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Siegel Sez

September 12, 2019

Siegel Sez

I have always been a believer in taking chances. Knowing that sometimes you will fail, it still beats avoiding failure because you never take chances. I am not sure this always makes sense, but that is what I do. This year at the Hospitality Upgrade CIO Summit we told attendees if they arrived a day early we had arranged for them to experience the IBM X-Force Cyber Security Command Center to understand how vulnerable they were and what happens when a breach occurs. To our astonishment, almost 90 percent of the attendees came in a day early. We thank IBM for accommodating a much larger crowd than originally planned. When you have nearly 60 attendees say that the experience was unbelievably valuable and something they deal with daily, you know that you have hit a home run. A couple of the larger companies are now planning to bring entire executive teams since a breach affects everybody. It was one of the great experiences at the 18th annual CIO Summit. On the fun side, who would have guessed how enamored people are with a behind the scenes tour of Fenway Park? Here a sneak peek of the first amazing pictures on https://www.hospitalityupgrade.com/CIOSummit2019photos. Keep checking back for more very soon.  
Hopefully, you will take a look at them and laugh. My favorite event was watching a group of competitive technology leaders rowing down the Charles River, which separates Boston from Cambridge. The race was a close one! Take a minute to watch the video and if you see someone you know, be prepared to laugh or maybe congratulate them. https://www.hospitalityupgrade.com/CIOSummit2019RowingCompetition/ . In the horse world the winner of the rowing won by a nose! It was a great week in Cambridge, Mass., and it was a very successful CIO Summit from the feedback we have received.

In our Fall issue of Hospitality Upgrade out in October, we will take a deep review at the event and the very unique program presented. Be sure to subscribe to receive this fantastic summary (www.hospitalityupgrade.com/subscribe) which will include a legal look of what is going on in California and a very different look at the role women play or should play in the hotel industry. We thank the more than 60 attendees for taking time out of their very busy schedules to join us at this year’s CIO Summit. What a week! If you are a vendor of technology there is still time to be part of our big fall issue and all the related online digital opportunities that are included. Please contact anne@hospitalityupgrade.com quickly for information.
On a sad note, the industry lost one of its most liked and respected personalities, and to many of us we will miss a good friend. Larry Hall lost his battle with pancreatic cancer last week. Larry started his career with Sheraton, was a pioneer in the revenue management space as the president of Aeronomics, ran Springer-Miller Systems as its president and CEO for many years and was a great supporter of both HTNG and HFTP. He will be very much missed but always remembered as one of the good guys in the industry who always brought a smile to your face.  We will look back at Larry’s career and influence in our upcoming issue of Hospitality Upgrade. Rest in peace, Larry.
Doug Rice has a thought-provoking piece on why technology innovation in the hospitality industry will not happen and why. I am sure everyone reading this can relate. Also included is the latest happenings in the world of technology for our industry. I will see you at the end with this week’s attempt at you-know-what. Questions or comments, please use rich@hospitalityupgrade.com

