get returned in their search results.

Pool – what we’re learning is a pool’s not a pool anymore. Is it heated or not? Is it indoor or outdoor? Is it a lap pool?

Is parking free or valet? Is wifi-free? Are pets allowed?

Free parking, free wi-fi, pool, and are pets allowed.

We’re telling hotels, “Hey, you better have not only descriptive content to appear on online travel sites, but you better also have coded in the content database whether or not you have these features.”

Skift: Now I get it. But hotels won’t bother unless they’re sure that bookings will increase and that the effort will be worth it, right?

Portmann: But we are boosting conversion!

I’ll give you project that we did with Amadeus, which distributes hotels to travel agencies. We call it content connect. We did this data transformation.

We are now feeding Amadeus’ front end, and we show that just through DHISCO improving the quality of the content, bookings are up 23 percent for one brand, up 8 percent for another and nothing changed otherwise.

The only thing that changed is we’re giving Amadeus better content, and it is distributing it so that people can read it.

Skift: Let’s talk competition. Amadeus Hospitality has its tools. Sabre Hospitality Solutions has the SynXis product and other software. Aren’t these the middlemen that are connecting the hotels to the Pricelines of the world? How does DHISCO fit in?

Portmann: The beauty is, those distributor tech companies outsource to us the stuff they don’t want to do.

So Sabre and Amadeus and Travelport are all really big parts of our ecosystem. They use us as a switch.

If you’re Amadeus or its peer, we make it easier to get access to demand partners like Priceline and easier to get access to hotel inventory.

Skift: OK but hotels are still the bulk of your business. Aren’t they all trying to have direct connections with demand partners like Priceline and the global distribution systems?

There was a craze for direct-connecting. But now hotels see that, when they have to make one change, they have to push that change through all of their various direct connections instead of saying, “DHISCO, we’re connected once to you.

These 12 partners that you’re connected to — will you just modify and map and transform our data to get to all of this search engine?”

Skift: Don’t travel management companies also do what you do?

Portmann: Think about all the chains, all of the properties, all of the images of rooms and lobbies, all of the different types of rates.

When a travel manager goes property by property and creates direct connections with demand platforms, it’s not as robust of a connection.

You don’t have as much of the functionality. You certainly don’t have the leverage of our speed and the protection to surges of calls on your system.

And again, one change gets made, and now a travel manager has to change it through all of those individual direct connections, versus that one DHISCO feed.

Skift: Since you took over the business at the end of 2014, has anything changed in the commercial model for DHISCO and what is the commercial model?

Portmann: We needed to align interests with both the supply side and the demand side. We inherited some pricing and some contracts that were counterintuitive and counterproductive to driving a partnership with a win-win goal.

If the hotels aren’t making money, we are not making money. If the demand partners aren’t making money, we are not making money.

So we’ve commercially changed to align all of our commercials with the success of our partners making money.

Skift: How expensive is DHISCO?

Portmann: We are less than one-half of a percent of the cost of distribution, on average. So we are a very very efficient and very, very cost conscious channel for switching.

Sometimes, we make money largely from a transaction-based model, which aligns us with helping boost conversions, but we also are making money in content distribution.

Some brands use us for content distribution even if they have direct connections because they like the fact that we have, for example, 175,000 images in our hotel contact database.

Skift: Still not getting why hotels would prefer to distribute via DHISCO if they can have direct connections.

Portmann: Lots of ways we enhance the data and simplify the distribution.

One example: We can translate the descriptions of their rooms and amenities, and we pass that translated content over, to help hotels to appeal to global audiences.

We are going to our hotel chains and saying, we will translate your content in up to nine languages. We’re doing the translations with a partner, SDL, that has talent in market — real people that speak the language.

We will monetize that translation, and then charge a very small fee per property per month for maintaining that. So if a hotel changes the franchising company it works with, that translated content follows that hotel.

We then feed that translated content into our hotel content repository, and we distribute that anywhere that that hotel wants it distributed.

So all the distribution systems like Amadeus, Sabre, and Travelport, and all of the online travel agencies, would have access to it that are connected to us for that content.

If you put in a different pool or you add a new restaurant with a fancy chef, and you want that translated, we just add that in, as and when.

