Earlier this month, Expedia’s minority investment in hotel technology startup Alice made waves in the industry.
But that wasn’t the first business-to-business (B2B) startup in hospitality that the online travel giant has invested in.
It has since emerged that a year ago Expedia invested in CheckMate, a hotel tech startup based in San Francisco that focuses on improving communication between hotels and guests.
CheckMate enables mobile conversations between a property and a guest, particularly in the days before a guest arrives at a property through the guest’s stay at the property. It does this by adding functionality to hotels' branded apps but also via SMS messaging-style tools.
Today CheckMate says it has signed “hundreds” of hotels and hotel brands, including most recently two Skyline Resorts in Canada, Portola Hotel in Monterey, and the DOMA Group.
It says more than 1.2 million messages have been exchanged since it launched, and that 71% of guests opted into SMS communication during mobile check-in when offered it via CheckMate's regular or white-label service.
More than 40,000 guests have texted with their hotel at some point during the customer journey and 16.7% of guests used real-time feedback tools to alert staff to their experience, according to the company.
CheckMate also offers services that aim to increase guest satisfaction and loyalty. It says 84,457 guests have completed its in-stay feedback survey — which offers hotel a chance to respond to guest concerns before the guests leave dissatisfied.
The company has made strides on its partnerships with management companies, such as with Commune Hotels, Modus, Tristar, and Windward.
Among hotel owners, it is in a “proof of concept” phase with LaSalle and Hersha.
To get a broader context, Tnooz spoke with CEO Drew Patterson.
Tnooz: Expedia has invested in you. It has made an investment in Alice, the hotel tech startup. What do you make of that?
Patterson: I think they're hungry to get smarter and start increasing their commitment to property technology. They believe that they need to play in that space.
Priceline Group has been more active at that, or has been active in B2B earlier, than Expedia has, but it appears Expedia may be trying to catch up.
Tnooz: What do you think about how Booking.com has a new B2B hotel communication product called Pulse. Within just a few months it was downloaded more than 100,000 property owners, mostly in Europe, with, like, a 16% adoption rate within a very short period of time. It is a variation on a hotel communication tool.
Patterson: What Booking's Pulse is super sharp. I think the Pulse product is incredibly well executed. I have a huge amount of respect for what they've done. It is what consumers want today. We'd be in violent agreement around that.
The challenge that Booking faces, and frankly Expedia and all these other guys face, is it's great that thousands of hoteliers download tools like this, but what percentage of traffic does Booking drive to that hotel and what percentage of customers does the Booking Pulse product actually serve?
We see Booking typically represent 10 to 15% of the occupancy at a given hotel in the US. It is the second or third biggest distribution channel that the hotel has but it's also only representing one in ten, one in eight guests that are staying at that property.
What are you supposed to do with the other seven customers that are staying that inn, seven of eight customers that are staying at that hotel who didn't book through Booking.com for whom Booking.com Pulse doesn't actually provide service?
By contrast a product like CheckMate that says, "You can use this to communicate with all of your customers," the Booking.com customers, also direct customers, also group, also corporate, also wholesale, also all these other guests, that becomes a much more efficient way to organize your team.
The challenge, of course, you have some PBX operator, some front desk agent, who's supposed to respond to these customer requests.
If the expectation is they're going to download the Pulse app, and they're going to use the Expedia Partner Central tool, and they're also going to use the X, Y, and Z tool that they're going to use to communicate with other customers, somewhere in that mix it's going to be really hard for them to manage all those different inboxes.
By contrast, what the hotel needs is a single shared inbox that allows them to collaborate as a team and to respond to and engage all their of their customers.
Tnooz: Does CheckMate bring a knife to a gun fight in terms of capital and scale and being able to reach for inventory partners if one of the big OTA groups or another well-capitalized company or venture capital-backed group goes after this vertical?
Patterson: I don't think that sort of knife-to-a-gunfight analogy quite sticks. A better analogy is if you look at a what has happened around channel management and channel management tools.
For sure, Booking, and Expedia, and all these guys have extranets where hotels can go to manage rates and inventory.
But the reality is most hotels today use a channel manager to operate that function because it's just timely and inefficient to go directly to each of these channels to try and manage rates and inventory.
