This week’s column will be controversial. It is built on both my own experience over three decades in hotel technology, and on countless conversations with some of the most knowledgeable IT leaders in the hotel industry, including major brand CIOs, vendor CEOs, consultants, investors, and others. Brand IT executives might publicly dispute much of what I will say, but many have privately admitted that it is largely accurate. These are things that need to be said.
As much as we embrace the new technologies and innovations that have arrived in hospitality in recent decades, the fact remains that for most hotels, technology remains fundamentally dysfunctional. And while many in the industry point at the vendor community for delivering products and services that fail to meet the needs of hotels, my 33 years of perspective suggests that this is far from the biggest issue.
I just returned from an extended family road trip across the US that involved 17 stays over 20 nights in 16 different, mostly major-brand, mid-market hotels, which spanned the portfolios of five of the top eight hotel groups. In those three weeks, the number of times technology let me down was astonishing. There were easily 40 issues, and we were hardly in any hotel for longer than a night’s sleep and breakfast. Only one night was problem-free; it was in a 20-room small-town independent motel whose entire technology stack consisted of booking.com for distribution, a Square point-of-sale terminal for payments, and a local Wi-Fi provider, none of them interconnected (or needing to be). Okay, they probably also had something like QuickBooks for accounting and payroll behind the scenes.
As for the other hotels, there were several times where I used mobile check-in and was promised a mobile key when my room was ready, but it was never delivered. When I asked, the front desk response was something like “oh, that never works, I don’t know why the app says it does” or “we turned that off because we have to check your ID” or “yes, a lot of guests have problems with that.” Okay, so why specifically invite me to use something that is supposed to save me time and hassle, if you know it will not work and will simply cost me time and hassle? And of course, I knew better than to ask that question of a front desk associate; they would only be able to shrug their shoulders.
The Wi-Fi worked flawlessly in only six of the 17 hotels; it failed completely at three. Like many road warriors, I have learned to simply fall back to my GSM hotspot rather than spend an hour on the phone with support seeking a solution that might or might not be forthcoming. Brand websites, OTAs and metasearch sites all promised a (brand-standard) free breakfast at one hotel where the hotel owner had discontinued breakfast entirely … more than a year ago. One day I got the usual early-morning email inviting me to use mobile checkout, but when I went to do it, the checkout option had gone missing from the brand app. Food and beverage credits associated with my rate plan or status were routinely not applied to my folio, and I had to stand in line three times to get them adjusted at check-out. Folio copies, promised by email after checkout, were on multiple occasions never sent. One front desk checked us into a room that had not yet been cleaned. Another housekeeper knocked on our door at 8am on our departure day despite our having previously confirmed a noon departure in the mobile app. App messaging functionality that I tried to use to text the front desk that the Wi-Fi was out at one hotel failed because (wait for it…) it required a working Wi-Fi connection! I could go on for quite a while, but you get the idea.
None of these were a failure of hospitality or the front-line staff; most of the hotels and staff were genuinely welcoming and wanted to make sure we had a good stay. And few were likely due to failures of the technology products themselves. Rather, the issues were either the integrations needed to achieve a seamless experience for guest or staff, or hotels that had not aligned their operational processes with their system capabilities and configurations, or that did not proactively monitor the health of their systems to detect problems before they impact guests or staff. Some issues clearly related to disagreements between hotel owners and brands over operational practices, with guests caught in the middle between brands promising things that owners were unwilling or unable to deliver, but with the brand’s technology still promising the guest that they would. While owner-brand friction has been around for decades, the chasm has certainly widened during the pandemic. Neither brands nor owners benefit from making the guest the arbiter of their differences, which often seems to be what is now happening.
Now I will admit that, when it comes to technology, I am not exactly the average guest. I know enough that I can usually tell the difference between a technology issue and user error. And when something fails, most of the time I have a pretty good idea why. Knowing how things should work, I am probably more critical than most. But I may also be the canary in the coal mine; we should not assume that average guests will not see these problems and judge hotels accordingly – because they will.
Certainly, while technology failures occur in every aspect of our digital lives, I would be hard-pressed to name another vertical market where virtually every purchase comes with at least one, and often multiple, technology failures. To be sure, I have had issues with airline or rental car technologies, but maybe on one trip out of ten. Online retail, maybe one purchase out of four. Online banking, perhaps one transaction in 1000. Why are other industries able to get it right most of the time, but hospitality seems incapable of delivering even a single night in 20 without a glitch, and most of them with two or more?
This week I want to address the structural issues that lead to this dysfunction. And while I cannot point to a solution today, I will propose some directions in which both hotels and tech vendors can move to start to fix this.
