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A great deal has been written over the years about the viability of moving a hotel’s property-management system (PMS) to the cloud to take advantage of the latest technologies, but hoteliers need to realize that it’s not the only viable option. All platforms have advantages, including self-hosted, private cloud and on-premise solutions that leverage the latest mobile, contact free and web-based technologies. Independent operators can still enhance the digital guest experience, support personalized and mobile check-in, deploy contact free technologies, and secure hotel/guest data even if their PMS does not reside in the cloud. It should not be a question of “Cloud or On Premise?” but rather “Does the PMS solve your business objectives in both technology and service?”

Much has been written in the mainstream hospitality press about the challenges COVID-19 has presented to the industry. Hotels are in more pain than at any time in our memories. Because of the extensive media coverage, I won’t dwell on this topic further in what is primarily a technology column. But it’s the background for this week’s column, and so merits acknowledgement.

Are You All In?
Posted: 07/27/2020

Imagine everyone in your organization engaged, aligned, and performing to their potential. Imagine everyone playing “All In.”

Great organizations have synergy. Their culture allows them to play to a rhythm at a different tempo than the average organization. How do you get that at your organization?

Many front-line hospitality workers rely on tips for a significant part of their paychecks. If not for tips, many hotel associates who serve as waitstaff, bartenders, housekeepers, bell staff, concierges and pool attendants would soon be looking for other jobs. This is a regional issue: in most of Asia and Europe, staff get higher base pay, and tips are either not expected at all, or are truly discretionary. But in the U.S., Canada, Britain and other countries, tips are an important reality, and one that’s not likely to change anytime soon.

As somebody who’s helped to grow a company from 13 people to nearly a thousand, I know very well the excitement that comes with having a mindset focused entirely on growth. Every newly acquired customer, every new office and every milestone means the gap between you and your nearest competitor is that much bigger and that much harder to overtake.



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Definitely Doug 8/07/20: Tech Vendor Survival under COVID

08/07/2020
by Doug Rice
When Tech Vendors Get COVID-19


Much has been written in the mainstream hospitality press about the challenges COVID-19 has presented to the industry. Hotels are in more pain than at any time in our memories. Because of the extensive media coverage, I won’t dwell on this topic further in what is primarily a technology column. But it’s the background for this week’s column, and so merits acknowledgement.
 
As hotels have been hard hit, so too have their technology providers. The industry’s return to health will require rebuilding a strong and vibrant vendor community and preserving the talent of its human capital. Indeed, many recent articles have highlighted the role that technology will play in enabling hotels to move forward.
 
In my first COVID-related blog back in March I laid out some guidelines for tech vendors trying to come to grips with the most severe external market event that their businesses would likely ever face.  At the time, I speculated that the best case was if the world managed to control the coronavirus as effectively as some of the earliest-hit countries. But I also said that even under that best case, it was going to be pretty bad.
 
We now know that the best case has not come to pass, especially in the United States. Recoveries in travel have been slow, irregular, and mostly regional. While economies are starting to inch their way back towards some semblance of normalcy in China and parts of Asia, Europe, Australia, and elsewhere, major restrictions on travel are still in place. And in truth, we still don’t know how long this will last: there are promising signs on the vaccine front, but still much uncertainty about when one might be available, how quickly enough can be produced to immunize billions of people, how effective it will be, how many doses will be needed, or how long immunity will last. We can hope for the best, but we can’t count on it. Many things can go wrong, and inevitably some of them will.

Even in good times, many tech vendors in our industry live “on the edge.”  While both microbusinesses and megacompanies can often weather even major downturns, those in the middle, between say $1 million to $10 million in annual revenue, tend to be the most vulnerable. This is typically too small to sustain long-term profitability sufficient to weather major, extended disruptions. And this is where most of our tech vendors are: of the nearly 3000 companies that I track, only about 30% have annual sales of more than about $10 million. The 70% that are smaller have been left with very room to maneuver this year.
 
