If you've ever worked at any of the large hotel chains, you probably are familiar with brand standards. Whether you work at a corporate-owned property or you are the franchisee owner of a hotel flying a brand flag, you know that everything is standardized and setup to run like a well-oiled machine. The chain helps with everything from the brand of towels to the proper way to greet a guest in the lobby. So one would assume that the brand should also dictate the hotel software used at the hotel right? If I wasn't from the industry I would have thought so too, but I've recently noticed some trends that I am positive aren't beneficial to the guest or the hotel's owner. In this article I will outline what I see as the 8 main downfalls of using brand-mandated software, as well as who such brand-mandated hotel software decisions help and who they hurt.
Top 8 Problems With Brand Mandated Software
#1: It's Outdated
Have you ever worked with a PMS built by a hotel brand and then contrasted it with what is on the market today? How about a Sales and Catering program? Or a Point of Sale system? Often brands build their own hotel software in-house which initially seems like a great idea as it allows them enormous flexibility. Over time though, those software products lag behind the general market in terms of product updates and innovation. It's hard to be a hotel brand AND a software company after all.
Example of branded hotel's reservation system.
#2: It's Not Compatible
I remember the first time I found out about a brand standard for a Hotel CRM designed for group sales, I asked why. I was expecting it was so that all of the properties could have access to the same standardized database which would in turn enable head office to get a birds' eye view of what was happening at all of the properties in terms of pace, production, sharing of key accounts and leads, etc. I was very surprised when I found out that the brand-mandated systems weren't even capable of communicating with each other. I am not saying this is always the case by any means, but it happens much more than you'd expect. As well, I mentioned before that these systems are often old. This means that they are often not compatible or able to integrate on modern internet browsers, mobile devices or even the cloud. The hotels could have more connectivity by using almost any modern product, but the standard has limited them to be stuck with other old technology because that is all that the software they have works on.
#3: It's Expensive
One of the main arguments that a hotel chain will make to owners when selecting a standardized hotel software is that they will get a brand-level discount. This in theory should drive the price of the product down. But chain-level discounts don't drive prices down, innovation and the free market does, so what happens instead is that as software has moved to the cloud and pricing on almost all hotel software has slowly moved down, brands are still selling their hotels software programs that charge five to six figures to implement, train and transfer data, then another five or six figures a year. The truth is these hotels could have software products that are strong and faster in almost every imaginable way for a fraction of the price.
#4: It Is Not Competitive
Let's say you have two hotels that are across the street from one another and are identical in every way except for their technology. One of these hotels is independent, so you can pick your own software. The other one is a branded hotel and it is using old, slow, mandated software. The new hotel has features that help your sales team prioritize leads, send off beautiful proposals in seconds, enable customers to sign online and then provides them with automated upsell offers a couple of days before they are set to arrive on property. The other software forces your staff to click through 12 windows to create a size 8 font document that doesn't look quite right that your customer needs to print off, sign with a pen and then fax back to you. Your staff then needs to remember to enter the data into two systems (which takes them 25 minutes). Which hotel do you think provides the customer with a better experience? Would you rather have an Apple computer made this year or an IBM from 1995 to do an important project? What about an iphone vs a flip phone? The technology advantage is real and hotels that aren't able to choose the best solution lose business to those who can.
#5: It's Not Integrated
Modern hotel software programs are built to connect. In the past, you'd need companies with thousands of employees coding the software used by hotels because literally everything the hotel would ever require had to be in that one program. That creates a problem that we in the tech world refer to as "technical debt". It's very hard to re-write 10,000,000 lines of code. It's also hard to make a great product when you try to do everything. Can you think of a market leader who is the best in the world at literally everything? Aside from maybe Amazon, there aren't too many. Instead, new software in almost every vertical, hotels included, are shifting to a connected business model. Instead of one giant company building a black box that does everything, new tech companies are becoming the best in the world at solving one small but important problem. They then use straightforward technology to connect their program to any other hotel software you'd need. This means that you can move pieces of your technology in and out as new products become available or as your budget changes, etc. In the old world, products were too big to change, like a giant army, they couldn't move fast. In the new world of hotel technology, you need to switch products in and out to keep up with the speed of business. This is a reality that using a brand-mandated legacy product just doesn't support.
#6: Security Risks
Not to name names, but a very well known and respected hotel brand that just happens to be one of the biggest in the world had a security breach that exposed the passport numbers of more than 5 million people. I have to admit, I wasn't surprised after seeing some of the software these brands are running on. What scares me even more is a quick Linkedin search to see who the brands have working on these products. Often the person who built it retired 10 years ago and it's now been outsourced. There are a handful of people in the world who even know how the software works. In the modern world it would be unfair to say that this hack was preventable but I certainly have to wonder if a modern suite of software products may have prevented the issue. Things happen, but modern products mean you have full time people working on the code-base daily that are familiar with both the language the software is written in, the servers it runs on and the product itself.
