Even after the pandemic decimated the hotel industry, operators are still shy about adopting new technologies — and inevitably losing precious dollars because of it.
Before the pandemic hit, hotels were spending about 2.5% of revenue on new technologies. The size of this investment decreased during the pandemic.
Many hoteliers said they are implementing new technology now or plan to. A 2022 survey of 500 hoteliers by hospitality technology company Stayntouch and the NYU Tisch Center of Hospitality found that 50% expected to increase innovation by the end of 2022.
Despite the growth, it’s not happening fast enough – especially considering the economic state of the industry – and hotels are unnecessarily losing money on inefficient systems in the process. Yes, it takes money to adopt new technology, but there is a long-term reward — that’s how investing works.
All of the third-party hotel technology companies, new or old, each account for a small fraction of the number of hotels worldwide, although their customer bases are growing.
Mews, a hotel tech startup that just raised $185 million, has more than 3,200 hotel customers worldwide. MCR-owned Stayntouch said it serves more than 100,000 rooms in total.
Cloudbeds, a hotel technology startup that has raised $253 million in total, has more than 20,000 hotel customers worldwide.
Oracle – the most established hotel technology company – doesn’t have much more than that.
When you consider the number of hotels that exist worldwide, this level of adoption is not just very high.
All software systems are being developed, but they still experience significant pushback from potential customers.
Adam Harris, CEO of independent hotel specialist Cloudbeds, believes it comes from a few quarters, particularly a reluctance to adopt something new.
“The average rate of spending on technology in the hotel industry is like a fraction of what it should be,” Harris said.
“The number one reason we don’t sign up a customer isn’t because they went to a competitor. it’s because they fear change.”
Harris believes another reason is hotels’ reliance on a fragmented system that requires them to cobble together software from multiple companies. But it’s not just hotels that are stuck in the past — some universities are still training on platforms that are decades old.
At the same time, Harris believes some of the big brands are more concerned about the top line than helping individual properties complete their operations more efficiently.
As other industries introduce new AI-powered technology, much of the travel industry is still approaching the turn of the 21st century. This can be frustrating for industry innovators.
“There are manual tasks that hoteliers do every day that don’t require human resources, yet our industry requires them. I mean, only 13 percent of the door locks in our industry are digital,” Harris said.
“We’re so focused on today’s guests, we’re not even looking at the next guest, who’s going to change five years from now, 10 years from now.”
The labor shortage is one of the top issues that has made hotels push for more technology adoption recently. Because of this, some hotels do not have the bandwidth to attract all potential customers, especially if they do not have an up-to-date reservation system. Meanwhile, hotels continue to lose money to middlemen like online travel agencies when technology exists to help secure direct bookings.
Harris believes it will take all innovative companies to continue to promote and present data to move the collaborative industry forward.
“We make excuses like change is too hard or work is the reason. All of these can be solved with technology and small investment improvement. And even if that meant shifting a booking or two a month away from an OTA, you’re paying for all that technology improvement just in savings and commission,” Harris said.
“It’s not like we need them to climb mountains. We just need them to climb a small hill and start from there. And then we can gradually get better.”
Regardless, change is inevitable — because it’s largely what customers want.
“I don’t know if this industry is ready for it, but a lot of change is coming,” Harris said.