Definitely Doug

Barriers to Successful Innovation in Hospitality
There is no shortage of innovation in hospitality tech. If you have been following this blog over the past five months, you’ve been introduced to several dozen companies doing cool stuff, and I suspect only a few were already on your radar. I’m discovering new ones every day. These are mostly small companies, many of them startups; only a few employ more than 100. This is no surprise: small companies are where the most disruptive innovations usually start. Larger companies tend focus more on incremental improvements to their existing products and on protecting their business models. Very few actively try to reinvent or disrupt them.
This week I’m going to change up my usual format and talk about why, with so many innovative ideas, so few of these startups ultimately succeed in hospitality. To be sure, the failure of tech startups is a universal phenomenon, not unique to our industry. The Startup Genome project found that 90% of tech startups fail. I haven’t seen any comparable study that is specific to hospitality, but having watched literally hundreds of startups over the last 20 years, I suspect the failure rate in our industry is even higher. Many of these companies had great ideas, talented people, excited customers and solid funding. So, what went wrong? In my years of talking with, advising, and mentoring many of these entrepreneurs, and investing in several of their companies, there are key patterns that keep emerging – and that will be the focus of today’s column. Some of these represent failures of the startups, some represent failures of their hotel customers. Others simply represent the reality of an extremely challenging industry structure.
A typical pattern is like this. The startup finds a lead customer or three, builds or adapts a product to meet their needs, and gets great feedback and quotable references. They believe they are ready to conquer the world. They take that product to the broader market and start chasing every lead. But it just doesn’t sell like they think it should. Nine months or a year later, they run out of money. While few follow this exact sequence and timing, and many may have (or find) funding to buy themselves a little more time, most failed startups follow at least a somewhat similar path. They either go broke, or more commonly are scooped up by larger companies, often at pennies on the dollar.
Startups and new industry entrants alike consistently underestimate the differences in needs from one potential hotel customer to the next. Especially for core technologies (think Property Management (PMS), Central Reservations, and Customer Relationship Management), functional requirements can vary tremendously by market, and the number of relevant market dimensions is huge. Geographic regions matter, as do price point (luxury vs. midmarket vs. hard budget), business model (hotel, resort, vacation rental, timeshare, serviced apartment, B&B, hostel, campground, cruise ship, all-inclusive), target market (business, group, leisure, wholesaler), company size (one property or 10,000), hotel size (one room or 3,000), affiliation (hard brand, soft brand, management group, independent), and amenities (dining, spa, concierge, casino, theme park, outdoor activities, etc.). Key takeaway: Successful startups find a few small niches and focus on them while they scale, then strategically expand into adjacent ones. They aren’t distracted by opportunities that don’t build their chosen markets.
Another common observation is that startups and new entrants to hospitality alike often fail to understand who controls the purse strings. I can’t tell you how many startups I’ve talked to who were convinced that they would sell some technology to a major brand in year one and be happily deploying it at thousands of hotels. They just needed an introduction to the right person at that brand. Most times they were selling products that a brand could simply never impose on its hotels. What they haven’t learned is that, depending on the product being sold and the brand and/or management company associated with a particular hotel, there could easily be three (and sometimes as many as six) parties involved in a particular decision – and figuring out which ones are most influential, and what their evaluation criteria are, is usually a case-by-case analysis; even in the same brand or management company, no two hotels may be the same. Brands, management companies, asset managers and owners are key for many systems, but with widely varying influence and decision factors. Where one brand may make a brand-wide decision to use a specific solution, other brands may let the owner or management company make its own independent choices. With technologies that are sold into new-build construction, the developer, general contractor, and Mechanical/Electrical/Plumbing contractor may all be involved, in addition to or instead of the brand, management company, and owner (who are frequently not even known until later in the construction process).
The complexity of the decision process, the challenges in identifying the true decision makers and influencers, and the variation in their respective roles all lead to sales cycles that can be 2-3 times as long as other industries – something that investors rarely understand. Even if a startup is starting to achieve market success, when sales miss projections, investors lose patience. Key takeaway: Startups and new entrants need to spend serious time understanding how to identify, categorize, and approach the right targets to close early sales – and the cost and time for doing so need to be baked into the business plan. Listening only to launch customers and prospects can be deadly. Engaging independent consultants or advisors who understand the landscape for the target market, beyond the launch customers, can be critical to success. Educating investors and providing realistic revenue forecasts that reflect the true sales cycle is also essential.
Another issue I hear all the time from vendors new to the industry is how challenging it is for them to get on the radar of any but the smallest brands. Even for those few that have a product that a brand might buy and fund, there is rarely any clear point of entry. So, the vendor uses whatever networking contacts they can to get to someone who is almost certainly not the right person, and who likely has limited knowledge of, or influence over, the one who is. Introductions get ignored, and emails and phone calls are not returned.