#7: Poor Customer Service
I know for a fact that a third party software who has been mandated as the new brand-standard at a very large chain has a 6 month waitlist just to onboard new hotels onto their platform. I heard another story from a management group of 30+ hotels that they were told by the software vendor that they were just "too small to take feedback from" and to try teaming up with more hotels from the brand to have their voice heard. If your software company already has the contract for 1000's of hotels for a set number of years, no matter what, what is the incentive to treat your customers like gold? They are forced to use you. This is exactly what we have seen happen with some of the largest, most well known hotel software companies over the last decade. They started strong, but their reputations haven't always stayed with them as the years have worn on.
#8: It Stops Evolution
Imagine if every hotel in the world had to look and function the exact same way. That wouldn't create a dynamic and interesting industry filled with creativity and limitless opportunity at all. It would create a poor guest experience, staff that don't have any differentiators to be proud of and it would make winning and growing very difficult. Whenever monopolies exist, I feel this happens to a business and I think it is happening today when brands only give a singular option regarding software. It stops evolution at the brand level, it hurts the owner's ability to compete and it actually hurts the evolution of the software company with the contract as well. What incentive do they have to be better if it's all locked in forever with no competition? That sounds a bit anti-capitalism to me. Don't get me wrong, I'd love a big contract with one of the big 5 chains, but I would hope others have an opportunity to compete too. In my opinion this is a huge industry with more than enough business for many different brands of hotels and many different software providers. Just like in the hotel market, software providers should win by differentiating and niching down, becoming more creative and adapting to the market dynamically, just like hotels do.
Who Is Winning And Who Is Losing?
When a software company gets mandated as a brand-standard, the owner loses immediately. I am very confident in stating this because I have seen the huge costs the incur to purchase old, outdated hotel software that is slower and worse than the competition and often priced between 5-20x higher. I've also seen the hotel's staff lose because the actual people using the software are so far removed from the software company, who instead prioritizes the relationship with the brand. There is then a communication issue as unhappy users try to talk to the brand's head office staff who then talk to the software company. Have you ever played a game of telephone? I have always believed that at a great company, you can pick up the phone and call the CEO if you have to. I know that is how I run mine. The software only exists to serve the staff on property and in management and their job is to use it to serve your guests. When this connection is severed, you can easily see how it would affect everyone involved negatively.
The software that gets mandated wins some revenue and market share, but as a business owner myself, I believe this to be a false sense of security. I am a firm believer that a company's competitive advantage is it's brand. Strangely, all a brand is, is the perception your customers have about your business. When you have a mandate, it's an attempt to circumvent building that trust and instead to make a deal with "your bosses boss". This can hurt your company too as you gain too much comfort, stop listening to users, stop providing great service and innovative features and overcharge much more than you should. It also means you are using a one-size fits all solution on multiple customers. In short, my philosophy is that nobody is the best in the world at everything. You can only be the best in the world at something "narrow and deep" and in the hotel market we have luxury vs select service vs conference properties etc. It's hard to solve all of their needs as one company. I have never thought that just because a business is very large it can be the best in the world at everything. I feel the same about when brands build their own products. There is a reason that Microsoft focussed on software not hardware and I think that's the same reason hotels should focus on hotels, not software. They are very different and each one takes immense focus to do properly.
So What Is My Solution?
I have always believed that if you are going to bring up a problem, you should also bring up the solution, so here it goes. I think brands should absolutely have standards, but those standards should never be monopolies and that includes my own company. Software companies should be selected based on the merits of their product and owner's and management groups should be allowed a voice in deciding the key systems that will run their business and affect how their money is spent. Having said that, the brand should of course mandate options that are pre-vetted by them and standardized. What I am arguing for though is optionality. Give an owner or management group 2 or 3 choices, not one. Ensure that all of the software is tried and tested, produced by well-reviewed companies that offer world-class support. Then, make sure it is integrated to the existing infrastructure. This will help owners save money while staying more competitive and it will help hotel brands keep up with the speed of business and remain more competitive at the corporate level too.
In summary, I think brand-mandates are important for standardizing the guest experience, but software isn't like soap or carpeting or standard operating procedures. Software moves very quickly and if you do not keep pace with innovation, you will eventually lose to someone else who does. For this reason, I think brands need to consider providing their properties with multiple options and to give new vendors a chance. It will create more upside for the owners, a more competitive market that creates innovation and ultimately more success for the brand and the software companies too.
What do you think?
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