Definitely Doug 12/2/22: 2022 in Review

As December begins, we can reflect on a year in which quite a bit happened in the hotel tech space. A year ago, we were still contemplating whether and when a full industry recovery from the pandemic would happen. Now the debate has shifted, as many sectors of the industry have recovered, but with structural changes evident. Hybrid workplaces, work-from-anywhere, and greater use of video conferencing in place of many face-to-face meetings, all appear to be part of the new reality. The hotel and lodging accommodation industry are adjusting, albeit in fits and starts. Leisure and blended travel are very strong, conferences and trade shows are returning, but business travel is weaker.

What were the key events and trends in hospitality technology over the past year? Here are several key trends, and a few one-offs.

Property Management Systems

Consolidation of legacy companies continues in the PMS market even as new entrants continue to pop up every day. Last December, IQware acquired Megasys, and then in April, Fullsteam swallowed both companies. In January, Agilysys bought ResortSuite.

What is perhaps more interesting is to watch the progress of some of the newer breed of PMS companies. Cloudbeds, which has historically focused on boutique accommodations and is still largely invisible in the mainstream market, raised a whopping $150 million a year ago, and is using it to methodically expand into new markets. Forbes named it one of America’s best startup employers for the second consecutive year, and it received four of the top honors from 2022 Hotel Tech Awards. In July, it acquired the guest-messaging platform Whistle.

It is also hard not to notice the progress Mews has made, especially in the large middle market. Mews has more than doubled its staff to nearly 600 in the past 15 months according to LinkedIn, which would make it the world’s fourth largest PMS company. And at a smaller scale, Stayntouch continues to penetrate into the upscale sector, a market where few companies its size have successfully stolen much business from market leader Oracle Hospitality.

Guest Journey Software

The rise of contactless self-service, spurred by both demographic trends and the pandemic, has greatly raised the profile of software products that can manage the guest journey digitally and seamlessly from pre-booking through to post-stay. PMSs historically were designed to optimize interactions with hotel staff. They rarely if ever exposed their inner workings through guest-facing interfaces, nor were they designed in a way that made it easy to do so.

Newer PMSs, including in varying degrees Cloudbeds, Mews, and Stayntouch mentioned above and also Apaleo, have followed more modern design principles that enable both staff and guests to perform actions directly in the system. This facilitates a more connected guest experience that does not require lots of complex interfaces. But most hotels are using older systems that predated this need or design, meaning that they must employ third-party vendors to manage the guest journey. For the newer generation of PMS, the guest interface may just be a different view into the system than the staff interface (with different security, of course), but using the same business logic. A check-out transaction is essentially the same whether performed by the staff or the guest, so this approach makes sense and will become more common over time.

More than 40 products are competing to manage the guest experience for the legacy PMSs that cannot. Most of these companies are still quite small. However, I have been impressed with some of their offerings, even if none of them do everything I might want. The better ones produce strong incremental revenue (both in the hotel and from local partners), reduce front desk labor through guest self-preregistration and mobile/kiosk check-in (yes, even in countries with strict ID capture requirements), and provide a superior experience for the guest through features like digital compendia, mobile key, in-room device controls, and mobile food and beverage ordering.

Companies to watch in this space include Alliants, AT-Visions, Bowo, Duve, hudini, and InnSpire, all of which have broad and inclusive offerings. Dozens of others have very credible offerings covering some but not all of the guest journey; a few that are noteworthy especially for digital check-in include Canary Technologies (just off a $30 million capital raise in October) and Virdee, which raised $9 million early in the year and announced a partnership with Clear for identity management in September.

