Credit: Rodrigo_SalomonHC
The hotel industry is among the hardest hit markets by COVID-19. At the height of the pandemic, occupancy rates nearly flatlined and the collective revenue per available room was abysmal. By 2022, when the threat of COVID-19 was significantly reduced, the industry found itself on a steady path to recovery, with revenue at the end of the year projected to surpass nominal pre-pandemic figures. However, the pandemic paved the way for new norms, and many hotels are having trouble keeping up with these as they face various digital transformation issues.
A report by the American Hotel & Lodging Association (AHLA) shows the average room occupancy rate increasing from 43.9% in 2020 to 63.4% in 2022, eventually reaching pre-pandemic levels (65.2%) in the following year. Similarly, the hotel room revenue of American lodging is seen to jump from $85.9 billion in 2020 to $201.3 billion by 2023, with the industry eclipsing pre-pandemic numbers in this regard by 2022 ($188.4 billion vs $170.1 billion).
Evidently, the hotel industry is on track to fully recover from the effects of the pandemic soon. However, it faces a new landscape defined by modern software solutions, integrated systems, and customized customer experiences.
Unlike other industries, the hotel and hospitality market isn’t fully reliant on remote work tools to operate since its special features and attractions are location-based, except for booking, payments, and food deliveries. Hotels and other forms of lodging weren’t compelled to transform digitally at the height of COVID-19 to the same level as other sectors.
As a result, the hotel industry is currently considered a laggard in adopting solutions that suit the needs of the modern consumer. And this is reflected by the market performance of one of the most integral components of modern hospitality operations: hotel management software.
Lukewarm Hotel Management Software Growth
A new report by Technavio shows the value of the hotel management system market climbing by $1.18 billion from 2022 to 2027 at an annual growth rate of 6.59%. While the growth is decent, it is not commensurate with the staggering expansion of the hotel industry.
Interestingly, the market’s primary driver is reduced operational costs, largely stemming from the adoption of newer technologies that automate document processing and other related workflows. These are core features of hotel management systems. Therefore, the anticipated benefits from the use of these tools are partly fueling the demand, along with the growing adoption of and integration with other cloud-based tools.
Many hotels are aware of the advantages of establishing and pursuing digital transformation initiatives. In fact, these establishments typically spend 10% of their budgets on digital solutions and strategies that enable them to draw and retain guests, streamline operations, eliminate workflow inadequacies, and control expenditures. After all, the industry is facing a labor shortage, a larger population of potential guests, and altered consumer standards influenced by the increased digitalized experiences during the onset of COVID-19.
A report by Stayntouch found that the use of hospitality tech increased by 31% from 2019 to the end of 2021, and is poised to grow an additional 19% in 2022. But fully migrating to and integrating these new property management systems has proven to be a challenge, pulling down the market’s growth.
Stuck with Legacy Systems
Two of the biggest concerns among hoteliers are the complexity of hotel management platforms and other related technologies and how to integrate them with existing systems. Many hotels leverage legacy systems that fail to cover the entire operational bandwidth. As such, revenue management, guest profiling, and typically isolated workflows like amenity reservations and recording special requests are likely to be plagued with data silos and human error.
Generally, for legacy systems to address today’s demands, these necessitate a lot of backend integrations. Even then, the resulting performance of the system will still leave inadequacies and will still be significantly outperformed by modern SaaS systems. Meanwhile, overhauling core systems can be tedious and time-consuming. It can also paralyze parts of operations, if not managed well.
The Stayntouch report notes that many hotels are also likely to have problems dealing with the high upfront costs of new technologies, including hotel management systems. Moreover, there is fear among hoteliers that streamlining and automating operations could reduce the “personalized touch” that traditional workflows impart to customers.
Conversely, a top-tier hotel management system offers more modes of personalization for guests. It can also effectively streamline and automate operations, provide several communication channels to guests and hotel staff, and help in managing an establishment’s finances.
With this, recent real estate statistics predict that the usage rate of automation tools will increase from 60.4% to 71.3% by the end of 2022. Likewise, guest messaging (69.2% to 81%), self-service check-ins (63.6% to 75.4%), digital payments (44.9% to 59.2%), and chatbots (19.1% to 29.2%) will likely see a rise in usage.
Streamlined Transitions
Many hoteliers recognize the capabilities of hotel management software and how these can vastly improve their establishments’ returns and operational efficiency. However, the aforesaid digital transformation issues prevent them from fully adopting these systems. Hotel management software vendors know this, which is why they typically provide assistance to make the transition process as painless as possible.
Some providers enable hotels to easily import contacts and guest profiles to the new system during the changeover period, which would barely cause delays. Others furnish digital assistants that guide users through each step of the installation and transition process, complete with checklists and reminders. And there are those that streamline transitions up until the new system goes live.
Planning ahead helps make the transition process even smoother since potential issues can be addressed and temporary workflows can be tested, analyzed, then deployed during the changeover period, if necessary.
As for cost-related concerns, the Technavio report shows that hotel management systems are capable of increasing sales by 35% and maximizing revenues by 8%. These gains are more than enough to cover software subscription and maintenance expenses.
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