Hospitality Market Control Going the Way of the Dodo

How to Accelerate Your Revenue Growth in a Fast Changing Market

Executive Summary

The hospitality industry technology market is moving through an operating model paradigm shift. For companies to succeed, they need to adjust their go-to-market strategies to maximize their revenue growth.

Hospitality Technology

For over 50 years, the distribution models of hospitality technology offerings (POS, PMS, back-office server applications) have been managed and controlled by large global 100 hardware players. Even if you did not sell hardware to the hospitality market, and sold time management and scheduling, inventory and menu explosion, digital signs, payroll, PMS reservations or liquor dispensing systems, often you had to integrate your software application into these hardware manufacturers proprietary applications to be marketable.

During this timeline, hospitality hardware manufacturers, primarily dominated by POS companies, bypassed much of the commoditization of the PC market and captured huge market share with large gross margins.

The POS industry is now in its fourth generation of product evolution and hospitality technology companies today are unchained and are the captains of their own success.

1. The first period of the POS industry began in the early 1970s when a company named Data Terminal Systems (DTS) started manufacturing the first stand-alone electronic cash registers in the US, years before NCR.
2. The second stage of POS market evolution occurred when a Canadian company called Remanco Systems launched the first CPU-based POS computer system in the early 1980s.
3. The third stage of POS market evolution happened in 1994 when a company called Aloha (originally called Ibertech) launched the first native Windows POS offering a year before the release of Windows 95. An important fact to understand is that at no point in the history of the POS market evolution, did the large global 100 hardware POS manufacturers ever create innovation. When DTS started manufacturing electronic cash registers in the US, they were the first. POS companies like IBM, NCR and Micros (now owned by Oracle) have always been the me-too innovation followers in the POS industry who offered national sales and local technology support to the retail, hospitality and supermarket industry verticals.
4. But today, the fourth POS market evolution is taking place. This new evolutionary step has opened up the entire hospitality technology marketplace creating a market gap with no obvious industry leader in the next five years.

Current State of the Market

Hospitality Technology buyers today are seeking mobile and tablet-based POS systems that use an open application platform and require no on-site maintenance and are priced under $500 per terminal.

Additionally, POS sales are also being driven by free POS hardware and software credit card payment processing solution companies who are giving away or aggressively discounting system solutions sales to get the credit card processing fees.
These seismic market model changes are causing the entire POS manufacturer industry to go into commoditization and is triggering non-innovative, hardware-dependent companies like Micros and NCR to go the way of the Dodo bird.

This industry change is also putting thousands of local cash register resellers out of business who are part of an aging generation of entrepreneurial business owners and whose primary revenue profit center is generated from local on-site field service maintenance agreements.

With the fourth evolutionary market change underway, over 50 venture capital funded and private equity startups have been launched seeking to grab market share from the POS manufacturers with new tablet and mobile-based POS offerings and open platform, cloud-based software applications.

Market Outlook

With the POS industry entering this chaotic stage of non-hardware driven sales, the future of who will be the next big hospitality technology national player is still unknown.

Within 5 years (or sooner), all POS manufacturers will be out of the industry or morphed into a software and services company only.

This change will also affect those hospitality software partners who only focused on building sales and marketing models that were dependent on POS resellers, manufacturer partnerships and proprietary interfaces as their bridge to new business from new prospects and recurring revenue from existing customers.

As the hospitality technology market platforms open up, they also will unhook all existing sales distribution models forcing all technology players to become more independent in revenue capture. Getting on a short list just because you have the proprietary POS interface ready to go will become less and less common.

With new hospitality technologies running in the cloud, SaaS-based payment model being presented, mobile smartphones and tablets being used, virtualization becoming more prevalent and open API standards the norm, it is obvious that the current POS manufacturers who owned the hospitality software/hardware market for over 50 years will just be Dodos... and just a shell of their former greatness.

But this new area will allow smart, strategic hospitality technology companies to flourish if they build go-to-market strategies based on six primary business drivers.

1. Why will your targeted prospects buy from you? (Do you really know?)
2. Why will your targeted prospects not buy from you? (See above.)
3. How do you create business value that your prospects believe?
4. How will you build digital marketing and sales models to capture market share?
5. What roll-up software applications and custom services can you add to increase your customer lifetime value (LTV)?
6. How will you train your salespeople to sell in this new market model?

Simple sounding questions, but most companies today really don’t know the correct answers to these questions and instead just guess or assume based on their industry experience (or even worse, just copy their competitors) and build go-to-market strategies they think will work and that never really help them meet their corporate growth objectives.

In the new hospitality technology market gap:

Branding is not revenue.
Advertising is not revenue.
Marketing is not revenue.
PR is not revenue.
Operations is not revenue.
Development is not revenue.
Revenue is revenue.

To grow your top line market strategies today and take advantage of the new hospitality technology opportunity, it’s smart to market, not first to market that counts.

Conclusion

To survive this hospitality technology commoditization stage and accelerate corporate growth, executive C-suite teams need to adapt to the current market realities. Success in our market will be based on building and executing success strategies focused on increasing customer life-time value (LTV), maximizing annual recurring revenues (ARR) under longer contracts and building scalable revenue capture systems using digital sales and marketing methods.

The hospitality technology market is open to those who seek to dominate.

Where are you? In hospitality technology sales, it’s... hunt now or be eaten later!

About The Author

Paul DiModica is the founder and CEO of Value Forward Group, a high tech revenue capture specialist advisement and management consulting firm. Paul is also editor of the world’s largest IT sales, strategy and marketing strategy newsletter called HighTechSuccess read by high tech executives in over 110 countries.

Additionally, he is the author of the books High Tech CEO Business Success Strategies, How to Sell Technology® and his new book being published this year called the Revenue Capture Scorecard^®.

Prior to launching the Value Forward Group in 2001, Paul spent over 20 years in high tech businesses as a Senior Vice President of Sales and Marketing, Vice President of Strategy Worldwide (Renaissance Worldwide Inc.), Vice President of Operations, Chief Operating Officer and company Founder in private, family-run and public IT companies with annual revenues up to $900 million.

Paul has been featured or interviewed in hundreds of media outlets including the New York Times, Investors Daily, Fox News, Selling Power Magazine, Sales and Marketing Magazine, CIO Magazine, CFO Magazine, Entrepreneur Magazine, Training Magazine, Marketing Magazine, Computer World Magazine, Entrepreneur Radio, Chicago Tribune, Executive Travel Magazine, Value Added Partners and many others.