When we started our business 3,5 years ago and built our PMS solution as Cloud-first, we thought we would get a lot of resistance from hoteliers on the safety of the cloud and potential Internet connectivity challenges. Looking back, this was probably the least of our worries in selling our solution to hoteliers.
Most small independent hotels we initially focused on, were still receiving bookings from leading OTA’s via fax machines, processing credit cards by hand and manually entering bookings and payments into the PMS. The security of a Cloud system was the least of their worries.
We also noticed a significant difference between Eastern and West European approaches. The West is much more prepared for the Cloud than the East, the main reason being that we were competing against very expensive solutions, who offered no way of alleviating the hours of manual work it took to operate them, suddenly finding that our solution makes a very positive impact on most hotel’s P&Ls. However, we’ve been disappointed with how difficult it has been to convince hotels of the potential revenue upsides of automation and so sometimes we find that price and not functionality is at the forefront of hoteliers’ minds when switching to the cloud.
At the same time, we also spoke to many hoteliers who were ahead of the curve and had researched significantly on the Cloud and its potential upsides. It was from these discussions that we learned the most, and we were especially surprised about the “Industry Leaders” and their lack of innovation in the Cloud. So what did we learn?
Not all Cloud Solutions are Equal!
As we started selling our solution, we heard different (horror) stories from hotels and found that there is a huge difference in what companies represent as “Cloud Innovation”. Unfortunately many unknowing hoteliers end up with solutions that bring little to no innovation, even if they choose for the Cloud.
1. The Box Solution…needs great APIs
Cloud Solutions are generally built as a “box” solutions, with relatively limited flexibility in features. All hotels run on the same solution, share the same features/reports and user interface. We found that some hoteliers asked us for access to the database (to manipulate data), wanted customized registration cards and bills, specific reports, which they were used to for the last 10 years. However, as we were focused on speed, optimisation of performance and streamlining, we could only decline those requests, so that we were able to focus on building key features that bring true innovation. We saw how this had hamstrung some of the initial Cloud PMS systems, as they offered a huge amount of customisation, but had huge challenges with speed and performance once they managed properties with over 60 rooms.
However, this has made us focus on building truly great APIs (see point 5 – just to make sure you read to the end!) – and find great partners to be able to deliver the kinds of functionality and customisation that great hotels look for. As we grow out our library, we also learn what kinds of reports and features to optimise for.
2. Cloud-First vs Cloud Storage
Not all Cloud solutions are equal; there are 2 types of systems:
- Cloud-first systems, that were built natively in the Cloud and incorporating the upside of a Cloud-first-vision.
- Traditional companies who store data in the Cloud, but whose origin is in local server based PMS solutions. These companies literally just moved the old solution into the cloud without any significant innovation.
These old style systems (often the industry leaders) are still polluted with the old mind-set, as their developers have known only 1 truth, and are simply replicating this in a slightly different format. Probably the biggest tell-tale sign of these types of systems is the presence of a “night-audit”.
When we started Mews, none of our developers had any hotel system experience, which turned out to be a huge upside. When our initial version was built, and we started testing it, I panicked when I realized that they “forgot” to build a night audit. After a long discussion with the development team, I realised that I was just stuck in the old mind-set, and had to get out of my comfort zone. In 2016 there is absolutely no need for a night audit. 3 years later, we have not had any hotel who complained about missing the nightly manual audit procedure.
Most solutions in the Cloud come with monthly pricing. If you add up these costs, they generally result to a higher cost than you would have paid for an annual extension of the licensing fee of the old system. But this is not a true representation of the costs, let me explain:
Hotels usually have 2 different budgets, a CAPEX and an operational budget. Their previous system purchase would have come out of the CAPEX “investment budget, which came with a one-time huge fee for the server purchase, initial licence, printers, training and all kinds of complex charges.
The annual licencing fee came out of the operational budget. With a Cloud solution this entire cost moves to the operational budget.
This sometimes leaves operators with the impression that the costs are comparable, though they are far from it (when you factor in the costs for hardware upkeep, on-site support and other ad hoc price additions). However, this requires a more holistic look at costs, which is an industry issue which is too often split between management and ownership steering in different directions.
4. Software as a Service
Cloud solutions where you “pay-as-you-go” are also referred to as Software as a Service (SaaS). As the name suggests, you should actually expect to get some service from your software provider. Most of the times when we win a new deal, its not only because of our features, but the personal connection we make with clients, and the bad service experiences hotels have had in the past.
SaaS also means that contracts should no longer be locking in hoteliers for multiple years, allowing them to swiftly and smoothly switch to another service, if they find a better solution. When we compete against the more traditional PMS companies, we often find that they have locked hotels into multi-year contracts, essentially blocking innovation.
When you negotiate a contract with a Cloud solution, ensure it allows you the flexibility to make quick and painless moves between platforms. Software develops at a much faster pace than it used to, and you want to ensure you are ahead of the curve.
Another big eye opener were “Application Programming Interfaces”, now a daily staple in my vocabulary, but most hoteliers may not necessarily understand what the importance of API’s are to a great system setup. As well as those features outlined in point 1, they are a great way of expanding your system’s functionality
Most Cloud solutions welcome integrations with other systems, and these integrations are done via “API’s” that allow the system to talk to each other. So basically it’s a translation system that allows 2 foreign systems to communicate in a common language. If a hotel wants an integration into a channel manager, booking engine, accounting solution, door lock solution, telephone system, POS or any other integration, this usually works via API’s.
If you are setting up your PMS, be sure to ask what existing connections the company offers, but also which API’s are available, so that you could hire and external company that can potentially build bridges on your behalf to other systems if required.
A Cloud Based PMS can bring a huge amount of innovation and automation, but there are a lot of options out there, so be careful and ask a lot of questions along the way.
Matthijs Welle – CEO