A Maryland hotel giant sees future opportunity in the cloud

Jeffrey MacMillan/JEFFREY MACMILLAN - Stephen P. Joyce, president and chief executive of Choice Hotels.

Ten years ago, Choice Hotels unplugged its servers, tossed out its central computers and moved its property-management system onto a cloud.

Now the Montgomery County-based company wants to sell the same Internet software to its competitors. Beginning this week, SkyTouch Technology, a new division of Choice Hotels, will begin marketing SkyTouch Hotel OS, a system for property and rate management, to other hotel companies.

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“We’ve been working on this for years. We already have 5,500 properties up on the cloud, so we know what it takes,” said Stephen P. Joyce, president and chief executive of Choice Hotels. “We’ve had dramatic levels of interest, not just from independent hotels but also from other [hotel] chains.”

Choice Hotels, which oversees brands such as Comfort Inn and EconoLodge, is the latest in a string of unconventional businesses that have ventured into the tech world. Seven years ago, ­Amazon.com paved the way when it started Amazon Web Services. Since then, the online retailer’s cloud-computing arm has grown into what analysts estimate is a multibillion-dollar-a-year business.

To Joyce and his team, it seemed like a model that could be replicated. “Other properties have a computer-based server that needs to be cabled, that needs an air conditioner, that needs a tech guy to come in and check it,” Joyce said. “We don’t have any of that, so it is by definition a lower-cost alternative.”

But first, how do you turn a 74-year-old hotel company into a technology start-up?

At Choice, the process began in earnest three years ago, when the company started thinking about adapting its internal software system for the broader market. The company nearly doubled the number of employees in its IT division and brought on Ric Leutwyler, a longtime entrepreneur with roots in the hospitality industry, to oversee the transition.

There were other changes, too. SkyTouch employees moved from Choice’s offices in downtown Phoenix into an older, dingier building that used to hold the company’s data center.

“There’s a message here,” Leutwyler said. “We’re saying, ‘Hey, guys, let’s not think big like a billion-dollar corporation. Let’s think of ourselves as a small start-up that needs to make its own way.’ ”

A cumbersome predecessor

Choice Advantage, the internal precursor to SkyTouch Hotel OS, was created 10 years ago. The company knew it needed an Internet-based program that was less cumbersome and more secure than the system it had been using.

“Physically, with the old system, there was a lot of hardware and infrastructure needed at every single hotel,” said Todd Davis, Choice Hotels’ chief information officer. “We had deployed 15,000 workstations to 4,000 hotels, and our hotels needed a lot of help managing that technology.”

The company began shopping around, but there was not anything on the market that would fulfill all of the company’s needs, Davis said.

Choice decided to take matters into its own hands. The company spent the next 18 months creating and testing the first iteration of ChoiceAdvantage.

There were two main goals: The system had to be easily accessible with an Internet connection, and it had to be easy to use.

“If you’re working at the front desk, you’re checking people in, you’re checking people out,” Joyce said. “The phone is ringing. So you need to be able to do things very quickly and easily, so we’re all about focusing on, what is it that’s going to make that hotel operate more effectively, more efficiently, more profitably?”

The company tested the software with 56k dial-up Internet service to make sure hotels around the world, even those without high-speed connections, could access the system. They brought in testers from outside the hotel world to make sure commands were intuitive enough to accommodate newcomers in an industry marked by constant turnover.

“We would basically bring in anybody from off the street, sit them down in our test lab and say, ‘Can you check somebody in? Can you check somebody out?’ ” Davis said. “We’d see what steps they took, how they would navigate. We want it to be so simple that it takes very little training.”

Managing rates

Today, ChoiceAdvantage handles all aspects of a franchisee’s business, from guest check-ins and housekeeping services to billing and finances. Throughout the years, it has become much more sophisticated, Davis said, adding that it is available in four languages and eight countries.

“In the early days, it was: This room is clean. This room is dirty. The sink is leaking,” he said. “Now it automatically assigns rooms to housekeepers based on what floor they’re on, the number of rooms that are dirty, those types of things.”

Perhaps most helpful, franchisee Praful Patel said, is the system’s rate-management program, which helps him track competitors’ nightly rates. The ability to change rates quickly across a number of different Web sites has increased his annual revenue by 10 to 20 percent, he said. “It’s like the stock market — rates fluctuate on an hourly basis,” said Patel, who owns a Quality Inn & Suites and and EconoLodge in Anaheim. “To be able to capi­tal­ize on that is really important. It can literally add hundreds of thousands of dollars to your bottom line.”

Joyce would not disclose how much the company has invested in its technology, nor how much it is putting toward SkyTouch, but he said the public company would eventually discuss figures with investors and shareholders. Clients will pay a monthly fee to use the software.

“We’ve been spending some money on it, and when we launch the company we’ll be spending some more,” he said. “We think this is going to be very positive from an earnings perspective.”

Last year, Choice’s Web site had about 100 million visitors. Use of its mobile app has tripled in the past year, with nearly 14 percent of hotel bookings now being made via smartphones and tablets. Being tuned in is crucial, Joyce said.

It is that new reality — a changing industry that relies increasingly on being at the forefront of technology — that Joyce hopes will fuel SkyTouch’s success. But is selling your company’s secret weapon the answer? Is it possible that it could give your competitors too much of a leg up?

Joyce says he doesn’t think so.

“In the end, it’s just a technology platform,” he said. “It will perform as your business does — even if you’ve got a great technology platform, you still have to get your own customers and build your own business.”

 
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