Definitely Doug 12/17/21: 2021 In Review

If there has been a silver lining for hospitality from the pandemic, it is the rapid changes that occurred in the technology landscape during 2021. Two major trends are combining to help hotels better address some long-ignored opportunities: expanded interest in technologies that improve operational efficiencies, and consolidation in the vendor space. While these trends are distinct, they are also mutually reinforcing.

For years, technologies were available to help hotels reduce staffing costs. But adoption was anemic until this year’s staffing shortages forced a rethink.

Mobile check-in options proliferated. I covered this in a blog back in May, when there were still a lot of challenges. Many solutions at the time required mobile apps that were available only to the minority of guests willing to download them, but by the end of 2021 many of them are now accessible to all guests, with or without native apps, via responsive web apps and self-service kiosks (there is even one targeting economy hotels that accept cash). Enhancements to some products have addressed security concerns around biometric ID checks (see this blog) and payment; this has further reduced the barriers to adoption. Similarly, guest self-service options expanded: room service ordering; reservations for dining, spa, or activities; in-restaurant ordering; and service requests have all enabled a reduction in staff without sacrificing the guest experience – especially for guests who prefer contactless options. Apple has opened up the iPhone secure element to mobile hotel keys for the first time, meaning a native app will no longer be needed for mobile key.

Operational software was king this year: housekeeping, maintenance, and communication platforms that can better identify what needs to be done, set priorities, and assign resources. All of the companies I have spoken to with offerings in these categories say business has been booming. Automation has become critical as the once-standard daily housekeeping routine has evolved into a complex and rapidly changing set of options that can vary by guest, day of week, staff availability, and other factors. Good operational software helps by identifying the things most likely to result in unhappy guests, and then prioritizing the actions needed to address them – especially when staff is limited. While competent and focused managers can do this manually, the realities of current workloads make this almost impossible for anyone to do well.

On the communication side, many hotels now support some sort of chat function for guests to communicate with staff. My own experience with these has been decidedly mixed. The non-AI products that allow guests to send messages but that require hotel colleagues to respond are fine for non-time-sensitive issues, such as questions or requests that might be sent pre-arrival. But few hotels can monitor and respond to chat in real time, so it is not unusual for responses to take an hour or more. As a result, these solutions can negatively affect guests’ service perceptions if they use them for more urgent issues that arise during their stay. As artificial intelligence and voice recognition technologies improve, I see much more potential in an AI-based chatbot or voice response solution that can both answer routine questions without human intervention, and also escalate more urgent needs to a human who can act on them. Products in this category continued to improve in 2021.

And to be sure, improvements in guest-facing apps can also reduce the need for personal communication. If the guest can request more towels or order room service via an app or responsive web page, then they will likely do this vs. sending a voice or text request that might be misunderstood or left unanswered. This is not to suggest that technology should replace personal service, simply that hotels should service guest requests, however the guest prefers to submit it – and should make it as easy as possible.

If some of these trends are not evident to all hoteliers, they are clearly seen by the investment community. During 2021, Alpine Investors’ ASG Hospitality Group acquired operational platform Alice, and ASG’s Visual Matrix PMS business unit also acquired housekeeping productivity provider LodgingControls. Unifocus, buoyed by an investment from Riverside, acquired housekeeping and operational platform Knowcross. MCR, which last year bought the property management company StaynTouch, just last week added housekeeping platform Optii to its portfolio. Beekeeper acquired the operational workflow platform Lua. And AI chatbots and voice recognition also came of age in 2021, with Revinate acquiring AI chatbot provider Go Moment, and Uniguest buying voice assistant company Volara.

And it is not just acquisitions. Buoyed by success with small independent properties, Cloudbedsraised $150 million in a D round led by Softbank Vision Fund 2, and the massive funding infusion continues to support functionality that reduces staff requirements. Cloudbeds claims its platform saves four hours of work per employee, per day. And while I am skeptical that many hotels can achieve that much savings, I have no doubt that the claim is directionally meaningful. Cloudbeds’ focus on a complete operational package is an excellent approach for the smaller, simpler hotels that dominate its customer base. But its huge success in that market positions it to start moving into larger and more complex properties over time.

For larger and upscale properties with more complex needs, the integration of work-order management, housekeeping, guest request, staff scheduling systems, and guest-room technology holds the promise of similar efficiencies. Good integration is necessary wherever management and franchise arrangements prevent adoption of a single unified solution. ASG and MCR have clearly recognized this with their acquisition strategies, but success will depend on execution. They will need to focus on much tighter integration to achieve labor savings in larger and upscale hotels that is on the same order of magnitude as Cloudbeds claims for its customers.

While operational systems got the biggest boost from M&A activity in 2021, there were other notable transactions. Cendyn merged with NextGuest and later with Pegasus as it builds up a marketing and distribution powerhouse. On the infrastructure and guest-room technology side, H.I.G. Capital took a majority stake in Enseo and Cloud5 acquired MTS, while VDA acquired a majority stake in Telkonet. Among bigger players, Rategain acquired MyHotelShop, OTA Insight got an $80 million B-round investment, Siteminder completed an A$627 million public offering, and Cvent went public via an acquisition by Dragoneer Growth Opportunities Corp. II, a special purpose acquisition company (SPAC).

The hospitality tech vendor landscape has been much too fragmented, and I believe that many of these acquisitions and cash infusions will turn out to be good for the industry, reducing the number of integrations required while building larger companies that are better able to serve the hotel industry at scale. While there is certainly the potential for M&A to create vendors that are too large, dysfunctional, or greedy, the bulk of the activity in 2021 was focused within modest-sized organizations, generally within the annual revenue range of $50 million to $250 million. Historically this has been the sweet spot, where vendors are large enough to meet their customers’ needs efficiently, but not so large that they become arrogant or unresponsive.

Investors understand the value of technology that improves the efficiency of its customers, but they are also diligent in assessing the readiness of customers to adopt it. In 2021 for the first time, they saw tangible results that said hotels are starting to recognize the need for better operational technology. As a result, they have started pouring money into companies that can provide various aspects of operational efficiency, and into combining them with others to launch a new generation of operational solutions. I hope some of their visions succeed!

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