Guest journey software should not be confused with hotel mobile apps, although the two form factors can have significant overlap. Guest resistance to downloading a native app remains high, except for regular guests of the same brand or hotel. Unlike native apps, most guest journey software can work based on invocation from a simple hyperlink that is sent by email or text message prior to arrival, meaning it is readily usable by all guests, including OTA bookings and others who may simply be unwilling to download a native app. Guest journey software that is offered as a progressive web app fills this need can support the guest experience, upselling, and labor savings for the 50-80% of guests who don’t have the native app. To be sure, native apps still make sense for frequent guests (and many providers offer their platform both ways, so that guests have a choice), but the only function that actually requires a guest app (at least today) is mobile key, due to security restrictions on mobile phones.

Labor Productivity and HR/Operations Management

Another major trend that became evident in the past year is the tech focus on labor productivity, operations and human resources management in hotels. This is reflected in the guest journey software discussed above (which can reduce the workload at the front desk and other departments substantially), but also in consolidation and investment among companies in the space. In May, Sabre acquired Nuvola, a hotel operations platform that complements the SynXis Property Hub. In June, ASG (a portfolio company of Alpine Investors) launched Actabl, which joined the capabilities of ASG’s prior investments in Alice, Profitsword, and Transcendent; it subsequently acquired Hotel Effectiveness as well.  And in November, Beekeeper announced a $50 million Series C investment.

Operations and human resources have long been backwater technologies for most hotels, with systems connected only loosely if at all with core systems such as the PMS. The need to better coordinate the hiring, scheduling, and tasking of resources in ways that deliver the same or better guest satisfaction with less cost has become much more visible since the great resignation. The integrations are still not where they need to be, but it will be interesting to see how this evolves now that there is greater strategic focus from well-funded companies like Actabl and Unifocus.

Analytics

‍ASG’s acquisition of Profitsword (above) was just one element of consolidation around reporting, analytics, and business intelligence. myDigitalOffice, which has roughly doubled in size in the past year, acquired Focal Revenue in April and Datavision Technologies in June. In August, it was ranked by Inc. magazine as the sixth fastest-growing private company in all of Travel and Hospitality, and #608 on the Inc. 5000 list. Not bad for a company most of us had not heard of two years ago!

Associations and Trade Shows

‍In May, Hospitality Financial and Technology Professionals (HFTP) rejected a merger offer from the American Hotel and Lodging Association (AHLA), about a year after Hospitality Technology Next Generation (HTNG) accepted one. HFTP’s HITEC trade show celebrated its 50^th anniversary in June, with attendance reportedly approaching pre-pandemic levels. In July, AHLA together with Questex announced The Hospitality Show, a new trade show scheduled on the exact same dates as HITEC in 2023. Subsequently, HFTP announced it was ending its long-term relationship with AHLA, and reaffirmed alliances with associations including Hotel Sales & Marketing Association International that have co-located with HITEC in past years. Do we really need an association war?

Integrations

While it’s hard to identify any specific news events that were groundbreaking in the area of integration, I have seen more progress in the move toward open APIs and easy connectivity in the past year than I can remember seeing at any time in the past 20 years. A new breed of software providers that is increasingly focused on reuse of open-source code, open APIs, microservices, and low-code/no-code solutions is really starting to remove much of the historical friction around integration – and the associated costs. I have watched companies produce complex new integrations in a matter of days or weeks that used to take months or years. The days of closed ecosystems where a core vendor tried to keep everyone else out of their domain may not be completely gone, but they are rapidly diminishing. Many vendors now include existing integrations as part of their base offering, and may even develop new ones at no additional cost. Ten years ago, this was almost unheard of, and it was rare even five years ago.

While integrations to legacy systems can still be challenging, new lightweight integration tools using enterprise service buses, event streaming and robotic process automation have helped to ease the pain. I wrote about them in this column earlier this year; if you missed it, you can find it here.