Skift: You mention caching the data. Why only cache about 65 percent of it?

Portmann: The problem today is that rates aren’t always static. Hotels are becoming more sophisticated, as airlines have long been about revenue and yield management.

It is vital that not every room under every situation get cached. There isn’t a lot of variability with a standard extended stay property.

But a high-end property in a major urban destination might see lots of swings in demand depending on business events that happen in town.

If I am a hotelier, I want to cache the stuff that’s unlikely to change from a revenue management standpoint. That takes care of the majority of bookings.

Skift: So the service that DHISCO provides for the lodging supplier is, it protects the CRS (computerized reservation system) from buckling under the pressure of too many calls, and it does this with caching, among other techniques…

Portman: Yes.

Skift: But what do you do for the demand aggregators, like the Booking.com’s of the world?

Portmann: We optimize to make sure data is accurate and fast.

The last thing that the Pricelines of this world want is to have a customer show up, and the rate or room isn’t accurate.

The number one worst thing is, you cannot walk a guest. If a guest arrives with, say, a Delta Vacations confirmation number, the resort has got to have that suite available at the rate booked on the website, with the resort fees and the taxes delineated and accurate.

That’s why the Pricelines of this world say they use DHISCO: Because we return to them a reliable rate and inventory no matter where that guest is traveling to.

We’ve cleaned the data, so to speak, and we’re fast so our cached, or saved and copied data, is still accurate.

Skift: What are your goals in the next year or two?

Portmann: So, beyond shopping connectivity between lodging supply and demand partners, we’re working on our access strategy.

We’re coming up with management consoles and portals that will be quicker and more intuitive for hospitality pros to use.

Today, unfortunately, it takes days and weeks to load what’s called a property build. We have a strategy that will get that time down to mere seconds to get a property loaded with rates and availability and ready for distribution to all of the online travel players.

We also want to get into business intelligence.

For example, we might show a Marriott all of their online travel agents and show them the look-to-book ratio for each of those shoppers — which agents books Marriotts most often.

Marriott then can see who’s the most productive at booking their rooms. Its commercial teams then can pitch those agents more effectively.

We are also showing the 45 central reservation systems we work with their speed and latency via our connection relative to an anonymized set of competitors. So without naming names, we can point out a CRS’s speed it takes a travel agent to shop and book a transaction on it relative to others.”

Right now we’re offering this for free. We’re learning how to get good at this.

Skift: Right, and does DHISCO charge for it or is the idea of like giving an analysis like about which attributes are most important sort of a way of just building … it’s a free service to build a relationship with the important clients?

Skift: So hotel and lodging owners who were concerned about the brittleness of Pegasus’ systems and then they built direct connections. What is your message to them now to lure them back, what’s a metric or proof to say, feel confident, we are your choice.

Portmann: We now have 18 KPIs09, key performance indicators, that we provide them free of charge that not only tells them how well we’re doing the job we promised them we would do.

So we have 18 of those discreet metrics now that we’re distributing and the good news is that we’re getting high scores on reliability and we’re super fast and super stable. Those are table stakes nowadays in technology, but we hadn’t been performing that well in the past.

Skift: What’s the biggest problem in hotel distribution today?

Portmann: From a technology perspective, there needs to be a revolutionary change in data structure.

I don’t think the answer is for the industry to try to push for technical messaging standards the way the airline industry has with the New Distribution Capability. The hotel industry is too fragmented, while there is a concentration of a few airline groups that can drive through a standards change in airline distribution and merchandising.

I know I’m making a radical statement to reject standards, but hear me out.

Hospitality reminds me of health care 15, 20 years ago where we had very fragmented and disconnected systems and we did not have a data structure that facilitated inoperability.

And quite frankly, the travel tech environment has gotten even increasingly complex with mobile only or mobile first distribution.

There is somewhere between 900 and 4,000 attributes floating around, meaning different types of ways of describing hotel information.

It’s madness.

We’ve got to start over and I have this conversation often with our largest hotel partners and our largest demand partners including the global distribution systems like Amadeus and Sabre that have the power to advocate for industry change.

I suspect that we’re all going to come to the same place which is standards but not going to work.