When will cloud computing become the norm in the global hotel industry?

The benefits of moving from on-premises hardware to cloud-based IT systems are largely undisputed, and yet the transition in the hotel industry has been relatively slow.

Although definitive statistics are hard to come by, according to a recent count by Jos Schaap, CEO and co-founder, Roomdex, only 20,000 hotels are using cloud-based solutions, just a fraction of the total global hotel stock.

“Some hotels have made the move to the cloud, particularly branded hotels, however, there is still a huge amount of on-premise hotel tech, which really is incongruent when you look at other industries and products. It almost defies logic,” said Kevin Edwards, business development director, Alliants.

Manufacturing, healthcare, government and retail are sectors that have rapidly embraced cloud services. What is holding the hospitality industry back?

John Burns, president, Hospitality Technology Consulting, likened cloud migration to getting a knee replacement: “You keep delaying and delaying. You know there’s going to be downtime, but you know it’s going to be an improvement when it’s done.”

The cloud might not even be the right solution for every hotel, reckoned Jane Pendlebury, CEO, HOSPA.

“It’s not right for every property to be cloud-based necessarily. It depends on security for your data, what IT skills you have on-site, internet connectivity. There are lots of variables. It may come down to personal preference and the security of the provider you are working with,” she said.

When is a good time? Not now!

Just like a knee operation, identifying the right time to make a major IT overhaul is not easy.

“Hotel data is forever a moving target. You’re always taking reservations, checking people in and out. There’s always someone at reception who wants to extend their stay or depart early so it’s not like changing washing machines where you finish one load of clothes and start a new one,” said Pendlebury. “Most PMS suppliers will have good advice on how to transfer that data across and when to actually go live.”

With periods of reduced activity, the pandemic was arguably a better time than most, but Edwards observed: “A lot of people didn’t take the opportunity to evolve. There were huge financial pressures in terms of cashflow and ensuring they came out of it the other side so, to some degree, you can understand why there wasn’t that mass change.”

The major tech vendors, such as Oracle, Infor, Agilisys and others, are telling the story that cloud is better and coaxing their hotel clients to make the change. The hotel companies know it’s the right thing to do, but it’s a case of building the business case to do it today.

Once the decision is made, most tech vendors can work a hybrid model for multi-site brands with the aim of eliminating on-premises systems over time.

“Depending on the hotel group, some will say: ‘This is the cut-off date. We’re going to do it and you have to be on-board.’ Other hotel groups don’t have the clout to be able to do that,” commented Burns.

The big brands are much more motivated and faster at cloud migration than independent hotels, noted Burns, who: “don’t have the time to think so much about what to do with their PMS. They just need it to work.”

The first phase

We are currently in the first phase of cloud migration which is likely to last a couple of years.

During this phase, hotels with multiple outlets such as F&B, spa, golf and retail may find that the new cloud-based version of their PMS is not as functionally-rich as the old on-premises version.

As is the case in other industries, tech vendors have initially migrated the core functions with plans to expand upon them later.

“There may be work-arounds or some of these gaps are things you don’t actually need,” said Burns. “But it’s a trade-off because cloud systems bring real positives. You don’t need to have computer hardware on property, or the same attention to back-ups and day-to-day maintenance. That’s a real relief.”

Compared to manual updates required on-premises, cloud PMS systems, like Apple or Microsoft, update themselves automatically.

He added: “In many cases the new cloud systems have new user interfaces, new screens; workflows are simpler. That’s a win for a hotel with young employees who hate the old PMS.”

Reduced cost

Previously, buying an on-premises PMS meant an acquisition cost of $50,000 to $100,000 per hotel plus an annual maintenance fee. The upfront costs for a cloud system are much lower at around $5,000.

Remington Hotels is a multi-brand US management company with 121 hotels in 28 states.

The company’s vice president of revenue strategy, Cassie Bond, said that, overall, hotels want a PMS that is reliable and dependable and can be accessed remotely i.e. a cloud PMS. Changing a PMS can take between one month and six months, she said.

Outside of the branded PMS products with Hilton, IHG, Marriott, Wyndham and Hyatt, Remington uses Springer-Miller and Opera PMSs for the most part.

Most systems are based on a monthly fee per room for the base model, but the price increases with extra features such as upgrade opportunities, revenue add-ons, outlet purchases, and loyalty program features, Bond explained.

“As the focus on total revenue vs room revenue increased, systems needed the functionality to help drive these initiatives. Each PMS we work with has seen much needed system enhancements over the years and will continue to do so,” she said.

More services

In addition to ease of use, there is an expansion of the traditional PMS services delivered in the cloud beyond the core functions of reservations and billing to include the entire guest journey.

PMSs now deliver pre-arrival email campaigns, on property messaging and post-departure surveys. In fact, it is becoming more common to talk about a suite of functions or a technology platform, rather than a PMS.

Tech vendors are responding to this development by offering a wider range of services. For example, via acquisition, Cloudbeds recently launched a digital marketing service called Amplify.

“Hoteliers can only maintain so many vendor relationships so it’s advantageous to have one vendor who has half a dozen products they need,” commented Burns.

As well as service expansion through acquisition, consolidation is occurring amongst tech vendors, with Mews buying up three PMS providers in recent months, and MCR acquiring  StayNTouch.

How long will it be until cloud computing is omnipresent in the hotel industry? It’s going to take a decade, reckoned Burns: “We are still in the first phase and there will be the laggards who don’t make a start until year nine.”