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EVS 2022 Frisco Wrapup

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June 10, 2022
Executive Vendor Summit Review
Douglas Rice

March 30-31, 2022 - Westin Dallas Stonebriar Golf Resort

The 17th Executive Vendor Summit, held in late March in Frisco, Texas, brought together about 100 senior executives from hospitality technology vendor companies for two days of education, networking, food, and fun. A special feature this year was watching Rich Siegel sit silently on stage the second evening, as no fewer than 17 industry luminaries roasted him on the 30th anniversary of the founding of Hospitality Upgrade. Watching Rich hold his tongue for an hour can only be described as a once-in-a-lifetime experience!


Paying in Crypto

After a Wednesday morning golf outing in near gale-force winds, the educational program kicked off mid-afternoon with Coinbase’s VJ Vesnaver explaining cryptocurrencies and blockchain.  Vesnaver emphasized how the technologies enable the creation of digital property on the Internet, both monetary and nonmonetary. He described how they are enabling the migration of the worldwide web from Web 1.0 (read-only) and Web 2.0 (read-write) into Web 3.0 (read-write-own). He also discussed the perception that cryptocurrencies attract criminal elements, noting that except for ransomware attacks, criminals now face higher risks of getting caught using cryptocurrencies, where unlike cash, all transactions are traceable. Criminals do still use crypto for ransomware, however, because law enforcement in the countries they target cannot reach them in the countries where they live. Also, unlike other forms of payment, crypto transactions cannot be blocked or reversed, which makes them ideal for ransomware.

Art Class

Attendees’ kindergarten-level artistic talents were tested at the cocktail reception, where they received a piece of paper with the name of another attendee and were instructed to find that person and draw a lifelike crayon picture of their face. There were some great likenesses and a few humorous ones, but if it was a test of the correlation between technology management expertise and artistic talent, the result was somewhat sadly predictable!

Protecting Personal Data

Thursday morning kicked off with Eva Novick from the law firm of Foster Garvey providing an overview of the current state of privacy law, which covers the collection and use of personal data, as well as cybersecurity law, with its obligations to protect the data that you have. Novick said that it is a matter of when, not if, you will have a data breach. The impact for vendors, both on their own businesses and that of their customers, is being affected by changing public views on data minimization, many of them resulting from high-profile disclosures like Cambridge Analytica and Google location tracking.

Novick walked attendees through a litany of new privacy laws, including the California Privacy Rights Act (CPRA), which supplements the earlier California Consumer Privacy Act by adding the right of consumers to know what data companies hold. It also regulates “inferences” obtained by marrying consumer-provided data with third-party sources. She also reviewed recent privacy legislation in Virginia, Colorado, Utah, and China, and the evolution of European Union regulations regarding transfer of data between EU and US organizations under the Schrems II court ruling. The session closed with a discussion of ransomware trends, noting that attackers now specifically target companies with cyber insurance and that 90% of attacks do not result in financial loss to the target. However, the perpetrators increasingly threaten to publish stolen data to competitors or authorities, rather than just locking down files.

Identity and the Future of E-Commerce

The next session was about the “upside-down world” of self-sovereign identity (SSI), which I presented along with Mark Haley of Prism Hospitality Consulting. We covered the key building blocks of this emerging Web 3.0 technology, including the ability to control your own identity and logins digitally without needing to entrust them to third parties, and the potential to obtain, store, and use verifiable digital credentials attesting to everything from citizenship, memberships, loyalty status, and credit cards, and even to proof of vaccinations or specific past purchases. 

The emerging technology maturity today was described as like that of the Worldwide Web around 1993, which at the time had HTTP standards and the first browsers but otherwise very limited capabilities; few even imagined then how it would ultimately change the nature of commerce, payments, social dialogue, communications, and other everyday interactions. SSI technology is getting significant investment from numerous national and state governments, technology firms, and large financial services organizations, and has been a major focus of the Worldwide Web Consortium for the past several years, with several of the necessary standards now fully developed.

SSI was described as potentially revolutionary to all aspects of commerce, including travel. Customers will be able to maintain their identity data in a single place and enable merchants to access it selectively, eliminating the need to update dozens or hundreds of accounts when they move or change email addresses or phone numbers. Potential travelers can broadcast their travel needs, interests, and credentials (anonymously or otherwise), and then collect real-time “bids” from suppliers. These bids need no intermediaries, since they can be communicated via point-to-point protocols, potentially enabling today’s “B2C” models to be replaced by “C2B” models with the customer at the center. SSI also enables travel suppliers and other merchants to retrieve permissioned, up-to-date customer data whenever they need it, eliminating in most cases the need to store it. One of the reasons financial firms support SSI is that it can indeed eliminate the need to store (or even to use) credit card numbers.

Finding the Exit Door

John Rovani of Ponterra Business Advisors led an engaging session on preparing your technology business for sale and attracting the right buyers. Rovani has advised tens of companies in the hospitality tech field through successful exits; he described the current acquisition market as “crazy.” He said that recurring revenue is the key. He talked about one company that offers premise-based software but sells subscriptions a year in advance with little churn; it got 12 bids without any one of the bidders even visiting their offices. Valuations remain high, with EBITDA multiples around 12 for the past four years.