Hospitality tech vendors saw revenues and cash flow drop precipitously in the second quarter. Many with whom I have spoken have seen declines in the range of 50%, and some distribution companies who were dependent on booking fees or commissions even had negative revenues in April and May, as cancellations exceeded new bookings. Most have seen a modest recovery in recent months. But their average revenue and cash flow, based on my informal survey, is still down 25-40% from where it was a year ago, as customers have demanded concessions, cancelled contracts, seen dramatic volume drops on revenue-share arrangements, or, in many cases, simply stopped paying.
 
Most of these companies have taken difficult actions to cut costs: furloughing or terminating staff, imposing mandatory salary reductions, and cutting discretionary (and even not-so-discretionary) expenses. Government subsidies and loans have been helpful for some, but vary widely by country, were often challenging to qualify and apply for, and may not last as long as the need does. While all of these measures help, they are only holding patterns. For most companies, a return to health and profitability requires a recovery in the underlying business, and sooner rather than later. Even some of the largest and financially strong companies have taken major actions, as illustrated by Booking Holdings’ announcement this week that it would eliminate up to 25% of its 17,500 worldwide employees.
 
What will become of our fragmented vendor community if the downturn lasts years rather than months? If history is any lesson, those with access to capital will be on the acquisition hunt and will rescue some of the better smaller companies and key staff (if not always their shareholders). Right now, many larger companies are thinking that it is easier to buy customers through acquisition than to find new ones through sales efforts, especially in light of travel restrictions and trade-show cancellations.
 
All of this is background to what I really want to talk about this week, which is diversifying into other industries. I covered this briefly in the March article, and got a lot of comments and questions from companies who were looking at this. Some have taken the plunge, while others thought carefully but decided not to. But now that the shell-shock of April and May is behind us, executives are starting to shift focus from simple survival to how to return to growth in an upside-down hospitality market. And those that aren’t, should be. Diversification is one way to do that.
 
Many of us made our careers in hospitality because we love the industry. Some grew up in it, others adopted it later in life, but now it’s so much a part of us that we can’t imagine working elsewhere. Lots of our technology providers were founded by people like this. A large portion of the companies I track focus almost exclusively on hospitality. Many of them were founded by someone from the industry who saw a problem and built a product or service to address it. Close ties with, and dedication to, a single industry can be personally rewarding when times are good. But overdependence can be dangerous when outside factors swoop in and target it.
 
Even well-managed companies that are too dependent on a single sector can be destroyed by events like the current one. Diversification helps because different markets will be affected differently by the same external factors. As much as hospitality has been hit hard by the pandemic, others like Zoom and Netflix have prospered, and many others have been relatively unaffected.
 
If you’re a tech vendor to hospitality, should you be looking at other industries? There is no one simple answer. But this week I will offer a framework and some ideas to think about, depending on the type of products and services you offer.
 
The first thing I will say is that expanding into other industries, or even pivoting totally, is much easier for some hotel tech companies than for others. For example, those that make components or systems that control buildings, such as environmental controls, access controls, life safety systems, or security systems are likely to find it easier to change course. The same or similar systems are used in office buildings, apartments, college dormitories, senior living facilities, hospitals, entertainment venues, military bases and even retail space. Moreover, those buildings are often built by the same developers and contractors as hotels, so sales channels and relationships may already exist and a good reputation may already be established.
 
But an important caveat with this strategy is ensuring that you understand the customers’ needs and the product changes that might be needed to meet them. Every market is different, and it’s essential to do your homework. Where the differences are small and manageable, however, there can be good opportunity, especially if the competition in the new market is vulnerable.
 
Other hospitality tech vendors make devices and systems that also are used in homes. I wouldn’t counsel most of them to go after the consumer market directly; business-to-consumer (B2C) markets are simply too different from business-to-business (B2B). But there are segments of the consumer market that are serviced indirectly through other businesses (the B2B2C approach). For example, entertainment systems, wi-fi infrastructure, bedside tablets, voice response systems, and telephone solutions can be sold into health care facilities and senior living centers, as well as to hotels.
 