The Tech Stack Complexity
Hotels larger than a small roadside motel need a complex technology stack because they must combine and integrate up to several dozen technologies, which are targeted at multiple, distinct and mostly non-hospitality domains.
- Hotels need industry-specific solutions for things like hotel operations, distribution, group sales and catering, and marketing.
- Because they are businesses, hotels need the technologies that any similar-sized business needs: payments, accounting, payroll, human resources, inventory management, purchasing, telecommunications, and procurement being typical examples.
- Because they are buildings, they need the usual building technologies: network infrastructure, heating and cooling, energy management, water management, power management, security, access control, life safety, preventive maintenance, occupancy detection, and similar systems.
- Because guests live in hotels, they require technologies found in homes, such as Wi-Fi and cellular service, televisions, thermostats, telephones, charging ports, lighting controls, and increasingly even smart-home features like voice control.
- Hotels with restaurant operations may need point-of-sale, menu planning and costing, specialized inventory management and purchasing, reservations and table management, and other systems.
- Resorts, casino hotels, hotels with spas or retail outlets, vacation rentals or time-shares, and clubs offering accommodations, may each have additional requirements.
In today’s super-connected world, many of these systems need to work together to achieve guest satisfaction, effective marketing and sales, and operational efficiency. Yet to the extent they do, it is often limited (maybe working well within one vendor’s suite of products but not with others), complex (hard to configure, maintain, and support), or overly simplistic (handling only the most basic use cases). And too many hotel owners buy technology products designed for residential or commercial applications that, while excellent products in their intended markets, lack the features or integrations needed for hospitality. These owners may save money up front, but such decisions can degrade the guest experience, increase operational costs, or prevent the implementation of future enhancements, all in ways that can quickly offset any savings.
While some technology vendors claim to offer “complete solutions,” I have never seen one that even comes close to meeting all the needs of a hotel with more than, say, about 20-30 rooms. For larger properties, these packages may combine systems from a few of the categories above, but they leave the others untouched. To me, a complete solution would provide every technology you need to run a hotel, whether software, hardware, or networking, not just a few applications like property management (PMS), point-of-sale (POS), and distribution. A 25-room motel does not need that much, which is why there are some semi-comprehensive options for that market. But for the mainstream of the industry, there are no single-vendor options, or even anything close.
I have spoken with many owners and General Managers over the years and asked the question, if you could hire a single company to deliver and support a complete technology solution, would that be appealing? The answer is almost always a resounding “yes.” Of course, cost would be a consideration, and that company might need to work with required solutions from the brand and management company as well as each hotel’s existing technologies that have not yet reached end-of-life. But the underlying truth is that the entire portfolio needs to be managed, and most GMs want to manage people and guest experiences, not technology. Hotels rarely have IT staff onsite anymore, and even for those larger ones that do, the breadth and depth of knowledge required to maintain so many complex systems have simply become too great to support locally.
Why Isn’t There a Single-Provider Solution?
The lack of alignment between what hotels need and what vendors provide has little to do with the vendors, and everything to do with the hotels. It is no secret that hotels (especially in North America) are commonly owned by one party, managed by a second one, and marketed through a third one (such as a brand). The owner, manager, and brand each have specific responsibilities in the relationship, and acquire or build the technologies needed to fulfill those responsibilities.
While there are many variations, brands are typically responsible for distribution, some marketing and sales, loyalty, and certain customer-facing functions, such as the mobile app. They may also provide or at least qualify a few other systems such as PMS or POS. Management companies choose most of the operational, back-office and staff-facing systems. Owners tend make the decisions on major capital projects, including most building systems and infrastructure, and may get involved in some other decisions as well. Brands may weigh in with a list of approved or supported vendors. This sometimes is used to ensure that brand standards can be delivered to guests, but it can also be driven by financial considerations such as back-end commissions from technology providers.
The problem is that while some of the core technologies clearly fit within the responsibility and budgetary scope a single entity (whether the owner, manager, or brand), the increasingly important interactions between them often do not. As the ecosystem becomes more complex and connected, more and more transactions must cross the boundaries between systems to achieve the desired result. That means interfaces, and interfaces need to be managed. But by whom?
For example, a seamless guest arrival solution may require cooperation between a mobile app, a PMS, a door-lock system, a guest-room control system, and a POS in order for the guest to check in, get a mobile key, enter their room, and then use the app to adjust the room temperature and order room service. The mobile app is typically provided by the brand, which may also support or at least specify a particular PMS. But the door-lock system and guest-room control system were probably selected by the hotel owner (or maybe even by a prior owner or developer), and the POS might well have been chosen by the management company. Across a diverse brand portfolio, the number of interfaces needed to achieve a consistent guest experience can quickly grow into the tens of thousands of different combinations, especially when one considers ever-changing software versions.
