Prior to launching Highgate Ventures, I had been fortunate to lead Highgate’s revenue management initiative and distribution practices for the past 15 years, signing off finally as its Chief Revenue Officer. During my tenure there, we built a culture of Revenue Management First! Creating this culture was possible because of the firm’s foresight and belief in talent and leadership to make it happen. Luckily, our crystal ball was accurate. Our predictions of how quickly the digital age would evolve prepared us well and we demonstrated success upon success in every hotel that we took over as Managers.
I now head Highgate Ventures, where we are focused on investing, incubating and partnering with companies in travel technology. It has been fun and a whirlwind 18 months! Highgate Ventures was created to be part of the technological revolution that has begun to sweep hospitality and travel. Hopefully, our crystal ball will be correct this time too. By partnering with travel tech companies in the early stage, we will understand technologies as they shape the industry and contribute to that change.
In this short span, it has been great to meet Accelerators, Venture Capitalists, Growth Capital or Growth Equity, Private Equity, Strategic Buyers and not to miss the Investment Bankers, who make everything look very attractive to a potential buyer. They are like the make-up artist who pretties up the model before the show. These capital firms are hungry to add companies at various stages to their portfolio and hopefully, some successful exits.
We all know and have seen how startups go through various stages of financing before growing up–Friends & Family, Angel, Seed, Series A, B.... It is so amazing to see how various investment companies are so boxed into which stage they would invest in, the size of investment check, clearly defined ownership percent, controlling vs non-controlling interest, types of business–B2B or B2C. There seems to be a clear framework of what a capital firm invests, and at what stage.
Luckily, Highgate Ventures cuts across all stages and is focused on companies with the right idea, the right team and a sizable market. Our investments are across CRS, RMS, Rate Shopping, loyalty and any business that can improve distribution profitability or generate incremental revenue for hotels. I will touch upon a few areas of interest and where change is fast.
CRS (Central Reservations System)
It has taken 15 years for hoteliers to realize that direct business within the CRS is the most important when deciding on who to choose vs commoditized connectivity. The main CRS companies have been agnostic to where the customer for a hotel comes from. They price each transaction similarly, irrespective of the channel. This does not incentivize them to improve the direct booking process. However, the realization of the importance of direct channels is pushing innovation in the booking experience. OTAs continue to invest heavily in their booking experience and a subpar booking experience on direct channels will result in further erosion of direct booking share.
By partnering with travel tech companies in the early stage, we will understand technologies as they shape the industry and contribute to that change
There is also a push from both Expedia and Priceline to provide direct booking services. These clearly show a shift to be viewed as technology companies for hotels. Further, the approach by Marriott with Autograph collection, Hilton with Curio collection, Accor with their purchase of fastbooking clearly sets the stage for bringing on more independent hotels onto their respective systems. There seems to be a clear blurring of the lines with OTAs providing central reservations and loyalty technology and brands moving into the OTA turf. This could set up an interesting playground.
When there is volatility like this, it is important for a company to focus on a few things–continued innovation to be ahead of the game, extreme customer service focus, employee culture, and satisfaction. We are clearly seeing Travel Tripper exhibit these qualities with a “Be Direct” mantra and extreme customer focus.
On the direct distribution side, companies with niche business concepts and easy implementation have mushroomed around the CRS space.
Some example of widgets created by these companies that will be able to scale and grow very quickly:
Metasearch price checking widgets
Rate Match from Travel Tripper, Price Check from Triptease, and Clicktripz metasearch widgets that integrate into the booking engine and show customers hotel direct prices vs. prices from third-party booking sites. See a price comparison widget working at www. parkcentralny.com
Personalized loyalty programs and direct booking incentives
New startups like StayWanderful have developed unique plug-and-play tools that offer guests loyalty and instant rewards on the hotel website. StayWanderful takes advantage of local partnerships to secure instant rewards for guests from retailers and service providers, such as free Gogo in-flight internet or local shopping and restaurant discounts. These instant reward programs overcome the inherent disadvantage of an independent hotel not having the scale required for successful loyalty programs.
Rate Shopping & RMS
I thought rate shopping was too commoditized till I came across OTA Insights. Cloud computing and modern day big data aggregation have enabled companies such as OTA Insights, a company focused on rate shopping, ranking, and parity analysis to grow very quickly. A simplistic approach to users has made them successful. Their methodology of organizing mountains of data in a clean, easy-to-use manner has been a hit among hoteliers. Also, data by itself is a commodity, but worth a lot when translated into usable information.
Revenue Management Systems today underpenetrate the hospitality sector. Several hotels still use spreadsheets and no scientific way for setting prices. The reason for under penetration has been the complexity of the legacy systems and the tools themselves being expensive. In fact, if you look at what is happening in Silicon Valley–the buzz is around Artificial Intelligence, Machine Learning, and Big Data. There is no better area in hospitality tech that adopts all three today than Revenue Management. Over the next few years’ machines will be trained and will use the intelligence to make great pricing decisions, close or open rates and decide how to fill a hotel. This is, by far, one of the most dynamic areas of shake up. The vision for LodgIQ is to use the developments in AI, Machine learning to build a more intelligent machine in this space.
Most hospitality tech investment today is in B2B. However, on the B2C side there have been a flurry of companies that want to break up the traditional approach of hotels—where the rooms are rented overnight with a defined check-in and check-out time. Their approach is to create an hourly concept similar to what Zipcar did to the car rental industry. Of all these companies, Recharge has a unique business model that can bring incremental revenue and challenge the existing overnight norm of hotels.
Investors today look for any business that can differentiate itself and create a unique market based on a problem they are trying to solve. Watch out for it and look for the winners and losers. Luckily, we are in the eye and can see the changes unfold by being at the intersection of capital and the adoption of technology amongst hoteliers.