By Alan Young
Steve Jobs once said, “The mark of an innovative company is not only that it comes up with new ideas first, but also that it knows how to leapfrog when it finds itself behind.” There is, perhaps, no more relevant sentiment to apply to the hospitality industry – a sector that is continuously molded by the fire of consumer preference yet often utterly resistant to the crashing waves of technological change.
Of course, this isn’t a novel observation; hospitality has long been criticized for its slow adoption of new-age technology and processes. However, it is a reality that bears repeating, both to identify the progress yet to be made – and opportunities yet to be explored – and to highlight the leaders who empower hospitality brands to leapfrog when the rest of the industry remains rooted in the legacy past. Feng Ou and Ted Zhang, the founders of DerbySoft – the leading provider of high-performance distribution services to the hospitality industry – are undoubtedly leaders by this definition.
I recently had an insightful conversation with Feng Ou. We discussed his experience starting up in Silicon Valley, the evolution of DerbySoft, and potential strategies for hoteliers to keep up with market changes.
Feng shared his journey, transitioning from centralized to distributed computing, the exposure he gained to innovative technologies like the Internet, and the shift from a single location to widespread connectivity through TCP/IP technology. We also talked about DerbySoft’s entry into the travel industry, and he candidly shared the challenges they faced, including the significant impact of the 9/11 tragedy, SARS, the global finance crisis, and the pandemic on the travel industry.
Feng discussed his views on recent tech trends and the obstacles the sector must tackle. He emphasized the need for integrated technology, robust data security, and data sovereignty. On the subject of future technologies, he acknowledged the potential of AI and VR. He also stressed the importance of efficiently using resources worldwide and the need for businesses to adapt to tech changes to remain competitive continuously.
As our talk came to a close, he suggested potential business opportunities that hotels can explore over the next five to ten years. Feng encouraged expansion into contract rate structures, business-oriented travel, and diversification into related industries. In closing, he highlighted the crucial part human resource diversification plays. Feng suggested a combination of expanding business domains, continuous technological innovation, and diverse human resources as a successful strategy to stay competitive in the rapidly evolving business environment.
Getting to Know Feng Ou
Feng first arrived in the US in 1990 from Beijing, China, where he studied and worked to pursue further education. He earned his Master of Science in Electrical Engineering degree in the field of image databases from the University of Washington. Shortly thereafter, Feng moved to New York to pursue better technology opportunities at a time when trendy new innovations, like object-oriented programming (OOP), distributed computing, and internet technology, were first taking shape. Before long, Feng secured a position as an engineer in the world of high-risk trading on Wall Street.
“I was hired by a major Wall Street investment bank as a programmer in charge of distributed computing; my team built a new derivative trading system,” he explains. “In the early ’90s, computing went in one of two directions – either a centralized system relied on like the IBM mainframe or minicomputers – or go the way of distributed computing, which relies on each individual system, like HP or Sun workstations.” Feng found himself navigating a key inflection point in trading history (the transition from centralized systems to distributed systems), and the system he built alongside his team was one of the early practical derivative trading systems for Wall Street.
This groundbreaking work soon attracted the attention of a startup company in the San Francisco Bay Area, and Feng left Wall Street for the world’s foremost technology start-up hub: Silicon Valley. Interestingly enough, Feng and Ted still had not crossed paths despite attending universities near to one another in Beijing. And, it wasn’t even their respective work in the technology sector that first brought them together. “It was through the Silicon Valley Chinese engineering community that Ted and I got to know each other,” Feng shares. “We realized there was an opportunity to work together. So Ted and I began that journey in 1999 as the dot-com bubble took shape.”
An Inside Look at the Rise of DerbySoft
Feng and Ted founded DerbySoft in 2002 after returning to Shanghai from Silicon Valley. “We wanted to build a new hotel distribution paradigm,” Feng explains. “The fundamental catalyst that brought Ted and me together was the realization of our shared values – we were willing to do just about anything to bring value to our customers, and neither of us was willing to give up until the goal was achieved.”