This creates two major barriers to deploying technology that works. First, it too often leaves the interactions between the systems (typically handled by interfaces) in an unmanaged void, where no one owns the end-result. On the buying side, the brand buys one system but the manager or owner buys the other one; often, neither has full end-to-end transaction visibility. On the vendor side, each vendor may provide an interface but often has no idea how it should or does work (or fail to work) in a particular customer environment.
Most interfaces simply throw transactions “over the fence” and hope they land somewhere, are picked up, and processed; but few vendors have end-to-end visibility to tell whether an interface transaction achieved the intended result. Each of the four parties (brand, manager, and two vendors) can look at what their systems are doing and verify that everything seems to be working properly, after which they typically point their finger at the other side. The guest (or associate, for staff-facing functions) can see that something is clearly wrong but none of the parties that bought or provided the technologies can. And neither guests nor (in most cases) front-line associates have an escalation mechanism to fix any but the most urgent issues. Not surprisingly, they often never get fixed.
Second, the owner-manager-franchise structure of the hotel industry creates too many situations where the entity that could address a problem lacks any financial incentive to do so. Most brands earn revenue as a percentage of their hotels’ gross room revenue, generally in the range of 5-12%. To the extent that their role is primarily marketing and sales, this makes perfect sense, and can be thought of as a sales commission; brands have no problem spending more if it gets them more sales and therefore more revenue. It gets more difficult when the investment is to improve the guest experience or operational efficiency. Many digital initiatives that are designed to do this require modifications to brand systems such as reservations, mobile apps, or PMSs. But the revenue benefits of these initiatives flow primarily (meaning all but that 5-12%) to the owner, as do all or most of the operational benefits. Not surprisingly, brands invest in these technologies only when the revenue benefit is overwhelming. If you only get, say, 8% of the resulting revenue from an investment, you need an ROI that is 12x what you would need if you got 100%.
While the brands have little incentive to make these types of investments, the owners and managers often cannot make them on their own, because they require connections and/or changes to the brand-supported systems. And even if they could, many initiatives would not pay back for a single property. Aside from losing the ability to share costs across multiple properties, the benefits from a better guest experience often need to be amplified by the network effect of the brand. Most guest-facing initiatives only deliver their full potential value when brands offer them throughout their portfolio, and guests become familiar with them and come to expect and demand them everywhere.
The hotel industry has a real conundrum. We have technologies that we know would improve hotel performance, but that we cannot justify or manage effectively today, and that no one has both the ability and the financial incentive to fix. To be sure, this does not describe every aspect of technology in hotels, but it does describe many of them.
Industries without these problems have been able to move forward in ways that hotels have not. Retail chains that own and manage their stores can calculate ROIs on technology investments that make sense, because they get the full top- and bottom-line benefit of the results. Banks invest in technology within a set of offerings from a single managed-service provider, and the benefits and costs are all counted in the same profit-and-loss statement. Even some franchised industries, such as fast food, can work quite well because there are typically only one or a few systems that touch the customer experience (such as the POS, mobile app, kiosk, and digital signage), and the franchisor may provide them all.
Is There a Way Forward?
The simple answer is that this problem will never get solved unless someone is made responsible for solving it. That someone needs to serve as the advocate and enforcer for both guests and hotel staff, ensuring that any two or more systems that need to work together do so accurately and consistently, and most importantly, meet the intended need. If that does not happen, then they need to work with the providers (or other support organizations) to fix the issue.
From a technology standpoint, I have written before about the value of Enterprise Service Bus (ESB) platforms such as iReckonU, protel.io, or Tibco in this regard. While they alone do not solve the problem, they do provide an easier and more cost-effective way for a hotelier or technology provider to address it, by enabling real-time visibility, monitoring, and quality assurance capabilities across the multiple-system end-result. Other platforms, such as Apaleo, Hapi, and Shiji Group offer some of the same capabilities as ESBs, at least in some situations.
But technology alone is not a solution; someone needs to customize, configure, deploy, manage, and monitor all of the system statuses and interactions (interfaces), and act on anomalies as they are detected. An ESB can be programmed to detect that a mobile key has not been issued when it should have been, can send an alert, and can provide diagnostics to help determine why. But in most cases, it cannot automatically fix the problem; for that, human or AI support is needed. And the ESB has to be taught what to monitor and how to react for every situation, which is not a trivial task.