From the perspective of the hotels, on the other hand, most staff are too involved in day-to-day priorities to spend much if any time on innovation. Everyone is focused on their own domain of expertise. Within that domain, there is a natural tendency to innovate internally (after all, don’t we know our own business better than anyone else?). Outside their own domain, most staff have very little to gain by proposing disruptive technologies. New technologies need to be vetted by multiple departments (marketing, operations, brand management, development, finance, risk management/security, HR, IT, and others), and disruptive technologies are, well, disruptive, and likely to cause anxiety among those who are invested in the current way of doing things. So, unless it’s being directed from above or has an internal champion with enough political clout, it can be difficult to gain consensus to adopt something new, particularly if it is disruptive. I can count on one hand the number of brands anywhere in the world where there has been someone owning technological innovation – and if it wasn’t the CEO, it was someone who had the CEO’s total confidence.
Not surprisingly, smaller vendors who hit this roadblock often bypass the brands and try to sell directly to owners of the branded hotels. At that point, many brands will slap their hands for circumventing the process (the one that doesn’t exist!). For this transgression, the vendor may be effectively blacklisted from future conversations with the brand.  Key takeaway: brands need a defined process if they want to get disruptive innovation on their radar with any consistency (as most of them say they do). Some of the more innovative brands have a person or small department whose job it is to seek out, test, and shepherd innovation. If this isn’t an option, though, there are other approaches. For example, a brand could create a cross-functional team of mid to senior level managers and dedicate 1-2 days a year to hearing 25-50 startup pitches - that’s about 15 minutes each. They could allow vendors to participate via web conference, so they aren’t limited to the few companies who are nearby. The brand can create an easy process and web page for any vendor to apply to participate, and an engagement protocol for those that generate interest leading up to the virtual pitch (set the bar low; if 1-2 executives find something interesting, get it in front of the group!). An email address can be created and publicized to field inquiries and funnel them into the desired process. Key staff can also monitor startup pitch competitions from relevant industry conferences and accelerators; many are available online or are written up in various newsletters.
Larger brands present another barrier to innovation, which is the requirement or strong preference for large, financially stable vendors. This is entirely understandable; no senior manager wants to deal with the financial collapse of a key but underfunded tech provider. At the same time, unless something is done to compensate for this preference, the most innovative and disruptive technologies will never find a way in the door. Key takeaway: large brands and management companies need to look to pair promising startups with larger vendors, relying on the startup for the core technology but their chosen megavendors (I’m thinking about companies like Accenture, Cognizant, or IBM) for the scale needed for deployment, training, and support. This needs to be done in a way that protects the interests of the startup, who will have little or no bargaining leverage if the large vendor is simply told to use the startup’s product. There is no sense in choosing an exciting new product from the startup but then killing their ability to succeed as a business, either by negotiating too low margin a deal, or by forcing them to navigate the bureaucracy of a massive partner company at their own expense. Large hotel groups are the ones with leverage over their larger vendors and need to create a viable and protective buffer for the smaller ones. The business and IT sponsors need to ride herd on procurement and contracting processes to do this.
A final barrier to innovation is integration. Many other industries don’t need this; they may be well served by Enterprise Resource Planning software that can do almost everything. Others may have just a few key systems that need to be integrated. But aside from health care, it’s hard to find an industry that has as many different systems needing to integrate than does hospitality. Individual hotels have anywhere between a handful and as many as 30-40 systems requiring some degree of integration; across the portfolio of a global brand this number can rise to more than 100 or even 200 systems, each with potentially dozens of vendors and product versions present in different geographic regions or in pre-existing solutions from properties that joined the brand after they were installed. This can lead to many hundreds or, for a large chain, thousands of required integrations. And a startup with a new product often can’t effectively sell unless they can achieve integration comparable to existing products. Yet many larger, established providers of (or brands with proprietary) core systems like PMS or CRS – the ones a new product is most likely going to need to integrate with – create barriers to integration (cost, time, prioritization, red tape). To be sure, they do this in part to protect themselves from spending a lot of technical resource supporting startups who will mostly fail.  But in the process, they create an additional 6-9 months lag time – and substantial cost – for our innovators to make a sale to any customer who needs a new integration.
There are two key takeaways for this. On the vendor side, and especially for those in core systems (and I include the brands that operate their own), there is a need to move away from proprietary APIs protected by resource-intensive certification processes, and towards open APIs protected by gateways that can support self-service integration but also effectively prevent third-party systems from inundating their systems with too many (or invalid) transactions. It is encouraging to see some key vendors, including several of the top PMS vendors, moving in this direction; those who do have recognized that it enables their platform to deliver unlimited and rapid innovation through third-party partnerships, rather than having to develop everything internally. But unfortunately, this is a migration process that takes many years, and there is still a long way to go.
On the hotel side, hotel companies can reduce barriers to integration by adopting middleware solutions, which can leverage connectivity on behalf of multiple hotel customers to reduce costs. I’m including in this category hospitality-specific Enterprise Service Bus (ESB) products like iReckonU, Jonas Chorum, and protel.io; data transfer/capture solutions like Hapi and Snapshot; and common API platforms like Comtrol’s Lodging Link® and Impala. Larger hotel groups also have the option of building their own ESBs using commercial bases from the likes of Amazon, Microsoft, Mulesoft, or Tibco.
What other actions can hotels and startups take that could increase the success rate for innovation? Drop me a line and let me know your thoughts!
Douglas Rice
Email: douglas.rice@hosptech.net
Twitter: @dougrice
LinkedIn: www.linkedin.com/in/ricedouglas/


