Red Roof outsources tech stack to HotelKey to help fight labor shortages

When George Limbert started as president of Red Roof, he met with the hotel brand’s franchise operators to better understand what was going well — and what wasn’t.

He became interim president of the Ohio-based company in late 2020 and fully assumed the role in August 2021. During that time, of course, the industry struggled.

The Red Roof portfolio includes 682 hotels across four brands. More than 100 of them are operated by two franchises affiliated with the Red Roof corporate. The rest are operated by independent franchise owners.

One of the top issues was the lack of hospitality workers in the current labor shortage. They needed franchises to reduce their reliance on workers, and technology is a big piece to solving that puzzle.

“Innovation to help with the labor shortage is imperative for us at the brand level,” said Limbert.

That’s why Red Roof announced Friday night that it is partnering with Texas-based HotelKey as the official property management system for the company.

All Red Roof franchise owners must use the official corporate technology system, which has historically been developed, hosted and supported in-house. It was clear that Red Roof was limited in what it could invest in, so it had to outsource, said Ted Hutchins, Red Roof’s chief information officer.

The platform’s simple interface will be a big help for owner-operators with employee training, he said.

“As you can imagine, they have a huge turnover in this job market. One of the biggest problems is that if you have an old, creaky interface, it takes a long time to train,” Hutchins said.

The HotelKey platform will streamline a number of Red Roof functions, including property management, guest management, central booking, point of sale, connectivity with third-party booking platforms and a loyalty program. Owner-operators will also have access to technology, such as cleaning and preventive maintenance applications and electronic signatures, that Red Roof has not been able to invest in in the past due to a lack of resources.

Franchise owners pay a fee to the Red Roof company for the technology it provides. This fee had been used to operate the internal software system and will now be used to operate the HotelKey system.

“We’re coming from an internal system where we put in $1 and get maybe 10, 20 cents of innovation out of it,” Hutchins said. “The community model allows me to put in $1 and get two, three, four dollars back.”

It’s unclear at this point how well the technology will lead to more visitor sales.

“It’s hard for us to predict … but there are indications that there is better connectivity with some [online travel agencies] and less complexity in booking leads to better conversion,” Hutchins said.

Is it better to sign with a new company or a legacy player?

HotelKey is part of a newer generation of hotel technology, similar to products offered by Canary Technologies, which just raised $30 million, and Stayntouch, the MCR-owned system.

The biggest competition for new platforms are those built by older industry players such as Oracle and Saber and Amadeus. Older companies have invested heavily lately in upgrading technology and moving to the cloud.

Whether a hotel provider outsources technology from newer or older companies is basically a matter of taste, said Klaus Kohlmayr, chief evangelist and developer at IDeaS, a maker of revenue management software.

Most major brands have gone with legacy companies so far, particularly for central reservation systems, he said. And the portfolios of most venture capital-backed hotel tech startups consist primarily of independent hotels.

“When you’re a very big brand, you want stability and you want to minimize risk and you want to make sure that the technology you’re spending on works. If you go with a legacy player or a larger company, the risk is somewhat minimized, but at the same time, you probably don’t have the same kind of future or next-generation capabilities,” Kohlmayr said.

“If you work with a smaller company, you have more influence over their roadmap and growth and can become a key partner with them. And the smaller companies are more nimble and nimble and more nimble than some of the bigger players.”

Regardless, Kohlmayr is confident that investment will continue across the board.

A survey earlier this year of 210 hospitality professionals worldwide by travel technology company Duetto found that 77.6 percent plan to increase their investment in hotel technology over the next three years.

“Innovation or investment is definitely accelerating. Covid contributed to that,” Kohlmayr said. “We’re kind of on the cusp of a wave of innovation in the industry that’s just starting to emerge. I’m pretty optimistic about the next few years.”

HotelKey

HotelKey supports approximately 400,000 rooms for 3,500 hotels, including 500 independent hotels, primarily in the US. The company plans to reach 600,000 rooms for 6,000 hotels by the end of 2023, according to Aditya Thyagarajan, co-founder and president of HotelKey.

The company provides the technology for all Motel 6 properties through a partnership with G6 Hospitality, as well as all Extended Stay America properties.

While the company started with a focus on the budget hotel segment, Thyagarajan said it is expanding into higher-end segments. The 10,000-room Evermore Orlando Resort at Disney World uses HotelKey, he said.

This February, HotelKey is announcing a partnership with what it says is one of the world’s largest brands, with properties ranging from budget to luxury. HotelKey is currently used in more than 500 hotels of this company.

As a smaller company, Thyagarajan said HotelKey has followed the path of growth by working with partners.

“For us, being only seven years old, we see this as an amazing opportunity to learn from brands like Red Roof, and that’s how we typically shape our roadmap,” Thyagarajan said. “And then the whole community can use it.”

HotelKey has more than 300 employees, with more than 100 openings.

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