Jeremy Rock
Jun 19, 2023

The Advantages of Hosted/Cloud PBX

While there are certainly business case reasons for selecting premise-based PBX Systems, hosted/cloud-based solutions deployments are on the rise and appear to be the way of the future.

The Advantages of Hosted/Cloud PBX

Jeremy Rock
Jun 19, 2023
Hosted PBX

While there are certainly business case reasons for selecting premise-based PBX Systems, hosted/cloud-based solutions deployments are on the rise and appear to be the way of the future.

When soliciting proposals for new or replacement PBX systems (whether for new builds or existing hotels) most properties invite industry solution providers to submit bids or proposals for both options – premise and hosted/cloud. For many years, premise-based options offered a better ROI when factored over the long term. That’s because monthly licensing costs for hosted options (typically based on the number of extensions) were just too high – especially for guestrooms where phone use is limited to ordering a cheeseburger and fries from room service. Additionally, many operators looking to reduce opex costs are also turning to time and materials (T&M) support options, which have proven advantageous for most stable installations.

The primary factors that have led to this shift include:

Reduction in licensing costs:

Like most subscription-based applications, hosted PBX solutions typically have a monthly recurring cost (MRC) made up of a number of items including hosting fees, hardware equipment, support and PBX license fees. Until recently, the price for some primary application providers was fairly expensive, particularly when you factor in guestroom extensions. This resulted in
a cost prohibitive MRC for many hotels, especially larger properties with room counts that resulted
in a much higher long-term cost than that of premise-based options. Recognizing that the feature requirements for guestrooms were substantially different than that of administrative phones, systems providers started to focus on restructuring licensing fees to provide for lower cost options that included pricing based on functional features and, in some cases, occupancy.

Lower communication costs:

In some cases, hosted providers are including charges for session initiation protocol (SIP) trunking, which uses the internet instead of phone lines, as part of a hotel’s MRC. They’re also including either an allocation of minutes and/or free local and long-distance minutes, although they still charge for international and toll-free calls.

Centralized services:

One of the major advantages for brands, management companies and operators who have multiple properties is the ability to centralize services between properties at little to no additional cost. Additionally, there are no communications costs associated with these calls. This can represent a large savings in labor costs for properties that can centralize operational or streamline services during off-late-night or off-peak periods.

Redundancy options:

While premise-based systems offer local redundancy, hosted/cloud-based products also have the ability to reroute calls to other lines – and even cell phones – should there be a disruption or cut in communications at the property. Most system offerings are also set up for failover to multiple data centers to provide additional system redundancy in the cloud. Properties seeking additional redundancy can receive a survivable node at the property level.

The Rise of Artificial Intelligence

Recent media coverage of ChatGPT has highlighted the use of artificial intelligence (AI) for many personal and business cases. One key focus area for the hospitality industry is leveraging this technology to help interact with guests and improve guest service, while at the same time reducing overhead – primarily labor.

In this regard many hosted platforms are now interfaced or interacting with various AI products, such as:

  • Virtual Assistants | Guest Services (VGS)
  • Chatbots
  • Speech and text analytics
  • Speech translation
  • Automatic responses
  • Voice and text analysis
  • Unified call recording

In short, artificial intelligence is improving the way we communicate by helping us respond to guest needs and requirements in a more efficient, personalized way. As the technology advances, we’re likely to see increased use of AI to communicate with guests, improve service and reduce costs.


It’s easy to add or delete extensions. In many cases it’s simply a question of adding new licenses. It’s also easier to set up and add new properties – especially for bands and management companies.

Brand adoption:

More and more brands are adopting hosted PBX options as part of their broader enterprise strategies for lower communications costs. This also frees up human resources to focus on improved guest communications. The ability to integrate voice, SMS and email communications, among others, allows brands and management companies to create a streamline approach to communicating with guests as well as between properties in their portfolios.

Capex versus opex costs:

The dynamic between capex and opex is really between developers/ownership on one side and management companies/operators on the other. Traditionally, the combination of low financing costs with a long-term ROI that generally benefitted premise-based solutions made a capex purchase the logical choice. However, recent rapid interest rate hikes have constrained access to capital. This, coupled with lower licensing costs for hosted solutions, has led to an increase in opex focused options.

Business intelligence – better analytics:

Many cloud service options provide call analytics, which allow hotels and call centers to analyze calls to better improve service, conversion rates and staffing. In today’s competitive environment, everyone is looking for an advantage. This information can help improve communications and service.


Like many electric car companies, hosted PBXs ensure the hardware and software are maintained and upgraded as required. This means system maintenance is always up to date and that any new software releases are included with the subscription services.


As more companies make the switch to voice over internet protocol (VoIP) or cloud-based private branch exchanges (PBX), the demand for legacy analog circuits has declined. Over the last few years, many telecommunications providers have been working to sunset their primary rate interface (PRI) circuits (a provider-free system that transmits data over copper wiring) and plain old telephone service (POTS) lines, or traditional telephone systems. Some have sold off these product offerings as they are no longer profitable.

As a result, most telecom companies have been transitioning away from these legacy product offerings and moving toward session initiation protocol (SIP)-based trunking and other internet-based solutions. Their active efforts to sunset traditional product offerings has led to significant price increases for services that use them, especially POTS lines. This, in turn, is causing hotels to move toward more cost-effective options such as SIP trunking for voice communications and 4G cellular dialers for backup/ life safety monitoring requirements.

Advantages of a move to SIP trunking include:

  • Lower communication costs
  • Some options include free local and long distance calling
  • Greater redundancy than traditional PRIs (offered over fiber data circuits)
  • Using minimal amounts of bandwidth
  • Transmitting over multiple networks
  • Theoretically no limit on the number of concurrent calls/channels

While there are mostly advantages moving to SIP trunking, the one main disadvantage is data security. That being said, calls can be encrypted to reduce exposure to data breaches.

Hosted or cloud-based private branch exchange (PBX) voice solutions have been around for quite some time, but the industry adoption rate has been relatively slow. While there are a number of reasons, one leading cause is that hotel phone use has long been on the decline. Also, the return on investment (ROI) for premise- based solutions is better considering their longevity and minimal support requirements. Another factor: Most PBX purchases are made as a capital expenditure (capex) because management companies or operators don’t want to add to their ever- increasing operational costs (opex).


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