The same is true for conversations. In some respects it's even more important because the timeliness and the expectation of action around conversation is far greater than what happens in rates and inventory.
You have customers that are making requests, so you need to take action.
While I think Booking.com is great, and smart, and important, and helps push the industry forward, and create interest around new things that we think can be very, very significant in 2016.
But ultimately hotels need operating software that truly tie this into the rest of their business and deal effectively with customers, to make sure they get answers in a timely way. A product like CheckMate will be better suited to that.
Tnooz: The OTA groups are new to hotel B2B services. What’s driving their interest?
Patterson: Owners are feeling more comfortable that they can make decisions like that on their own.
That's part of what’s behind Booking.com’s investment in and creation of Booking Suite — their belief that hotel owners are hungry for tools they can purchase on their own.
We see owners looking at the world and saying, "Well, I could buy services from a brand like a Marriott or a Starwood, or an Accor. Or I could turn to the incumbent technology players. Or I can also go to market and buy similar kinds of technologies and tools from best of breed players like CheckMate."
Tnooz: Is it actually owners expressing interest in your product, or just hotels themselves?
Patterson: We are finding that hotel owners are some of the better buyers, if you will. Owners are getting more aggressive. You see active managers being much more hands on in terms of the interaction they have with GMs and what goes on at properties.
When you look at why Marriott bought Starwood, and when you look at the Accor deal, too, ultimately hotel brands are recognizing that their core customers are truly real estate owners.
The globals have got to strengthen their proposition to those owners. Part of that means creating more economies of scale so they can lower their fees.
Hotels are hungry for folks like ourselves that aren't saddled with any of that baggage. But they face internal challenges, too.
It's as much the process change and operational change. You need to get GMs, and revenue managers, and front desk agents bought into this. They need to operate differently.
Tnooz: Do you have to just write off the major globals because they're always going to have a bureaucratic incentive to build the IT and tech in house, they're not going to want to use a supplier like CheckMate?
Patterson: Well we'll see. A lot of those guys are starting to think differently about their tech functions and how they want to go to market. I don't think it's monolithic.
If you look at how Marriott makes decisions, versus Hilton, versus Hyatt, they each operate their businesses in fairly different ways. We may be a good fit for one or more of them.
That said, where we see the greatest opportunity and where we see the most, shortest sales cycle, the best response is when you sell directly to general managers and owners.
Even within the context of many of these global brands, those guys are hungry for answers and see us, in many cases, superior to the product of the global brands.
They don't feel like they're getting the tools that they need, which is why they buy directly from us event though they're part of a flag.
Tnooz: What about the global distribution systems (GDSs)? They've taken hospitality tech extremely seriously lately with acquisitions. Does CheckMate see them as at all part of the ecosystem?
Patterson: Both Sabre and Amadeus have been both acquisitive in and aggressive in investing in their shift from agency and the air GDS world into hospitality tech.
It seems to us that they are more focused on the needs of the corporate brands and more focused around distribution, as opposed to property-level operations and what you might call the [property management system] PMS space.
They’re helping hotels building websites and other digital marketing services, but, in general, they aren’t doing property-level technology.
Tnooz: Is there any incentive for hotel tech partners to make their products user-friendly for frontline staff and operations? For some of the legacy players is there any incentive for them to do invest?
Patterson: The industry has been poorly served, largely by the incumbent technology players.
If you look at what the big scale, legacy PMS vendors and the like have provided, they just don't work real well. They don't meet the needs of today's operator.
You're seeing the consumerization of the enterprise across all these different industries, where enterprise tools have to be as easy to use, as fun, as friendly as accessible as what we see when we go on Facebook.
You could imagine that Micros might do that but when you look at Opera, it's basically the same product as when it was launched in the early '90s. It is not a particularly user friendly or easy to access tool.
It comes with lots and lots of on-boarding and training requirements and something that's difficult for employees to take action on.
Why haven't they fixed that? I can't speak to their strategy. I will say it's not exactly news that the technology is dated and hard to use, yet they haven't taken action against it so far.
That creates a huge opportunity for folks like us who can show hotels, and all the frontline employees are talking about, a different answer. That's why we get response that we do is that our product feels like a much easier to use than what they see everyday.