- Aimbridge Hospitality and Interstate Hotels & Resorts to Merge
Aimbridge Hospitality, one of North America’s largest independent hotel management firms, and Interstate Hotels & Resorts, a leading independent multinational hotel operator, announced that they have entered into a definitive agreement to merge, creating a global leader in third-party hotel management services.


- Russell Chen Appointed as Vice President Sales – APAC
Chen joins GuestTek with over 20 years of experience in the hospitality industry and has a strong proven sales record in the Great China Region.
- Jonas Chorum Continues Growth with Hiring of Ted Warring & Promotion of Jake Lewis
Jonas Chorum, a suite of streamlined, intuitive and flexible property management solutions, is pleased to announce their continued growth as a company with the hiring of Ted Warring as vice president of technology and chief scientist, along with the promotion of Jake Lewis to vice president of products and services.


- RMS Introduces New Solution to Make Property Management Easier for Hoteliers
RMS – The Hospitality Cloud, a leading provider of all-in-one, cloud-based hospitality solutions, today revealed RMS Prime, a streamlined version of its property management software for hotels.

- Olde Mill Inn Ties the Knot with Maestro PMS to Help Support 1,200 Corporate and Social Events a Year Including 240 Amazing Weddings
The Olde Mill Inn in Basking Ridge, New Jersey embraces couples with two fairy-tale wedding venues on a landscaped 10-acre estate. In addition to more than 240 weddings per year, the property also works with numerous corporations and hosts approximately 1,200 social and corporate events annually.

- RoomKeyPMS Launches Hotel Payment Processing Solution
RoomKeyPMS Payments is a perfect solution for any hotels looking to take the complexity out of payment processing, speed up reconciliations or increase payment security and compliance, all integrated within the RoomKeyPMS platform.


- SiteMinder Partners with HotelSwaps, Enables Boutique and Luxury Hotels to Trade Unsold Inventory 
- Travel Technology Leader Sabre opens Boston Innovation Lab 
- Pegasus & Travel Tripper Expand Reach and Capabilities of Powerful Analytics Platform for Hoteliers
- Marriott International Selects TravelClick for Business Intelligence and Travel Agent GDS Advertising


For more information on Reservations for 9/13/2019


- Kalahari Resorts and Conventions Partners with IDeaS to Enable Total Profit Optimization
IDeaS Revenue Solutions, one of the world’s leading providers of revenue management software and services, announced it will implement IDeaS G3 revenue management system (RMS) across Kalahari Resorts and Conventions’ all-under-one-roof convention and vacation destination hotels. 


- SpaSoft Announces Streamlined Approach to Implementation Process
SpaSoft, an industry leading, all-in-one spa management solution, announces that they have made significant improvements and enhancements to streamline their implementation process. With their newly enhanced approach, SpaSoft has been able to reduce their training time by about 33 percent on average.
- Fuel Mobile App Expands Mobile Access Options through Integration with Onity DirectKey™ System
Feature-rich mobile application for independent properties adds cost-effective digital key capabilities for hotels with Onity locking systems.