Rovani spent much of the presentation explaining how to prepare for an exit transaction. The key value drivers besides recurring revenue are gross margin, diversification, the size of the addressable market, customer retention, growth and EBITDA potential, and the management team. Value destroyers are the opposite, plus industry maturity and low barriers to entry. He also noted that having a head office in the U.S. provides about a 30% increase in valuation, and touted Puerto Rico as a good option for many companies because of its Economic Opportunity Zone benefits.

Specific preparation recommendations included converting from cash to accrual accounting; moving customers to longer-term, auto-renewing contracts; getting your books audited (or reviewed, for smaller companies); and using International Financial Reporting Standards if the business is international. Buyers look for predictable and reliable business models, so it’s critical that yours be easily understandable. Part of the preparation should be identifying the companies you could potentially sell to and adjusting practices to make yourself more attractive to them.

Rovani cautioned against sharing raw financial data with buyers, advising to always adjust for revenues or costs that the buyer will not acquire so they can see the financials as they would after acquisition. Deferred revenue on the books should be compared to the cost of servicing it, so that any excess can go into the valuation. Buyers will look for adequate cyber insurance and check software via penetration tests and reviews of open-source software, so sellers should anticipate this. He also recommended doing background checks on buyers.

An Arresting Presentation

The Executive Vendor Summit always has at least a few surprises. This one was no exception, with a few attendees who shall remain unnamed making a beeline for the exit as Frisco Assistant Police Chief Billy Clay entered the room and took the stage. Those who didn’t flee, however, heard an interesting dialog about the challenges of policing in a rapidly growing suburb. Many out-of-towners may have thought of Frisco as a sleepy Dallas suburb, but it is a rapidly growing city that is now the 12th largest in Texas, with 354 employees in the police department. Clay explained the proactive work the department does to engage with businesses, especially in the entertainment district, to help avoid incidents before they happen. They also provide active shooter training with local schools and businesses, including hotels. 

Mountains of Data and Analytics

Matt Busch of Equifax took the stage after lunch to talk about how the company has evolved following its major 2017 data breach. Busch noted that while most people know Equifax as a consumer credit agency, this only accounts for about 2% of the company’s business; its bread and butter is business-to-business data sales. He described a journey to replace fragmented databases scattered around the world with a single, more easily securable cloud architecture. Equifax consumes data from about 70 data exchanges, and now stores it in a data fabric where it can apply consistent security, privacy, and regulatory compliance, and effectively deal with the rapidly changing regulatory environment. 

Equifax today has strategic data assets that include web analytics; identification of suspicious behavior; employment verification services; business credit evaluations; financial asset data; and billing data from telecommunications carriers and payday loan data (which provide visibility to unbanked consumers). They try to understand whether people who want or need to buy things can actually afford them, which often requires data beyond the easily verifiable items like wage earnings. The data can help marketers understand whether a particular demographic is worth trying to reach. Bush highlighted the “Ability to Pay” index, which can rank consumers with the same credit score based on their likely ability to pay, which can vary widely. Even consumers with similar income may have vastly different spending power based on variations in their fixed expenses (such as a mortgage that has been paid off).

Making it Happen

Thursday afternoon featured two brief sessions from organizations that helped make the vendor summit possible: the event sponsor, CallTek, and the Westin Stonebriar Resort. CallTek’s Tony Espinoza spoke about data strategy, or how to improve all the ways you acquire, store, manage, share, and use data. Hotel General Manager James Montgomery and Area Associate Director of Sales Mandy Reid talked through the challenges of renovating and reopening the hotel during the pandemic.

The CIOs Speak

The final conference session was the traditional CIO panel, featuring Andrew Arthurs from Aimbridge Hospitality, Cameron Hammond from Hyatt, Dan Kornick from Loews, John Laplante from G6 Hospitality, and Yvette Vincent from Marriott. The panelists described their experience over the past year, in which the industry rebounded faster than anyone was prepared for, especially given staffing shortages. Strategic technology projects are again moving forward, in some cases more easily since hotels are still less full and therefore easier to deploy into. CIOs described hotel owners who are now leaning into technology investments as well as travelers looking for tech-forward experiences. Some supply chain issues have also impacted plans, notably a shortage in credit-card readers.

Mobile apps continued to improve. Kornick reported that Loews is getting 45% usage on the text-for-service capabilities from Kipsu, noting that this works well in a 26-property chain, where getting guests to download an app is challenging. There were several comments around mobile key, where Hyatt had already deployed 30 hotels with the new NFC key functionality from Apple, with 30 more scheduled by June. Panelists commented on the challenges with mobile key and whether it removed friction or added it today, but there was broad agreement that it will likely be widespread within a few years.

Asked about problems they wished technology could solve, the answers went in every direction: a magic pill to stop cyber-attacks; customer identity and personal information storage; making the guest’s coffee exactly the way they like it; reducing costs to owners; eliminating back-office complexity through robotic process automation; and lower-cost, more easily secured networks.

John Laplante said that the pandemic had done us all a favor by changing an industry that had not embraced technology. Dan Kornick agreed, noting that owners are now “asking how technology can make the business more effective.” 

It’s about time!
 

A special thank you to the 104 attendees who took time from their busy schedules to be with us in Frisco, Texas, and a special thanks to HFTP for its  logistical partnership again this year. Lastly, a big shout out to our event sponsors, Blueprint RF and CallTek.



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