Tnooz: One thing that TravelClick has done on the digital marketing side is it's bought a few services. It's done a roll up of tools that it cross-sells to hotels. Does something analogous need to happen to this new wave of hotel tech operations, including ones for internal communication and communication with guests. To scale up and achieve mass adoption, do the startups like yours and Alice need to be rolled up into a company that can turbocharge them with lots of capital?
Patterson: I don't expect to see a roll-up, per se. The challenge that technology like ours is, people say to us, "How do you get to market in a scalable way?"
If you look at the channel management marketplace, you've seen some very big, very impressive businesses get built. Things like SiteMinder and RateGain.
They did it by building out strong sales and marketing capabilities and educating the market.
One could make that argument and then one could pose the question, "Why is it that new entrants like RateGain and SiteMinder were able to build those franchises, as opposed to, Amadeus and Sabre doing it?"
The GDSs had connectivity to all the hotels, they had access to all this demand. How did new channel managers actually manage to emerge here?
The answer to that is that when you consider the need to create a distinct enough technological solution and the need to sell on a buying cycle that is distinct enough from what the GDSs had, that there's an opening for new entrants in the market.
The same is true here. When you actually look at who the buyers are, and what the requirements are to actually use the tools, it doesn't line up. It's a different set of stakeholders and it's a different set of buyers than what either the PMSs or the big distribution players have done historically.
Tnooz: Does CheckMate plan to do anything on the payments front?
Patterson: We're a lot more excited about communication than we are around automation. You've seen, there's been a lot of chatter in the industry around internet of things, and key-less entry, and various forms of automation. Those are exciting ideas. But they're also a ways out.
If you look at the penetration rate, for example, things like Apple Pay, these are exciting ideas but they are far from mainstream today. It's going to take a while for that to become commonplace, in terms of, basic consumer experience.
By contrast, communication patterns have changed and are changing in a pretty fundamental way and are much, much further along the adoption cycle.
In 2016, communication is going to be at the heart of how technology and how customer experience is changing the hotel business. Consumers have already changed the way they want to interact with each other. It's now incumbent on businesses to try and keep up.
Tnooz: What is it about hotel merchandising and guest centric services that is going to be big in 2016, that is really going to surface in a different way or a particular type of functionality that is going to be bigger besides the on-demand communication?
Patterson: When you unpack what's behind on-demand or that idea, the things that will come into that, one is it will create richer, deeper merchandising interactions between hotels and guests.
Once upon a time, you had booked a hotel room, that meant that you had booked a specific class.
You had to get out by noon, if you were part of the loyalty program they'd let you stay until 4 o'clock. Those are relatively artificial constraints, right?
There's not a good reason why that's the time that you have to arrive or that hotels can't offer more flexibility around that or start to charge consumers for control around that.
We have found that by having a richer dialogue with the customer, you can ask customers, "What time are you planning to arrive?" for those that are looking to arrive early, you can start to charge them for that.
That is a meaningful revenue driver and also customer benefit.
Likewise, hotels can begin to use that interaction to merchandise other services. You may have booked into a standard room but they can use that as a means of starting to up-sell you into other pieces of inventory.
Tnooz: Is the theme of 2016 that there is a product development gap on the hotel side to catch up on the technological possibility for merchandising?
Patterson: As we look at the lag, you have to ask, why hasn't that happened? We think it hasn’t happened because of the merchandising and communication around it.
Hotels have a ton of these services but they have been, they have not really excelled at merchandising that to the consumer, making sure that the consumer knows those things are available and presenting that in ways that are natural and intuitive.
If you look at what the airlines have done, fee revenue is now 20% of total revenue for airlines and growing far faster than the seat business.
The reason, the way in which they made that work, they have found lots of opportunities across the customer journey to suggest the customer might buy those things.
When you were checking in, the course of the journey, you're reminded of like, "Would you like to buy wifi? How many bags are you carrying?" They found ways to merchandise that to the consumer.
That's not something that hotels have done. They have not had those merchandising touch points that allow them to sell those services to the consumer.
Again, we think that's where communication has such and exciting role to play is it creates those merchandising touch points that didn't previously exist.
