Siegel Sez
August 7, 2020
I have learned many things during this pandemic and one of them is how the government works. The AH&LA plays a major role in dealing with the government and of course nothing is easy and nothing happens without major challenges along the way. I have joined multiple Zoom calls with Chip Rogers the CEO and President of AH&LA and also with Kevin Carey the COO of AH&LA who have played an active role in making sure the voices of hoteliers and also the suppliers including technology vendors are not forgotten during these times of limited travel. This week Chip Rogers did a webinar with Pat Pacious the President and CEO of Choice Hotels and were joined by Speaker of the House Nancy Pelosi. I know whenever you bring up anything political many are prepared for only good or bad reactions. Sometimes it is best to put your political passions aside and just remember it is our government regardless who the leaders are. I thought Speaker Pelosi did a nice job and kept politics out of it but government in it. When Chip and Pat brought up challenges and what the industry was going through, she took notes and asked questions. Yes, the hotel industry needs help from the government to survive during these times, but it was clear from Speaker Pelosi that not just businesses needed help but people in the United States also need help. It was interesting and I thought very honest. I was glad I was able to join the call along with many thousands of others. If you weren’t able to participate, the webinar is on YouTube at https://www.youtube.com/watch?v=fRTKkgFArTo . It was interesting and worth a view.
I don’t need to be another person sharing how crazy and depressing things are now in the hotel industry but there is a belief from many there is opportunity coming in the near future. In the following column, Doug Rice puts into words a thought that many of us have: If you are a vendor of technology and worried about surviving the pandemic, he has great suggestions and it isn’t just about the hotel industry. I’ve had many conversations with people from other industries that want to open up their product offerings to the hotel industry? Now? Of course, these products are focusing on what is needed now: contactless, safety, clean and sanitized rooms and hotels. Trying to keep up with changes is a never-ending battle. But it is a battle we will not lose.
Now onto a much lighter note. Many in the industry will drop me friendly notes about the horse world. Hoboe is now 6 years old and has moved on to a new career as a show horse. He will do great. Our 4- year-old Riken ran this past Sunday at Saratoga. How did you pronounce Riken? While at Saratoga I was grabbed by Fox Sports who was televising at Saratoga. All I can say is, it can be dangerous with me on live TV. If you want to see the goofy 2 minute clip, here it is: https://file.ac/l3S0l7bxNvo/080220%20Richard%20Siegel%20intv%20clipped.mp4 .
My cell phone exploded with text messages since all my horse racing friends were watching to see how Riken ran. Why they picked me is beyond me, but I am glad they did.
Here now is Doug Rice’s latest technology news. Again, if you are a vendor to the hotel industry, I strongly suggest you read it. Doug did a great job. I will see you at the end with this week’s you-know-what.
Stay well! Wear a mask!
Rich
rich@hospitalityupgrade.com
Definitely Doug
When Tech Vendors Get COVID-19
Much has been written in the mainstream hospitality press about the challenges COVID-19 has presented to the industry. Hotels are in more pain than at any time in our memories. Because of the extensive media coverage, I won’t dwell on this topic further in what is primarily a technology column. But it’s the background for this week’s column, and so merits acknowledgement.
As hotels have been hard hit, so too have their technology providers. The industry’s return to health will require rebuilding a strong and vibrant vendor community and preserving the talent of its human capital. Indeed, many recent articles have highlighted the role that technology will play in enabling hotels to move forward.
In my first COVID-related blog back in March I laid out some guidelines for tech vendors trying to come to grips with the most severe external market event that their businesses would likely ever face. At the time, I speculated that the best case was if the world managed to control the coronavirus as effectively as some of the earliest-hit countries. But I also said that even under that best case, it was going to be pretty bad.
We now know that the best case has not come to pass, especially in the United States. Recoveries in travel have been slow, irregular, and mostly regional. While economies are starting to inch their way back towards some semblance of normalcy in China and parts of Asia, Europe, Australia, and elsewhere, major restrictions on travel are still in place. And in truth, we still don’t know how long this will last: there are promising signs on the vaccine front, but still much uncertainty about when one might be available, how quickly enough can be produced to immunize billions of people, how effective it will be, how many doses will be needed, or how long immunity will last. We can hope for the best, but we can’t count on it. Many things can go wrong, and inevitably some of them will.