Their mission, in its most simple form, was to make the travel business—a notoriously complicated business—much easier. This led them to launch their first connectivity product, Build, in 2006, which made it possible for hotels to list on distribution channels. By 2007, the company had established partnerships with Hilton and InterContinental hotel groups, and by 2008, the Hilton CRS was successfully connected to Booking.com.
In 2011, DerbySoft was named Google’s global partner, and that same year, the company’s platform crossed the 700,000 room nights processed per month threshold. Fast forward to today, and DerbySoft has grown to include more than 80 global hotel chains, 200 plus distribution partners with over 900 connections worldwide, over 227,000 properties globally, and more than 400 employees. When asked what has contributed to the company’s success, Feng highlights their efforts in building a truly efficient, globalized organization.
“This industry has tremendous business opportunities from many perspectives,” he notes. “An efficient execution team is the most integral advantage for any hotelier. This non-negotiable approach has been at the core of our business from day one. Shared values and a willingness to keep innovating are at the heart of everything we do.” Feng goes on to explain that the foundation of DerbySoft can be broken into three elements: in-depth technology, expertise in a problematic domain, and best-in-class work ethics.
“We possess a deep understanding of our work domain and have adopted a balanced, practical, and cost-effective way to tackle every challenge we encounter. We understand our positions and are willing to tackle challenges seriously,” Feng shares. “Any hotel brands – big chains, in particular – have to work closely with technology vendors to effectively optimize the distribution of their services. This is becoming more and more challenging today, considering changes in the global environment. With this in mind, our technology is simple, efficient, and completely streamlined.”
DerbySoft’s Connectivity Suite, for example, takes multiple systems and connects them through a single implementation to give our partners uninhibited access to distributors and suppliers. Similarly, the company’s Property Connector is positioned as an AI-powered, “one-stop-shop” management platform for hotels of all sizes that delivers real-time availability, rates, and inventory while providing fast access to 500+ distribution channels.
Coding Hospitality’s Future
Feng envisions a future where technology plays an increasingly significant role in the hospitality industry. He believes that advancements in artificial intelligence (AI) and machine learning (ML) will revolutionize the way hotels operate, from customer service to operations management.
Another area where Feng sees potential for technological innovation is in data analytics. He believes that by harnessing the power of big data, hotels can gain valuable insights into their guests’ preferences and behaviors. This will allow them to tailor their offerings to meet specific needs and wants.
When it comes to the current economic environment, Feng notes that hotels are increasingly sensitive to cost. Simultaneously, the current geopolitical landscape has prompted hotels to emphasize data security and protective data compliance requirements. “We address these concerns within our offering,” he explains. “We work hard to ensure we are the most cost-effective solution on the market, and we take great care to ensure compliance with data security rules across the globe.”
Of course, Feng adds, everyone is currently fixated on the emergence and continued evolution of AI technology. “I think AI will fundamentally change the travel industry,” he shares. “To start, it will transform efficiency using data. Then, we will likely see the emergence of AI-powered rate forecasting – things like Dynamic Packaging. After that, AI-powered chatbots will be leveraged for services, and eventually, we will see new BI platforms emerge with AI capabilities and enhanced revenue management tools.”
As for what’s next for DerbySoft, Feng shares his desire to expand services to broader inventories. “As an example, we need to work on contract rates besides focusing more on public rates. For products, we need to expand to other lodging services and non-lodging services, such as ticketing, etc.,” he explains. “Along with general business expansion, we intend to pay close attention to more cutting-edge technology applications, such as AI and VR. The three axes will continue to define our efforts in tandem: business domains, technology advances, and a globalized team.”
Overall, Feng sees a future where technology is not just an add-on but an integral part of the hospitality industry. He believes that those who embrace these technological advancements will thrive.