Tnooz: You’ve said before that branded, standalone mobile apps are a mistake for many hotels. Why?
Patterson: When you look at what app activity looks like, it is an ugly, ugly story for hotel brands and individual hotels.
If you're to look, Google Play gives you total download counts, Apple you can use the number of reviews as a proxy for the number of downloads.
Look at an upscale brand like Four Seasons, which has something like fourteen reviews all told in the history of its app. It hasn't been able to get any of its customers to actually use that in a meaningful way.
Will hotel mobile apps actually work for this category?
The data isn’t promising. Look, in comparison, at aggregators like Kayak and TripAdvisor, whereas on the desktop they had three or four times the traffic of the big global brands, in the app economy they've got twenty times the number of downloads as the global brands.
That’s the scale differential.
Tnooz: To ask this a different way, why is CheckMate-style technology a better alternative to standalone mobile apps?
Patterson: Consumer-directed messaging apps are becoming a dominant metaphor for how consumers want to communicate.
One of the consequences of that is businesses are going to have to have inboxes that allows them to message.
If you want to see the future, look at what WeChat is doing in China. That is going to happen in the rest of the world. By that, I mean, messenger interaction is going to be a dominant model for how consumers communicate with hotels.
Hotels are going to have to have tools that allow them to deal with SMS, and Facebook Messenger, and WeChat, and WhatsApp. All the ways today's consumers interact with each other, they're going to want to use to interact with the business.
Tnooz: Any specific examples to bring this point alive?
Patterson: We work with many of hotel management companies. Commune is a good example. It was one of the anchor customers that we went to market with.
When we started working with them, this was a year and a half ago or so, when they went to market they put out an RFP looking for someone who was going to build them a mobile app.
It was going to be part of their loyalty program. It was going to be how they began to engage with their loyalty program customers.
We looked at the RFP and we're like, "We're not really in the app business," because we think apps aren't going to actually get customer engagement in a meaningful way.
When you started to unpack what they were asking for and the way they wanted to communicate with customers, that actually made a huge amount of sense to us.
They wanted to have a relationship with the customer over the course of the journey. They wanted to start that conversation before the guest left home. They wanted to have touch points when a guest was arriving.
They also wanted to be able to send feedback loops to micro-surveys while the customer's on property so they can get a pulse of, "Were they delivering service?"
And, "Did they have issues that they needed to tend to?" while the customer's still there. Rather than discovering it on TripAdvisor after the fact or that guest satisfaction survey.
That actually lines up perfectly with our vision but our view is you need to deliver that in all the ways the customers interact and communicate today. That means things like SMS, and mobile web, and email, and some of these messaging platforms.
Rather than, as an individual hotel brand, trying to actually put this in the app store and figure out ways to get consumers to download your app.
Tnooz: So what specifically went down with Commune?
Patterson: Sure. Our answer to Commune was: There's a lot of software that already sits on the user's device.
You can send an SMS and you don't have to worry about anyone discovering your branded app to be able to facilitate the conversation. You can send an email and everybody has a smartphone now and they can read their email without having to have downloaded your app.
You can integrate with apps that are already on the user's phone, like Sabre’s TripCase or Kayak — platforms that have a much bigger distribution base.
From the standpoint of the hotel, what you should really care about is having that dialog with all of your customers, being able to communicate with them over the course of their journey.
Obviously, I know I'm preaching my book here.
But I believe there’s an objectively clear market trend toward communication channels that are broader and that open up digital conversations with all of your guests, not just a tiny fraction that happen to download your app.
Tnooz: How does CheckMate-like technology get to be preponderant within, say, three years' time?
Patterson: For us, it's going to be a couple things. We are building up our sales and marketing organization that help educate the market to stop spending on standalone apps and start considering alternatives.
We're talking to a number of channel distribution partners now that might help us reach a larger audience. What we do is incredibly complementary to what a lot of the other technology players do.
If you look at where most of the investment and much of the focus has been today, as you point out, it's been around rates, and distribution, and inventory.
We are at the cutting-edge of how technology is starting to change operations, and service delivery, and customer experience, as opposed to, how we buy, and sell, and distribute hotel rooms.
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