In the 1970s, Dave Berkus created
one of the earliest property management systems for hotels. Over the next two
decades, Berkus grew his company, Computerized Lodging Systems (CLS), into one of the
world’s biggest suppliers of computer automation for hospitality, with Marriott
licensing the system in 1982 and just ending its use this year.
Berkus sold CLS
to MAI Systems in 1990 and shortly after turned his attention to venture
capital, as an investor or board member for more than 180 early stage companies
since 1993. Berkus is managing partner of Berkus Technology Ventures, Kodiak
Ventures, three funds managed for Tech Coast Angels and Wayfare Ventures,
launched in 2017 to invest in early stage travel technology companies.
author of more than a dozen books on entrepreneurism and business management,
speaks regularly at industry conferences and, in 1998, received the International
Hall of Fame designation from HFTP (Hospitality Financial Technology
We asked Berkus about a range of topics, ranging from technology lifecycles, the risk of hacking, moves by the tech giants into travel, his advice for travel entrepreneurs and the biggest mistakes being made by travel executives.
What will be the biggest changes we see
for hospitality technology in the coming years?
operational view, most everything will move to the cloud, allowing chains to control
a unified guest record across properties and applications. The gains will be in
reduced cost, speed of access and control over data.
From a guest perspective, hotels will speed
innovation to be at least equal to the expectation of guests at home. That
means supplying high-resolution, big screens in rooms with content often
supplied by the guests through casting from devices guests bring to the hotels.
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Robotics will become familiar and universal at hotels and resorts. Robots will
do the repetitive things, such as cleaning inside and outside, bringing
requested food and amenities directly to the guest and more.
We all question
whether robots, self-check-in systems or kiosks will displace the human touch
at four- and five-star properties. I believe we’ll see that aggressive change
in an increasing number of three-star properties, where cost and convenience
align between guests and management. But that same level of displacement will
much more slowly creep into high-service or luxury properties.
your opinion of voice technology in the hotel environment?
already seeing and using in our homes at least several of the many millions of
voice-controlled devices and applications. Of course, voice technology will do
much to enhance the ease of interface with systems, speed processes and
increase guest satisfaction.
We are already comfortable with Alexa, “Hey,
Google,” Siri, “Hey, Cortana,” and more. And this revolution has just begun. If
we are comfortable with speech commands and processes in the home, we will want
this in our hospitality experience as well.
should brands evaluate the decision on whether to build or buy when it comes to
innovate; properties implement. Brands are in a race to find ways to attract
the younger generation of guests used to leading their search and decision-making
using technology. And brands gain from loyalty when ahead of competitors in
application and marketing of guest-facing technologies.
Texting between guests
and property departments is a recent example of this. Of course, the “shiny
object” technology attracts guests, even if not profitable.
For operations and
the back office, brands will be much more careful and slow to implement or
propose to owners, based upon ROI above other criteria. Independent properties,
those with more than thirty rooms, amount to almost 19% of all U.S. properties. Owners
of independent properties are left to their own devices, and often lag brands
in innovation and application. That’s a challenge for management – convincing
owners of independents to pay for technologies to keep up with brand
blog you talk about the fact that product lifecycle is much shorter today than
even five years ago for technology. What are the implications of that?
renovation and replacement (MR&R) spending always lags the need throughout
the business world, including hospitality. There should be a disciplined
approach to MR&R, starting with an annual budget amounting to 2.5% of
revenue for facilities and technology and a budget for new technology implementation
over and above this.
Those who do not do this, a majority of businesses
everywhere, are digging an increasingly large hole over time. At some point,
the building must have a complete renovation, and the technology of the past
must be replaced, not upgraded. Costs for this are much higher than keeping up
with need. And all this is on top of new technology implementation.
how long the runway will be to upgrade from (or eradicate?) the old legacy
tell people that the front office system I licensed to Marriott in 1982 was in
use for 37 years by the chain. That’s not unusual for central reservation
systems and for chain PMS systems that are the work horses of the industry. Yet,
as costs decline and alternative solutions appear, the mandate to change is
becoming easier to recognize.