Even in good times, many tech vendors in our industry live “on the edge.” While both microbusinesses and megacompanies can often weather even major downturns, those in the middle, between say $1 million to $10 million in annual revenue, tend to be the most vulnerable. This is typically too small to sustain long-term profitability sufficient to weather major, extended disruptions. And this is where most of our tech vendors are: of the nearly 3000 companies that I track, only about 30% have annual sales of more than about $10 million. The 70% that are smaller have been left with very room to maneuver this year.
Hospitality tech vendors saw revenues and cash flow drop precipitously in the second quarter. Many with whom I have spoken have seen declines in the range of 50%, and some distribution companies who were dependent on booking fees or commissions even had negative revenues in April and May, as cancellations exceeded new bookings. Most have seen a modest recovery in recent months. But their average revenue and cash flow, based on my informal survey, is still down 25-40% from where it was a year ago, as customers have demanded concessions, cancelled contracts, seen dramatic volume drops on revenue-share arrangements, or, in many cases, simply stopped paying.
Most of these companies have taken difficult actions to cut costs: furloughing or terminating staff, imposing mandatory salary reductions, and cutting discretionary (and even not-so-discretionary) expenses. Government subsidies and loans have been helpful for some, but vary widely by country, were often challenging to qualify and apply for, and may not last as long as the need does. While all of these measures help, they are only holding patterns. For most companies, a return to health and profitability requires a recovery in the underlying business, and sooner rather than later. Even some of the largest and financially strong companies have taken major actions, as illustrated by Booking Holdings’ announcement this week that it would eliminate up to 25% of its 17,500 worldwide employees.
What will become of our fragmented vendor community if the downturn lasts years rather than months? If history is any lesson, those with access to capital will be on the acquisition hunt and will rescue some of the better smaller companies and key staff (if not always their shareholders). Right now, many larger companies are thinking that it is easier to buy customers through acquisition than to find new ones through sales efforts, especially in light of travel restrictions and trade-show cancellations.
All of this is background to what I really want to talk about this week, which is diversifying into other industries. I covered this briefly in the March article, and got a lot of comments and questions from companies who were looking at this. Some have taken the plunge, while others thought carefully but decided not to. But now that the shell-shock of April and May is behind us, executives are starting to shift focus from simple survival to how to return to growth in an upside-down hospitality market. And those that aren’t, should be. Diversification is one way to do that.
Many of us made our careers in hospitality because we love the industry. Some grew up in it, others adopted it later in life, but now it’s so much a part of us that we can’t imagine working elsewhere. Lots of our technology providers were founded by people like this. A large portion of the companies I track focus almost exclusively on hospitality. Many of them were founded by someone from the industry who saw a problem and built a product or service to address it. Close ties with, and dedication to, a single industry can be personally rewarding when times are good. But overdependence can be dangerous when outside factors swoop in and target it.
Even well-managed companies that are too dependent on a single sector can be destroyed by events like the current one. Diversification helps because different markets will be affected differently by the same external factors. As much as hospitality has been hit hard by the pandemic, others like Zoom and Netflix have prospered, and many others have been relatively unaffected.
If you’re a tech vendor to hospitality, should you be looking at other industries? There is no one simple answer. But this week I will offer a framework and some ideas to think about, depending on the type of products and services you offer.
The first thing I will say is that expanding into other industries, or even pivoting totally, is much easier for some hotel tech companies than for others. For example, those that make components or systems that control buildings, such as environmental controls, access controls, life safety systems, or security systems are likely to find it easier to change course. The same or similar systems are used in office buildings, apartments, college dormitories, senior living facilities, hospitals, entertainment venues, military bases and even retail space. Moreover, those buildings are often built by the same developers and contractors as hotels, so sales channels and relationships may already exist and a good reputation may already be established.
But an important caveat with this strategy is ensuring that you understand the customers’ needs and the product changes that might be needed to meet them. Every market is different, and it’s essential to do your homework. Where the differences are small and manageable, however, there can be good opportunity, especially if the competition in the new market is vulnerable.
Other hospitality tech vendors make devices and systems that also are used in homes. I wouldn’t counsel most of them to go after the consumer market directly; business-to-consumer (B2C) markets are simply too different from business-to-business (B2B). But there are segments of the consumer market that are serviced indirectly through other businesses (the B2B2C approach). For example, entertainment systems, wi-fi infrastructure, bedside tablets, voice response systems, and telephone solutions can be sold into health care facilities and senior living centers, as well as to hotels.