Still other vendors provide software to perform various functions within the hotel. Some of these systems are equally useful in other industries. Examples in this category would be workforce management, payroll, staff communication, preventive maintenance, and basic accounting systems. A hotel-focused tech company in one of these areas might be well served to look at other industries, perhaps one with specialized needs, where incumbents have dated products or poor reputations. Again, however, it’s important to find industries where the needs are similar enough to hospitality that you don’t end up needing a major rewrite, and where the sales process allows you to leverage your existing sales infrastructure. It’s one thing to add one or two key people with relationships in the new industry, something quite different to build an entirely new sales force operating on a different model. It’s also important to focus on just one or two industries and execute well, to avoid spreading yourself too thin.
 
Other software providers will have a harder time diversifying because their product is too specific to hotels. Even so, there can be opportunities to find markets with “hotel-like” characteristics, such as serviced apartments, short-term rentals, hospitals, college dormitories, and shared work facilities. Like hotels, all of these have guests, reserve rooms or beds, employ service staff, have operational procedures, prepare financial accounts, invoice customers, accept payments, and perform other functions supported by software.  Many of these markets will be harder to enter because there will be incumbent providers whose software is better tailored to the needs of that market – but sometimes there are new markets emerging with players who want to operate differently, and who are willing and able to invest in adapting an existing software package (perhaps from hospitality) in order to get what they want. I know of more than one central reservations company that have recently landed contracts to do exactly this.
 
A final group of companies does things that are so specific to hotels that their products may have no useful applications elsewhere – or if they do, it’s only in other sectors of the travel industry that have been equally hard hit. For these companies, diversification through internal efforts may be impossible. Diversification through acquisition may be an option for some, but typically not for small companies already starved for cash.
 
With a potentially multi-year-long recovery for hotels, these industry-constrained companies may be better served by finding a company from another industry to acquire them – you could call this reverse diversification. It may not help the company’s shareholders but it could provide a lifeline to some or all employees and customers. Many of the travel tech companies that had been on acquisition sprees in recent years, such as Amadeus, Cendyn, Expedia, and Booking Holdings, have had to slow down because of COVID. But companies less affected by the pandemic, such as Canada’s Constellation Software, US-based Infor, and China’s Alibaba-backed Shiji Group, have each acquired several hotel tech vendors in the past 1-2 years and may be more immune to the travel downturn because they have more diverse portfolios, deeper pocketed investors, and/or geographic concentration in places hit less hard by COVID. In recent years, megacompanies like Comcast, Honeywell, Emerson, Legrand and Cox Communications have also acquired hotel tech assets complimentary to their existing product lines.
 
A sale may also be the best strategy if your company has diversification opportunities but not the financial resources to exploit them. The best targets are established companies in the other industry that compete with market leaders, but that have product-line gaps that your product line could help fill. This strategy still requires diversification thinking and exploration, but it doesn’t require funding.
 
There’s no simple or right answer to solving the problem of having too many eggs in the (hospitality) basket. But the events of the past five months have certainly caused some soul-searching among the entrepreneurs that have been the backbone of our industry. Diversification may take you further from the things you love, but may well be the key to long-term survival and success.
 
Beyond the lessons for tech companies, there are ones here for the many experienced professionals who have lost their jobs due to COVID. If hospitality if it is your first career love, by all means keep it on your target list. But also recognize that there are other industries that may have needs for exactly your set of skills right now – and you can apply the same logic as above to find some of them. You can always return to hospitality at some point in the future when it’s healthy again.
 


About The Author
Doug Rice




Email: douglas.rice@hosptech.net
Twitter: @dougrice
LinkedIn: www.linkedin.com/in/ricedouglas

 
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