- Buffalo Lodging Associates Ensures Maximized Data Management and Business Planning Efficiency with ProfitSword Partnership
ProfitSword, one of hospitality's premier developers of business intelligence and data integration software, has been selected by Buffalo Lodging Associates, an award-winning hotel management and development company, to maximize its operational decision-making abilities via seamless access to real-time performance data.
- Hapi Unlocks Wider Business Intelligence Ability for the Hospitality Industry through Partnership with HotelIQ
Hapi, the first disruptive open data-streaming, integration, and enrichment platform in the hospitality industry has announced a partnership with Intelligent Hospitality to provide hoteliers with unprecedented business intelligence and analytics by making it seamless to connect multiple hotel operating systems to HotelIQ.
- Townhouse Hotel Miami Beach Builds Flexible Ownership Reporting with Aptech’s PVNG
Aptech Computer Systems, an industry standard for hospitality financial systems announced the Townhouse Hotel Miami Beach implemented the PVNG Enterprise Hotel Accounting System to move its back office to the Cloud for multi-property accounting.


- Sofitel Saigon Plaza Turns to Nomadix for Improved Guest Internet Experience
Luxurious Vietnamese hotel deploys Nomadix solution to increase bandwidth, streamline management and control, and improve the overall user experience.

- Hotel Whitcomb Partners with Hotel Internet Services to Provide Guests With Latest Standards in Wi-Fi Connectivity
Historic San Francisco property leverages HIS industry-leading expertise to upgrade property-wide Wi-Fi services and provide each guest with a fast, reliable and secure internet connection.


- 3C Payment Announces Strategic Partnership with Shiji Group to Expand Product Offerings and Accelerate Global Growth
Shiji, a global provider of world-class technological solutions for the hotel, retail, food service and entertainment industries, has integrated with 3C Payment to support the expansion of its payment solution to tens of thousands of additional hotels and restaurants worldwide.


- Quore Surpasses 4,000 Hotel Customers
Quore is pleased to announce that more than 4,000 hotels are successfully using its hotel operations platform, furthering its position as a market leader.

- Hotel Commonwealth Hits a Home Run with New Partnership
The Official Hotel of the Boston Red Sox chooses ALICE to optimize cross-department task management and communication.


- KSL Resorts Selects UniFocus as Labor Management, Time and Attendance Partner for Camelback Resort
UniFocus, a leader in advanced labor management solutions for the hospitality industry, announced that KSL Resorts has chosen UniFocus’ innovative labor management and time and attendance system for their recently acquired Camelback Resort property in Tannersville, Pa.

- Employee and Talent Experience Measurement Latest CustomerCount® Application
Communication is the key to employee performance and satisfaction. Mobius Vendor Partners has launched yet another enhancement to its CustomerCount® enterprise customer feedback system.


- TraknProtect Takes First Place in SoGal's Global Pitch Competition in Chicago
TraknProtect, a leading provider of real-time location technology purpose-built for the hospitality environment, continued its winning streak this week, claiming first place in the Chicago regional round of the SoGal Global Pitch Competition, the largest worldwide startup competition for women and diverse entrepreneurs.


- Hospitality Technology-focused Organizations HFTP and HTNG Partner for HITEC Europe
Two leading associations, who work to advance and educate on hospitality technology, are partnering to produce the fourth annual HITEC® Europe on April 21-23 in Palma, Mallorca Spain.


- Brand.com Bookings Exceed All Other Channels for First Time
July marked the first time in history Brand.com exceeded the share of hotel room nights booked through every other channel, as shown by the Kalibri Labs’ Hotel Industry Performance Overview.
- Negative RevPAR, Expense Uptick Pulls Profit Down in Mainland Europe
Mainland Europe hotels have seen better months. A 5.0% decline in average room rate dropped RevPAR 3.2% year-over-year in July, and with total revenue not faring better, GOPPAR in the month was down an unsettling 9.4% YOY, according to data from HotStats.


- Hotel Industry Accounts for More than 1 in 25 U.S. Jobs
- Why Invisible Will Make 2020’s Payments Innovation Roar
- Montana Hotel Employees Find Black Bear Relaxing in Women's Bathroom
- Guinness World Records Announces The World's Largest, Tallest, Smallest, Oldest Hotels, And More


For more information on Piqued Our Interest for 9/13/2019


And now for you-know-what.…  
I was on the sofa next to my wife who was eating and typing on her phone.
So, I heard my phone ringing in the kitchen where I was charging it.
I went to check.
The SMS was from my wife and she wrote “Bring the salt on your way back”!

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