Still other vendors provide software to perform various functions within the hotel. Some of these systems are equally useful in other industries. Examples in this category would be workforce management, payroll, staff communication, preventive maintenance, and basic accounting systems. A hotel-focused tech company in one of these areas might be well served to look at other industries, perhaps one with specialized needs, where incumbents have dated products or poor reputations. Again, however, it’s important to find industries where the needs are similar enough to hospitality that you don’t end up needing a major rewrite, and where the sales process allows you to leverage your existing sales infrastructure. It’s one thing to add one or two key people with relationships in the new industry, something quite different to build an entirely new sales force operating on a different model. It’s also important to focus on just one or two industries and execute well, to avoid spreading yourself too thin.
Other software providers will have a harder time diversifying because their product is too specific to hotels. Even so, there can be opportunities to find markets with “hotel-like” characteristics, such as serviced apartments, short-term rentals, hospitals, college dormitories, and shared work facilities. Like hotels, all of these have guests, reserve rooms or beds, employ service staff, have operational procedures, prepare financial accounts, invoice customers, accept payments, and perform other functions supported by software. Many of these markets will be harder to enter because there will be incumbent providers whose software is better tailored to the needs of that market – but sometimes there are new markets emerging with players who want to operate differently, and who are willing and able to invest in adapting an existing software package (perhaps from hospitality) in order to get what they want. I know of more than one central reservations company that have recently landed contracts to do exactly this.
A final group of companies does things that are so specific to hotels that their products may have no useful applications elsewhere – or if they do, it’s only in other sectors of the travel industry that have been equally hard hit. For these companies, diversification through internal efforts may be impossible. Diversification through acquisition may be an option for some, but typically not for small companies already starved for cash.
With a potentially multi-year-long recovery for hotels, these industry-constrained companies may be better served by finding a company from another industry to acquire them – you could call this reverse diversification. It may not help the company’s shareholders but it could provide a lifeline to some or all employees and customers. Many of the travel tech companies that had been on acquisition sprees in recent years, such as Amadeus, Cendyn, Expedia, and Booking Holdings, have had to slow down because of COVID. But companies less affected by the pandemic, such as Canada’s Constellation Software, US-based Infor, and China’s Alibaba-backed Shiji Group, have each acquired several hotel tech vendors in the past 1-2 years and may be more immune to the travel downturn because they have more diverse portfolios, deeper pocketed investors, and/or geographic concentration in places hit less hard by COVID. In recent years, megacompanies like Comcast, Honeywell, Emerson, Legrand and Cox Communications have also acquired hotel tech assets complimentary to their existing product lines.
A sale may also be the best strategy if your company has diversification opportunities but not the financial resources to exploit them. The best targets are established companies in the other industry that compete with market leaders, but that have product-line gaps that your product line could help fill. This strategy still requires diversification thinking and exploration, but it doesn’t require funding.
There’s no simple or right answer to solving the problem of having too many eggs in the (hospitality) basket. But the events of the past five months have certainly caused some soul-searching among the entrepreneurs that have been the backbone of our industry. Diversification may take you further from the things you love, but may well be the key to long-term survival and success.
Beyond the lessons for tech companies, there are ones here for the many experienced professionals who have lost their jobs due to COVID. If hospitality if it is your first career love, by all means keep it on your target list. But also recognize that there are other industries that may have needs for exactly your set of skills right now – and you can apply the same logic as above to find some of them. You can always return to hospitality at some point in the future when it’s healthy again.
Douglas Rice
Email: douglas.rice@hosptech.net
Twitter: @dougrice
LinkedIn: www.linkedin.com/in/ricedouglas/
Recent Technology News Headlines, from Hospitality Upgrade and Hotel Online
Guest Management Systems
– Maestro Asks: ‘How Serious Is Your PMS Provider About Service?’
