The tech issue at the heart of hotel investment

Hotel view

For decades, the Opera property management system has enjoyed a virtual monopoly in the hotel IT space. Anyone who worked on reception or in the front office most likely learned how to use Opera and it remains the PMS favoured by several of the major brands including IHG Hotels & Resorts, Marriott and Wyndham Hotels & Resorts. 

The benefits of over-arching, uniform and scalable IT systems are clear. Owners and franchisees know exactly what they are getting and employees are using a familiar system.

But not everyone thinks that the tech decisions made at the highest levels are always right. For instance, following the 2016 merger, Starwood properties converted to Marriott’s reservation system. This raised eyebrows amongst those who believed that Starwood was, in fact, the more tech-advanced outfit and the migration should have happened in the opposite direction.

Hotel tech has experienced real innovation and progress only in the last few years. A new breed of open and agile solutions are challenging legacy systems to keep up.

“There has been a real shift in how companies are using data and a lot of the big hotel groups have systems with very inaccessible data,” Kevin Edwards, director of global business development at consultancy Alliants, said.

“These are big monolithic systems which were not bought for modern-day technology and, whilst they are getting upgraded now, they are coming from a backward position.”

For investors and franchisees working with, or considering working with the major brands, this throws up a couple of pertinent questions. Now there’s more choice out there, how easy is it to add to or modify the tech stack at individual property level? And, secondly, which brand’s IT systems are most open to third-party software integrations?

Anecdotal evidence suggests that IHG offers a fair amount of flexibility to its owners and franchisees in choosing what tech they want to deploy. Hilton, on the other hand, with its own proprietary infrastructure known as OnQ, takes full control of the tech stack and is stricter about what must be used. Marriott sits somewhere between the two. 

Regardless of which brand you are dealing with, a minimum mandate and brand standard will be that you use a specific PMS. 

“A brand’s value is in loyalty and delivering reservations to hotels. Any system that touches this core offering will find resistance and a lot of legacy thinking, because it would be touching the core IP of the brand,” Matthijs Welle, CEO, Mews Systems, said.

“Therefore, most hotel brands are reticent for franchise owners to change any core solution.  However, if a technology solution does not directly interface with the central reservation and loyalty systems, suddenly it can open up many more opportunities. For example, housekeeping apps, upselling apps or even business intelligence tools.” 

In the US, Olive Tree Hotels & Resorts is at the start of its acquisition journey. With $500 million of capital and a pair of properties under its belt, it aims to acquire struggling limited service hotels and turn them into successful businesses. Its acquisition targets may be branded, unbranded, or ripe for new franchise deals. Olive Tree is keeping its options open, and it may even establish its own brand, but it is putting technology at the heart of its strategy.

Ava Chunjang, the group’s SVP of management and operations, underlines that while the front office interfacing systems (such as the PMS, POS, reservation system) are mandated by the brands, franchisees do have flexibility when it comes to the back office systems. 

“This means we can focus our attention on optimizing operational efficiency by thoughtfully selecting the right business intelligence tools and financial, work order and labor management systems,” she said.

In addition to the new PMS providers, there are also new technologies that work as interfaces into a brand’s legacy system, enabling franchisees to extract data.
Vibhu Gaind is the chief information officer at RBH Hospitality Management, a UK company with several brands in its portfolio of 45 hotels. He explained how the company dealt with this potential complexity by creating its own business intelligence system: “Across the portfolio we have around eight different PMS and, in some cases, we inherit systems already in place and it’s not cost-effective just to change them. To overcome this, all we need is an API feed from each PMS into our business intelligence system which sits under our control and presents data in our own format. It gives us a comprehensive view of the entire business.”

He added: “As operators, we also have our own proprietary management systems across the portfolio to add value and manage revenue, payroll, attendance and time-keeping. So we use our own stack for that part of the operation.”

Allowing franchisees to use APIs to open up legacy systems requires a forward-thinking mentality which is gathering pace. Edwards comments: “Some of the big companies do want to change. They understand the need from an executive level down, but they need to bring their investors and shareholders into the journey.” 
One brand worth mentioning is Accor. Through its deal with Ennismore in November 2020, the French hotel giant is investing in the know-how of a management team that has used cutting-edge tech to help reinvigorate iconic venues like The Hoxton and Gleneagles and the Mondrian and Delano brands. 

Accor is also piloting a Mews PMS at the Ibis Budget hotel at Heathrow Terminal 5 in London with a view to rolling it out.  Although Accor uses Opera and its own FOLS system, it is understood that the Mews PMS provides a more cost-effective solution for a very limited service brand like Ibis Budget.

The sudden fall in revenue due to the pandemic means that hotels need to deliver efficiencies often with fewer staff. This makes the need for automation (particularly contactless service) and an asset-light approach to IT all the more pressing. 

 “In the past, global hotel brands would build their own solutions but they now realise that these solutions are extremely expensive to keep up-to-date and maintained,” said Welle at Mews. “We’ve noticed several brands in recent RFPs, who have proprietary solutions, look to replace these with off-the-shelf providers but with an Open API so that they can still have the flexibility to build and retain their own unique brand values.”