Expert’s Voice: Hotels must embrace new technology

by | 14 Jun 2020 | Experts

Jordan Hollander, CEO at Hotel Tech Report, explains why hotels should adopt new technology to help them re-emerge stronger after Covid19.

We’re seeing collaboration like never before in the hotel community.

Competitive walls were broken down when major hotel chain CEOs addressed US president Donald Trump in their pleas for an industry bailout. Similarly, major hotel tech companies have banded together in an initiative spearheaded by Cloudbeds to convert excess hotel capacity into lodging for those in need like healthcare workers. Hotel owners are listing their beds in droves at HospitalityHelps.org.

It’s not all good news though. Never before in our lifetimes has business come to a screeching halt like this…and hopefully it won’t happen again.

Most hotel businesses maintain around 2x payroll as working capital (cash to run their day-to-day operations). As hotels get closer to the 60-day mark, we’ll see more and more layoffs because they simply can’t foot the staffing bills. The only way to help these hotels is through government bailouts and improved payment terms on mortgages. Here in the US, the government has put together an incredible programme to offer fully forgiven SBA [Small Business Administration] loans of 2.5x monthly payroll to any hotel business under 500 employees.

Hotel Tech Report is always looking to understand how technology can help improve hotel business performance but sadly there isn’t a tonne that you as a hotelier can do with new technology right now. Revenue-management systems don’t add much value when you’re at 2% occupancy, upsell software can only do so much with a couple of heads in beds and so on.

We’d be lying if we said ‘we’re all going to get through this together’. We’re not all going to get through this. Poorly capitalised hotels like those described in this great article by The Real Deal will go under even with government intervention. Overextended technology companies will face the unfortunate same truths. Even the previously untouchable venture funded alternatives like Sonder and Lyric have faced hard truths faster than Hotel Tech Report anticipated.

We are a strong and resilient industry like many have pointed out. The Darwinian reality is that these crises make all industries more antifragile. The bad actors die out (along with many good ones) and only the fittest survive. Ask your finance friends what major bank balance sheets look like today in comparison to 2008/2009. The companies that come out of times like these are the leanest and smartest – and they get even leaner and smarter through the pain.

We don’t say the above in a good or a bad way – it’s just the truth. Many hotels have or will cancel software contracts while others will go out of business. This is really unfortunate and painful for their suppliers in the short term but new owners will purchase those properties and those owners will understand more than anyone the power of running an efficient organisation.

They’ll be more entrepreneurial in aggregate and eager to surround themselves with the best technology partners around. For software companies, this means there will be more whitespace than ever before in history to pick up new market share – in the 12-18 months after this crisis fades, we will see the defining hotel technology companies of the future separate from the pack. Covid has been a great equaliser and, while painful, we believe that it will accelerate digital transformation in hospitality (like many industries) by 10-15 years.

As we said before, technology can’t save you RIGHT NOW, but great software is the key to running an efficient and consistent business. Market intelligence software helps you stay ahead of trends, revenue management software can help you price rooms automatically without relying on a revenue manager who’s basing forecasts on last year’s irrelevant results, operations tools can keep consistency of SOPs [standard operating procedures] and so on.

TCV’s David Yuan shared an awesome initiative from Toast POS to get consumers buying restaurant gift cards to support their favorite local businesses. The same way that a restaurant can’t serve you when they’re shut down, tech companies can’t do all that much for hotels that aren’t open.

Software is key to how you anticipate, react and recover from a recession. It makes you better at acquiring guests, running an efficient operation and maximising every dollar.

During Bill Gates’ recent interview with TED, he was asked what he would do if he was president right now, and his answer was basically: “It’s too late, the time to act was three years ago. All we can do now is ramp up testing, pray for a cure and promote social distancing.”

Similarly, the only thing hoteliers can really do now is negotiate with lenders, stay current on local bailout opportunities, make prudent layoffs, focus on helping their employees as much as they can and pray that this ends soon. Once we’ve sorted out all of those issues and have some downtime while our businesses are closed, the best thing we can do is prepare for the next downturn and improve our operational capabilities. Never again will you have this much time to try different technologies and lots of vendors are even offering concessions and free tools that we encourage every hotelier to take advantage of for this limited and unprecedented period before we get back to the new normal.

Do everything you can afford to support the technology companies pushing our industry forward because when this is all over, you’re going to need them more than ever.

The biggest barriers to adopting technology are broken down right now in ways they will never be again – take advantage of that to optimise your business before it’s too late.

  1. Contract Lock-in: Most can be broken with force majeure. If you don’t like a vendor, now is an opportune time to upgrade your stack.
  2. Switching Risk: Especially when it comes to mission-critical systems, it can be scary trying to migrate while your hotel is at full occupancy. This is the perfect time to make the move while your hotel is closed.
  3. Time: Learning new software takes time, no matter how easy to use the system is. You’ll never have this much time to try and learn once the market picks back up.
  4. Cost: Lots of vendors are extending free trials during closures from 30 days to 90 days. You’ll never have an opportunity like this to try software and see if you like it over extended periods of time. Having said that, your vendors are hurting as much as you are – support them, don’t strain their businesses unless you absolutely need payment delays, etc. Use the golden rule and treat them as you hope guests treat you.
  5. Integrations: This barrier is already broken down. Simply avoid vendors who charge high integration fees or don’t integrate with your critical systems. There are plenty of great vendors who have open APIs...it’s 2020 after all.

Focus on ensuring your hotel business survives this crisis financially, then get proactive, get creative and learn how to optimise your business to accelerate the recovery, and you’ll be outperforming the compset in no time. Remember that the best defence is a good offence. Everybody looks like a genius in a bull market, it’s times of crisis that separate the average hotel businesses from the truly great ones.

This is an edited version of a longer article that first appeared on Hotel Tech Report – click here to read the full story.

Jordan Hollander

Jordan Hollander

CEO at Hotel Tech Report

Jordan is CEO at Hotel Tech Report, one of the largest online community for technology insights and digital transformation strategies in the hotel industry. There he gives hotels owners and managers the tools needed to thrive in the digital disruption.

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