As independent hoteliers work diligently to prepare for reopening, many are struggling to get the support they need to ensure their property-management systems and integrated solutions are ready for guests’ return. Those who are dissatisfied with their provider’s lack of customer service are turning to Maestro, known industrywide for its Diamond Plus service.
www.maestropms.com
Revenue Management
– Les Hotels Baverez Selects IDeaS Revenue Solutions to Boost Competitiveness in Paris
One of Paris’s leading luxury hotel groups, Les Hotels Baverez, has selected IDeaS G3 Revenue Management System (RMS) to improve its forecasting capabilities and boost its competitiveness in Paris.
ideas.com
Guest Facing Technology
– Hotel Internet Services Unveils Survey Results Revealing New Insight into Guest and Hotelier In-Room Entertainment and Voice Technology TrendsComprehensive report leveraging feedback from over 700 guests and 200 hoteliers demonstrates escalating demands for the industry’s embracing of service personalization and voice-activated in-room technology.
www.hotelwifi.com
– Bartech NeoTray Provides Safe and Convenient Point-of-Sale for Generating Post-COVID Guestroom Revenue
Bartech, the leader in automatic minibar solutions for the global hospitality industry, is fulfilling a growing need in the post-COVID 19 hotel environment through its proprietary NeoTray solution, which allows non-refrigerated items to be securely offered to hotel guests through an automated point-of-sale within the safety of the guestroom.
www.bartech.com
Marketing
– Vizergy Launches Sleek New Website for Beachcomber Resort & Club
Beachcomber Resort & Club in Pompano Beach, FL, has partnered with Vizergy Digital Marketing to launch a new website unveiling its multi-million-dollar renovation featuring a stunning new look and wide array of experiences and offerings.
www.vizergy.com
Back Office
– ProfitSword Earns Recognition for Business Intelligence Innovation as Shortlist Finalist for 2020 SaaS Awards
International software awards program lists ProfitSword’s ProfitAbility as a leading award finalist for its cutting-edge AI and machine-learning abilities in detecting business performance fluctuations.
www.profitsword.com
Payment Processing
– Onyx CenterSource Launches Contactless Virtual Card Solutions
Onyx CenterSource, a leading global provider of B2B payments and business intelligence to the hospitality industry, today announced the launch of virtual credit card payment solutions to its hospitality and travel clients worldwide.
www.onyxcentersource.com
Operations
– San Clemente Palace Kempinski Turn to Knowcross Technology to Open Post Pandemic
Knowcross, a global leader in providing service quality and optimization solutions for hotels, is excited to share that the San Clemente Palace Kempinski Venice, has chosen to implement the Knowcross platform, to help improve staff communication, better compliance to new safety guidelines and increase overall operational efficiencies. This addition further strengthens Knowcross’ resolve to help and partner with hotels as they look to reopen post the pandemic across the globe.
www.knowcross.com
– Hotel Effectiveness Launches PerfectEngage
Hotel Effectiveness, a leader in labor management software, announces PerfectEngage, a built-in communications tool that allows managers to easily message individuals or groups of associates. Hotels can share announcements or news instantly company-wide or within a specific hotel — all tracked in one secure system.
hoteleffectiveness.com
Security
– React Mobile Releases Updated BLE Beacon Designed to Improve Location Accuracy, Increase Battery Life
React Mobile, the most trusted provider of panic button solutions to hotels, has released an updated proprietary beacon designed to deliver precise, up-to-the-minute location information within a multi-story building. The square, white, contemporary beacon houses a larger battery, expanding its life from three to seven years or longer, far exceeding standard Bluetooth® beacon devices.
www.reactmobile.com
Hospitality Events and Association News
– HTNG to Offer Free Membership to Employees in Transition
Hospitality Technology Next Generation (HTNG) extends free memberships through the end of the year to individuals who have recently been laid off by HTNG member companies.
www.htng.org
– HFTP Introduces CYBER HITEC 2020, A Virtual Platform for the World’s Largest Hospitality Technology Event
Hospitality Financial and Technology Professionals (HFTP) has unveiled the details for its virtual CYBER HITEC. The 47-year Hospitality Industry Technology Exposition and Conference (HITEC) recently pivoted from an in-person to a virtual program, but still retains the full-breadth of features and expertise HITEC is known for.
www.hftp.org
Piqued Our Interest
‘Revenge Travel’ is the Phenomenon that Could Bring Back Tourism with a Bang
New Data Shows COVID-19’s Impact on Hotel Industry
Baby Boomers Endure ‘A Lost Year,’ as they Await the Return of Safe Air and Cruise Travel
And now for you know what…
When my son graduated from high school, he had to give a speech. He began by reading from his prepared text.
“I want to talk about my mother and the wonderful influence she has had on my life,” he told the audience. “She is a shining example of parenthood, and I love her more than words could ever do justice.”
At this point he seemed to struggle for words. After a pause, he looked up with a sly grin and said, “Sorry, but it’s really hard to read my mother’s handwriting.”
