Expedia’s $1.3 billion acquisition of Orbitz has drawn plenty of headlines in the mainstream media, but there have been several other acquisitions that have flown under the radar.
NB: This is an analysis by Patrick Bosworth, CEO and a co-founder of Duetto.
Some of these could be more significant for the hospitality industry.
Yes, Expedia getting bigger and swallowing Orbitz and Travelocity will have repercussions. Hoteliers will lose even more negotiating power as the online travel agency duopoly gets stronger and the alternatives diminish.
But the billions spent in acquisitions by companies such as Oracle (MICROS), SAP (Concur), Priceline (Buuteeq and Hotel Ninjas), Amadeus (Newmarket International), Sabre (Genares), Thoma Bravo (TravelClick), Battery Ventures (InnLink and Trust International) also have my attention.
Those purchases, along with TCV’s $30-million investment in SiteMinder last year and TA Associates investment in RateGain this year, signal a recognition that the global hospitality industry is huge, growing and hungry for better technology.
The different kinds of buyers entering this space are truly remarkable. Global tech giants such as Oracle and SAP see an opportunity in a new vertical, while Priceline shifts its focus a little and moves into the B2B software space.
Financial buyers and institutional investors like Thoma Bravo, Battery Ventures, TCV and TA Associates are outbidding each other for healthy and growing companies and not identifying the turnaround situations often found in their portfolios.
Trade buyers like Sabre and Amadeus are getting a wake-up call.
But this is positive for hoteliers. Hospitality has always lagged in technology and suffered from tremendous fragmentation among the different systems needed to run a hotel (property management, central reservation, customer relationship, revenue management and channel management).
These new cloud-based companies are driving innovation and now consolidation as they are being acquired. Hoteliers will benefit from working with fewer and larger companies providing the bulk of technology and there should be more opportunities for integration of systems.
The resources behind these large companies will improve the quality of technology and the ability for hoteliers to serve global customers. With better backing, smaller companies will be able to grow and scale their innovations much faster.
This is a necessary and critical step in the maturation of the industry. A modern technology stack will better serve the growing needs of hoteliers, who are realizing their legacy and on-premise systems aren’t effective in a complex distribution world dominated by tech-focused companies such as Google and Expedia.
While these investments will provide hoteliers with better tools, there could be some short-term disruption along the way. Smaller vendors could be shuttered, products replaced and in general hoteliers could have less leverage with the global companies than they currently have with local and regional players.
Costs may increase as the bigger players narrow the field, but so should the innovation, integration and efficiency of their products.
Savvy hoteliers follow these developments; they look at the ecosystems their vendors exist in and where these vendors fit strategically in the marketplace. Hoteliers must consider how successful, scalable and strong a potential new partner will be. There are hundreds of options out there. The best companies will grow, some will get bought, others will stall and fade away.
There could be consequences to choosing a regional provider or one with poor technology and bad business practices. If a company is taking shortcuts by screen scraping, mimicking keystrokes in other applications or not being adequately staffed, the system and its services may be unreliable and the company might not be around in two years.
It may be more expensive to work with a company doing it the right way, but taking the cheap and easy option may cost you more in the long run.
NB: This is an analysis by Patrick Bosworth, CEO and a co-founder of Duetto. It features as part of Tnooz's sponsored content initiative.
NB2: Image by Shutterstock