Again, cloud-based technology will soon be an
obvious way to consolidate functions, reduce property costs and increase the
utility of information. The question is whether best-of-breed systems
integrating with each other or new multi-function systems will win out. Vendors
are diving in both directions, and there is no clear answer for the near
We are focusing upon the check-in today as the biggest pain point and missing all of the other agita-producing moments in the journey.
really possible to create hotel systems that are immune to hacking?
simple answer is “no.” As long as there is a human in the tech chain, there is
a chance of opening a door to hackers. Most hacks come from human interaction
at some point in the tech process, from inserting a USB device into a
workstation to vendors leaving a backdoor entrance into any part of the
The most visible hacks in the past several years found their way into
these backdoor entrances, starting at a property’s POS system or linked
owners seem to be seeing franchise, distribution, reward program and technology
fees increasing faster than revenues – is this sustainable?
of technology implementation is constantly falling. Training costs for new
systems used to be a major part of the cost. These are becoming far less as
staff familiar with technology interfaces are able to reduce the time their
process of absorbing new processes takes. But, of course, new technologies add
new costs – supposedly with an attached ROI that is attractive to owners.
costs have been increasing for the past decade as third-party systems attract
new and repeating guests by offering information about multiple alternatives
and displaying comparative pricing. To combat this, brands are investing
heavily in their loyalty programs to keep guests inside the family. As long as
brands insist upon price parity though, intermediaries will profit from
consolidation of information.
tech players moving to a SaaS model based on a cost per room (or similar), what
happens when there is a downturn? Who gets squeezed?
will always be periodic downturns in occupancy driven by outside forces from
weather to the economy. It is true that the wisest owners shed as much fixed
overhead as possible. But most SaaS systems charge by the room, not occupied
room, making those charges fixed as well.
However, technology costs per room
are a small portion of total costs per room. So, owners are much more aware of
their larger fixed costs over time.
your thoughts on some of the tech giants - Google, Amazon, Facebook, Alibaba,
Tencent – moving into travel?
second only to healthcare in total revenues worldwide. Of course, that creates
an attractive beachhead for all of those companies you mention. And many are
already experimenting with direct travel investments. After all, Facebook is an
example where one company that has access to billions of names, with
demographic data accompanying each. Amazon knows your shopping habits. Google
knows much more about you than both. Talk about micro-marketing (atomized
marketing in my blogs).
describe your “Berkus Method” for valuing early stage investments?
that you should ask. I am not known for this in hospitality, except for
startups. I created this method in 1996 to attempt to quantify risk in early
stage investments I was making, assigning a value to four areas of investment
risk for pre-revenue companies.
You will find much more by querying “The Berkus
Method” in any browser. The method became “famous” when Harvard’s Howard
Stevenson published a book that year, naming the method, describing it and
endorsing its use.
parts of the travel experience are the biggest pain points for you – where do
you see opportunities for disruption?
the travel experience as a series of steps, from leaving the home, to method of
transport to the airport, the flight, travel from the arrival airport to the
destination, check-in and the stay, and the reversal of this process upon
The customer journey is difficult, produces anxiety at many of its
points and is prime for disruption at numerous points. What if Airbnb offers to
pick you up from home, deposit you at the door to your rental and do the same
returning home. That would be a game-changer.
We are focusing upon the check-in
today as the biggest pain point and missing all of the other agita-producing
moments in the journey. We’ve been trying to solve the pain point problems
during a stay for years and even then have missed the elusive ability to offer
a single reservation for room and activities. (Industry veterans will remember
that we called this “dynamic packaging” and it is a problem still not solved.)
mentored a lot of people. Who was your mentor and what how did he or she impact
I was one of the unlucky ones. I had no
mentors - which is what induced me to become that person to numerous
entrepreneurs over these past 26 years. I measure my impact in several
ways, from influence upon company culture to revenues to speeding the processes
each values - and ultimately to helping obtain maximum value at the exit (sale
of a company or IPO).
than yourself, who is someone you think has had an important impact on
hospitality industry technology and why?
so many who have left an indelible impression upon hospitality technology over
the years. All you need do is look at the list of HFTP Hall of Fame awardees
from inception of that award. It’s an impressive list of innovators and
implementors now numbered at 46. (See how I dodged the question, retaining
friends I might have lost by attempting to name a few?)
the biggest mistake you see travel executives making?
with under investment in technology as discussed earlier. Continue with
under-estimation of the sophistication and cultural choices of our newest
generation of travelers. Blow through ignorance of the impact of alternative
competing sources of guest stay, and end with discounting the needs of
travelers for convenience at all points of the journey, before during and after
advice do you have for entrepreneurs trying to break into travel?
will always be opportunities for innovation in travel, especially in
technology. My fund, Wayfare Ventures, invests in early stage travel tech. We
pass on our best to venture capitalists specializing in this niche, including
Money is available for the best ideas and early
implementations. Brands are on the prowl for new technologies that can
differentiate them from the competition. (Those innovations that can save costs
are viable if by an order of magnitude.) And every generation of new technology
platform creates an opportunity for entrepreneurs to displace previous
generations of applications.
This will never cease. Nor will the arrival of
new, enthusiastic entrepreneurs ready to solve problems we never know we had,
and those that have vexed us for years.