Why the hotel industry needs Google, Amazon or Priceline to clean up the mess it has created
By Lennert de Jong, Commercial Director at citizenM
Have you ever wondered why you automatically get the newest version of Facebook on your phone, have made Google a synonym for search, Booking.com has just signed up its 500.000th accommodation and hotels are stuck with legacy systems for decades already, and new initiatives seem to never really take off or struggle to get traction at least? Surely these new systems seem to provide a modern solution to topics we are struggling with (online travel agencies, technology, demand management and pricing)? I started to work in the hospitality technology industry in 1999, to start up SynXis in Europe. We had a revolutionary product, 'cloud based', that would connect the PMS to the land of distribution, be a central reservation system for a hotel call-center and would make your scanned brochure (website) come alive with a booking engine that connected directly to the system. In 1999 Google was just starting up, hotels still received the majority of their reservations through their callcenter/reservations department and Booking.com was still Bookings.nl and just signed up their first hotel in Amsterdam.
In the first years of SynXis, 95% of the time we spoke to hotel managers, we ran into the same issues. The hotel manager did not see business moving to the internet, did not want to change anything, did not want to pay money for reservations coming from the website ('phone is a cheaper channel') or simply was too afraid of the unknown.
It took a few years to gain traction, but when we did, we ran into something else. People understood the new CRS/GDS/IDS and booking engine, but connecting new channels/sites or PMSs became an issue. License fees for interfaces, versions that first needed to be upgraded (at the expense of a few cars), lead times. It became messy.
in 2006, when I left SynXis (acquired by Sabre in the mean time), it had just signed 10.000 hotels on the CRS system and was 180 people strong with offices in all continents. Booking.com, which was still Bookings.nl had just signed hotel 55.000 and was doubling its growth every year, with a handful of people in Amsterdam and big plans in the drawer for global growth.
In 2014, when you look around in the hotel industry you see two things really clear: hotels seem to be unhappy with online travel agencies and hotels still do not move on any new technology. They are still stuck in PMS versions 1.0 and any new system they want to use, will cost them a license fee of thousands of euros and a support fee per month on top of that. For something new that they do not understand and/or trust yet.
Surely there are initiatives that tried to streamline inter-vendor communication such as the open travel alliance or HTNG but they have been around and did not seem to make the impact so that a new technology can be adapted at large by an industry.
The underlying issue and conclusion for me is that the maze of outdated technologies, under education because of fragmentation (surely a 20 rooms hotel will not need to understand all of this) and extortion by the existing players on interfaces is causing so much friction that it does not allow any company to enter.
At the same time hotels are complaining about the rise of the online travel agency, the power it is gaining worldwide and fear it is causing for the future.
Hotels, wake up and smell the coffee! If I were to write a book and sell it, would I need to use Fidelio, have a revenue management system in place, pay for expensive interfaces, educate myself on e-commerce etc.. etc? No, I would simply put in on Amazon and have a publisher to make some noise around it.
It is time for giant to fix this once and for all for the hotel industry. Google might have the power to it, but it does not seem to have the focus yet. Priceline/Booking.com surely wants to move in this direction, looking at their purchase of Hotel Ninjas, Buuteeq and OpenTable and help hotels to finally focus on what they should be good at (providing a good experience for guests) and outsource technology/marketing to them. It might be Amazon even with their travel initiative although that sees far fetched from a practical level.
Two things need to happen though for this. We, the hotel industry need to accept we are fragmented, do not have scale or skill in marketing and technology, and therefore need to accept that a big player will help us with this.
Secondly that big player will need to understand the P&L dynamics from an owner perspective and that there is a cost and margin for every step in this game, and price accordingly.
AirBNB is knocking on the door. My Uber driver this morning told me that 15% of taxi companies in the Netherlands went bankrupt in 2014 even though use of taxis was up big time. 'Because they did not cooperate with Uber'. It is time to understand that spectacular innovation will disrupt our industry, and embracing this will help to make this transition go smooth. Creating a level playing field will cause players in this industry to seize their business. Travelocity seems to be closing down in the next year, and my prediction is that we will see a rise of new players in technology, that can finally interact with us, and cause traditional PMSs, to go under, and with that all kinds of legacy companies that made their business out of the mess we created (channel managers, crs, etc.)
Hoteliers, get your experience in order. Rent out your own house through AirBNB to understand the simplicity of not having legacy systems. And then apply to the hotel industry. Be open for change.
2020: the hotel industry has been made frictionless. Owners are no longer blinded by operators and a maze of technological barriers, it has become easy to obtain data, knowledge and guests and hotels are able to focus on the fun of providing a spectacular experience again and beat each other up on the best new experience in town. Thanks to the giants who decided to take action 5 years ago and clean up the mess we created.