Historically, the major hotel brands made significant investments in their own IT systems and hardware.
In 1965, engineers created Holidex, the world’s first ever hotel reservation system. A hefty initial investment paid off as the system was used by Holiday Inn and its parent company IHG for the next 47 years, an extraordinarily long lifespan for a piece of technology.
Fast forward to the present day and there has been an explosion in off-the-shelf SaaS products aimed at hotels plus a new generation of operators who blur the lines between hotel, serviced apartment and rental business models.
When it comes to technology, what approach does this new generation favour? Build or buy? Speaking at IHIF 2022, interestingly, four leaders of ‘hybrid’ hospitality businesses all had different stories to tell.
Limehome was founded in 2018 and has venture capital backing from Picus Capital, Lakestar and HV Capital. It provides apartments in Europe via an entirely digital guest journey with no contact onsite. Co-founder and MD Josef Vollmayr said: “We decided to build all our tech in-house. Forty percent of our team – around 40 to 45 people – are software engineers and data scientists.”
“We decided to build everything ourselves because connecting the dots is difficult, especially if you start with the PMS … like, you already have some legacy, and everything which is already built has to be adjusted to a personal model. For us, the key ingredient was to automate everything. So we built it ourselves,” he added.
“We decided to go the other way,” said Stephen McCall, CEO, Edyn, a global provider of hotels, aparthotels and serviced apartments since 1997. “We have a fully integrated platform with enough complexity in it, so we thought we’ll buy in the tech.”
Edyn migrated to a cloud-based Mews property management system (PMS) in 2021.
The Student Hotel was founded in 2010 and CEO Charlie McGregor said: “We've gone for a hybrid. We have certain core systems. I mean, there was a bit of a gamble, to be honest, in the early days, because they were such small companies, you know? So, we've really worked hard together with them to become a core partner. And Mews is a system we use. On the other side, we do need to have some proprietary technology which we will probably have to build ourselves.”
Rami Zeidan, founder and CEO of Life House, said the company uses a mix of systems built in-house which are integrated with industry agnostic products i.e. software for HR, finance and CRM that has not been specifically created for hotels.
So which is the best approach to the increasingly important question of tech investment and management? Build, buy, or a mix?
Quite apart from the practical decisions around cost, expertise, resources, service level agreements and the ROI, there is the impact on asset valuation to consider.
Building your own technology is a capital expense whereas deploying SaaS products are operational expenses.
Kevin Edwards, SVP, Alliants, commented: “Whilst the shift to cloud technology and SaaS delivers greater agility, it also moves technology to an operational rather than capital expense and with the hotel market maturing as an asset class, short-term holders such as private equity houses are deterred by operational expense.”
“But, when tech providers get it right, reassurance comes in the form of improvements to the guest experience which lead to revenue growth and long-term loyalty,” he added.