How Much Hotel Tech Investment Is Just Way Too Much

Skift Take

Some hoteliers risk being overly ambitious in their tech efforts coming out of the pandemic.

Sean O’Neill

Hotel tech investment is beginning to boom. But “less is more” can be a valuable motto, as hotel executives spend on software.

• A survey of 210 hospitality industry professionals worldwide in late January and early February by travel technology firm Duetto found that 77.6 percent plan to increase their hotel tech investment in the next three years.
• “There’s definitely a move across almost all segments of hotels, from global chains to independents, to re-evaluate their tech stack,” said Sean Fitzpatrick, CEO of business intelligence firm OTA Insight.
• “Some of that is precipitated by an exodus of talent, with remaining staff having to manage more things,” Fitzpatrick said. “But there’s also a recognition of an opportunity to reset.”

When it comes to investing in tech, there can be a temptation to go overboard. But do you really need “all the things”?

• For distribution, hotels need to be in multiple channels, such as online travel agencies and social platforms, to expand their sales opportunities. But perhaps only up to a point.
• “Technology is so good today that it’s easy to open up 200 channels with just one click,” said Pablo Delgado, managing partner and CEO, America, at Mirai, which offers a booking engine and other tools to hotels. “But that’s the starting point of a big mistake.”
• It may be wiser for a hotelier of a non-chain property to ask what is the minimum number of channels they need to manage to reach their target segments.
• “You’ll only need seven or eight channels most of the time,” Delgado said, speaking at a panel on Tuesday’s Travel Tech event online.

Some others agree. While hoteliers need a channel manager tool to be efficient, they don’t need as many channels as they typically take on.

• “What we hear from clients at hotels that are resource-constrained by the pandemic is that they want to achieve results with the minimum commitment?” said Juanjo Rodríguez, CEO of The Hotels Network, a software company in Barcelona.
• “We offer a strategy we call ‘set it and forget it,’ a minimalist approach,” Rodríguez said during the panel talk. “That won’t give you 100 percent of the potential upside in digital, but it will give you, say 40 percent with a minimum investment in time for new integrations. Then you can tackle more when you have more resources and time later.”

Airbnb has popularized the idea of shopping for lodging by so-called attributes, or features like “free Wi-Fi” or “hot tub.” Some hoteliers are trying to copy the idea by throwing all the amenities they offer at customers in online menus. That’s a mistake.

• One danger is that guests will be overwhelmed by too many options.
• “If the booking process becomes longer, then you get a conversion rate issue,” said William Darrah, vice president of sales in North America for Amadeus, during the panel.
• Ideally, so-called personalization, or the surfacing of relevant offers based on signals gleaned about consumers, can avoid this problem.
• (Hotels can use third-parties to get data on customers based on their browsing behavior. For a taste of this, if you’re signed-in as a Google user, you can look up what Google’s advertising platform knows about you.)
• “We’re figuring out how to create a cohesive experience from the website to a booking engine that truly understands the guest and can present the right offer in the right room that anticipates a person’s needs,” Darrah said. “That’s where the industry is moving toward. There’s more profitability within personalization to be unlocked.”

Payments between hoteliers and third-parties, such as bedbanks and online and offline travel agencies, need to be simplified, too.

• “How do we remove all the points of friction today when people conduct B2B [business to business] payments while optimizing costs and mitigating risks,” asked Xavier Ginesta, chairman of tech vendor Voxel, during a panel on Wednesday at the ITB Berlin travel trade show. “For example, we need to automate sub-processes such as invoicing in particular cases.”
• Simplification can save money.
• “At a typical hotel, optimizing your B2B payment or collection processes can help you either make or save somewhere between 1 percent 5 percent [of revenue],” Ginesta said, citing all the inefficiencies associated with payments that aren’t collected in a timely manner because of manual processes or mistakes.
• “We’re talking to a client that hasn’t been supplying VAT [value-added tax] compliant invoices after charging a customer cost, so they weren’t able to recover the VAT, which can be 20 percent in a country like the UK,” Ginesta said.

Simplification can enable agility in payments, too.

• Today, most hotel direct websites and apps can only accept a payment at the end of a long booking process. Why?
• “Payment doesn’t necessarily have to happen at checkout,” said Jörg Kablitz, managing director at PayPal’s German division. “It could be an ancillary that is sold unconnected to a room or it could be a bolt on to something already bought.”
• The paradox is that most hotels can have a simplier approach to accepting consumer payments because they’re current payments process is too complicated.
• Today many hotels use different systems to be able to guest payments via traditional credit cards, platform payment methods like Apple Pay and PayTm, and QR-code based payment methods like AliPay.
• For example, Selfbook, a vendor that has raised $40 million in venture capital led by Tiger Global in the past six months, offers hotels code to put on their websites. The payment software will group multiple services, such as on-property restaurant reservations, spa appointments, and activities, into a single payment flow. It will accept a variety of payment types, too.

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