Other Acquisitions and Investments

‍Other M&A activity slowed a bit in the sector in 2022, but there were still some notable deals. Cendyn completed its merger with Pegasus in January, and then acquired digitalhotelier in August. Groups360 continued its expansion into the group booking space with a $35 million capital raise in April. In May, Ven Capital Partners acquired Eleven Software, a Wi-Fi management software platform used by many hotels. In June, Uniguest acquired Norwegian entertainment platform Otrum, a significant enhancement to its European presence. In July, World Cinema agreed to buy Hospitality WiFi, LLC. In November, GuestTekacquired Event Conferencing Services, and Serent Capital, which already owns BIrchStreet Systems, book4time, Knowland, Revinate, and Sceptre Hospitality Resources (SHR), acquired AI-powered booking engine provider Avvio through the SHR unit. On December 1, ResortPass announced a $26 million Series B round to expand their “daycation” software globally.

Other Key Developments

The Apple NFC key continued to roll out this year, although not as rapidly as many hoped. So far it is deployed mostly at launch customer Hyatt, although others are reportedly in the works. The NFC key provides a much simpler user experience than Bluetooth keys, but the transaction costs charged by Apple have given many hotels pause. The NFC key still requires a downloaded app, a barrier that has kept many potential users from experiencing even the Bluetooth version. Rumors are floating that Apple may support creation of keys in progressive web apps, potentially eliminating the downloaded app requirement, but I have yet to hear this confirmed.

September marked the first major cybersecurity breach in some time, with IHG’s booking system shut down by hackers for a couple of days. The BBC reported that it was intended as a ransomware attack by a Vietnamese couple, but it was thwarted as IHG’s IT team kept isolating servers before the ransomware could be deployed. As a result, the attackers decided to do a wiper attack (deleting data) instead. I have not heard any final forensic reports that fully describe what happened, but based on what has been published by the BBC and others, the breach reportedly started with a phishing email that deployed malware, found a way to bypass multifactor authentication, and then found a password vault encrypted with the weak password ‘Qwerty1234’.

Unlike most prior cyber breaches in hotels, where sensitive guest data such as credit cards was stolen, this one had a direct business impact on franchisees who depend on the flow of reservations, and potentially longer-term reputational damage. While IHG recovered quite quickly given the magnitude of the attack, it serves as a cautionary reminder for all hotels. Based on published reports, it is clear to me that IHG did a lot right, including having multilayered defenses and an effective attack response and disaster recovery plans. It sounds like they were able to quickly limit the damage from the phishing malware and multifactor authentication breaches. But cyber security is only ever one mistake away from disaster, and in this case that one mistake appears to have been the weak password protecting other a vault of other passwords, which likely provided access to the data that was ultimately wiped on multiple servers. It sounds like someone assumed that a password vault was already behind strong-enough walls that it didn’t need its own complex password. I would wager that’s been fixed by now!

The most recent news is in the voice response arena. There has been much hype around deployment of voice response devices in hotels over the past several years, although the number of hotels using them remains minuscule. This past week, Business Insider reported huge losses and layoffs at Amazon’s Alexa unit, which was the trailblazer and most common platform deployed in hotels. It seems Amazon has not found a formula for monetizing the dedicated hardware.

I am still not convinced that voice response technology is ready for hotels; it still needs better artificial intelligence (AI) and natural language processing (NLP) to interpret and contextualize the thousands of possible requests that guests may make in any language and accent. The last time I told an Alexa hotel unit “I’m hungry,” it responded with “cooking’s beyond me, but ask me for a recipe” (and no, my room did not have a kitchenette, I was hoping for room service or restaurant recommendations). The novelty effect that benefited some of the early adopters has now worn off, with so many Alexa units now in homes. I still believe that voice response will one day be common in hotels, but it doesn’t need an expensive device – it needs better AI and NLP. I have said for the last ten years that I think truly useful voice technology is at least 5 years in the future for hotels … and I still do.

What caught your attention that I missed? There are more than 600 new companies I’ve looked at in the last year, but probably 1000 more that I’ve missed, and I’d love to hear about them. I also hope to see many of you next week at HT-NEXT in Miami Beach.

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