This managed-service concept would be logical for a brand to provide to its franchisees, and on a smaller scale, the model is well proven. But with the exception of a few brands that own all of their hotels, I am unaware of any that try do this across more than a small slice of their technology portfolio (larger brands do it for some distribution technologies; and Hilton’s Connected Room is an example that addresses a limited set of guest-facing systems). Many brands, particularly smaller ones that rely almost entirely on third party technology providers, do not do it at all. As to why not, we need simply recall the economics: the brands would need to make the entire investment but would only get 7-12% of the revenue benefit. In theory the brands could seek franchisees’ agreement to provide the service and rebill the costs. Unfortunately, the fairness of such arrangements have been a point of contention between brands and owners too many times in the past, and franchisee support is not easy to obtain.
The other answer is for a third-party company to sell this as a service to hotels. To be sure, there are a few companies that have built small but successful businesses around the managed-service model on the software side, such as Centrada Solutions, M7 Services, and MIS Computer Corporation. However, they generally focus on the hotel-specific applications and a maybe few general-business software platforms such as accounting or payroll. They rarely if ever venture into building technologies, infrastructure, or guest-room devices, even though this is where hotels spend the bulk of their budgets and where many of the guest touchpoints occur.
There are also several managed-service providers that offer hotels one-stop shopping for network infrastructure and Wi-Fi along with telecommunications, guest entertainment systems, and maybe one or two other products. The technical proposition for this is much easier because the integration layers are simpler and require only limited domain expertise, and there is usually a single buyer (the owner or management company) with only limited interaction with the brand. Most of these companies offer network operations centers that could be useful in real-time monitoring of applications and interfaces, but to my knowledge, none have made significant ventures into the application software side of the hotel tech stack.
The third-party managed-services model is common in other industries. For example, most banks in the US, except for the very largest ones, use one of a handful of third-party managed service providers for all their technology (and their tech stacks approach the complexity of those in hotels). And while no solution is perfect and the solutions are not cheap, it is fair to say that there are very few major issues with how banking technology works for either customers or bank staff.
There is an obvious play for a managed-service provider in hospitality that can provide true end-to-end support for every technology needed to run a traditional hotel. Indeed, this might be the only way that the owner-manager-franchise model can compete with brand-owned hotels in attracting digital native guests in the longer term. The established brands know they are losing this market to trendier brands, and one reason is that the newer brands (even Airbnb) have modern technology models that can better deliver to the expectations of digital-native travelers.
However, it will not be a cheap business to build, nor would it be a simple pivot for existing tech providers, who could in theory expand their portfolios through acquisition. Hotels cannot be expected to simply replace all their existing technology at once, meaning that a managed-service provider trying to appeal to the mainstream hotel market will need at least a basic ability to support many thousands of different technology systems used in hotels today, even if the vision is to migrate them to a common tech stack over time (as has largely happened in banking).
But feasibility aside, a company that could manage a hotel’s entire technology stack, from strategic planning and system selection to day-to-day management, and do it cost-effectively, would be compelling. The service and support aspects would certainly cost more (because yes, it costs more to provide technology that works 100% of the time than technology that reliably fails). But the technology acquisition costs should be less, through better decision making, volume buying, and far fewer dollars spent on systems that are never integrated or operationalized to their full potential. And implementation costs should be less because a managed-service provider can develop a valuable knowledge base of compatibility issues (how many times have hotels discovered mid-project that a new system is not compatible with the version of another one they were not planning to replace or upgrade?).
Operational cost savings can be significant, especially in times of tight labor supply; interfaces that let housekeeping, front desk, the room occupancy detector, and mobile app all work seamlessly can yield significant benefits by optimizing the assignment of housekeeping resources; those that facilitate self-service options for guest arrival can eliminate the need for as many front desk staff. These savings have been promised for many existing products, but hotels have discovered that they materialize only if the products actually work, which if not properly managed, they do not.
Finally, this model removes most of the selling costs associated with the current business model for hotel tech. Today we have hundreds of vendors with large sales forces tasked with reaching tens of thousands of owners, managers, and brands. The new model would make a few managed service providers the main customers for most technology providers, eliminating most of their selling costs. This factor alone could cut technology costs by around 10% to 40%, depending on the product.
It is no surprise to me that as a guest, my best experiences with technology are usually within owner-operated brands that are large enough to manage IT professionally – and that actually do so. It is not a common model in North America, but there are a few established examples as well as some emerging hotel companies being built around it; it is also a growing trend in Europe and the Middle East. These companies are, I think, starting to recognize strategic benefits in the technology arena while their asset-light counterparts are struggling with the issues described above. They can achieve better marketing and distribution and deliver a better customer experience, all at less cost.
As technology continues to gain in importance to the guest and becomes more interconnected, it will quickly become a necessity for the major brands to find a better model. The current one is broken.