Tech first hotel management companies rewrite the operational playbook amid volatility
The last five years have put the hospitality industry to the test. COVID closed properties around the world, caused labor shortages and the aftermath is steering us directly into the eye of a new storm – looming recession, inflation and possibly stagflation.
Increasingly volatile market conditions have made hotel management exponentially more challenging.
To succeed in today's rapidly changing environment, hotel management companies must have tools that allow them to respond in real time to changes in market conditions. Hotel operators who are ahead of the curve in all things digital can identify changing market trends and implement new strategies to adapt in real time.
Volatility and technological change have prompted legacy hotel management companies to revise their operating models and update their technology tools. This scramble has opened the door for a new breed of hotel management company – tech-first hotel managers.
Tech-first hotel management companies have taken a first-principles approach from day one, using proprietary technology tools to automate back-office operations, eliminate cost redundancies and more effectively generate demand for their partners – hotel owners.
Volatility separated neo-hotels and tech-first management companies
Tech-first hotel management companies are often mistaken for neo-hotels because their capitalization tables both include risk financing; however, the two companies could not be more different.
Neo-Hotels take on long-term leases to sell short-term rentals (or long-term leases). Some of these businesses, such as Stay Alfred and Lyric, went under during the pandemic. Surviving neo-hotel brands like Sonder and OYO are struggling as investors scrutinize their business models.
In contrast, tech-first management companies like Life House are applying the same business model that traditional hotel management companies have used for years, charging owners 3.5-5% of revenue in exchange for full-service management of hotel assets. The traditional hotel management business model resembles a mix of SaaS (software as a service) subscription fees and payment/fintech companies that earn their fees as a percentage of revenue. Tech-first management companies like Life House invest their venture capital funding and profits in building core technology systems that make it easier to onboard new assets over time, and then help their portfolio properties outperform the competition.
80-Key Faraway, Nantucket with sister 140-seat restaurant & bar in Nantucket, MA, owned and founded by Blue Flag Partners and operated by Life House's white-label hotel and restaurant management platform
Hotel owners typically seek tech-first hotel management companies as an alternative to traditional management companies because they are able to onboard new hotels more quickly, require less oversight, attract talent more effectively, and typically outperform older hotel management companies by generating higher net operating rates income.
Life House's rapid growth can be attributed to its first-principles approach to hotel management
Life House was founded in 2017 and has scaled its tech-first hotel management platform to over 60 hotels with 18 more in the pipeline. Going from startup to 60+ managed hotels in less than 5 years is virtually unheard of, even for leading hotel management companies.
Kayak CEO Steve Hafner , selected Life House as the company's exclusive hotel management partner to help build Kayak-branded hotels. "We share the vision that independent hotels can improve operations and profitability through better technology," says Hafner, who has already opened 3 Kayak hotels with Life House in the past year, with more in the pipeline.
Pictured: Kayak Miami Beach powered by Life House
Life House is able to onboard a new property in 30 days, and has templated many of the onboarding processes for new properties in the same way that software companies are able to automate new user signups and training to scale quickly. While they work primarily with small to mid-sized properties today, tech-first managers like Life House are becoming more popular at properties of all sizes. Life House, for example, services three-star properties with limited services as well as an ultra-luxurious AAA Forbes five-star resort with $1.500 ADR (average daily rate). The company currently works with properties ranging from 14 to 125 keys and plans to continue testing its technology and move into larger, more complex properties. For example, their advanced pipeline includes several properties between 100 and 250 keys.
Most hotel management companies lack technology as a core competency and operate with outdated infrastructure – often crippled by outdated technologies , mandated by franchise brands like Marriott and Hilton. For example, publicly traded giant RLJ Lodging Trust mentions the word technology only three times in its 62-page annual SEC filing, where the only references to "technology" are in the "risks" section of its 10.000 appear.
In the age of digital transformation, partnering with a company like Life House that specializes in leveraging next-generation technologies to drive efficiencies and increase demand provides a much-needed advantage for property owners in an increasingly competitive marketplace.
Transform the Front-of-House Experience with Life House's Proprietary Tech Tool Rhythm
Anyone who has worked in a hotel knows that there are two painful issues that make staffing a major challenge for hotel owners: (1) there are lots of tedious and time-consuming manual processes associated with running a hotel, and (2) most roles end up wearing too many hats, especially general managers. Ultimately, it boils down to the fact that worker compensation in many cases does not match the effort and stress required to do certain jobs at a hotel. So hotel operators can do one of two things to solve the problem: raise wages and/or make hotel jobs more attractive.
Life House took a first-principles approach to solving the problem, using software to eliminate many of the tedious or frustrating tasks on property such as nightly audits, answering phones and check-in/out with its Rhythm product.
Where people are busy, frustrated or bored – technology excels at automating and task routing these types of tasks. Not only does this help make the daily lives of hotel staff more enjoyable, but it also saves time, reduces overhead and eliminates human error.
Life House's proprietary hotel operations software automates many front-of-house processes such as guest check-in, room assignments and guest communications.
Life House's Rhythm product has three main user groups: GMs (property managers), maids and maintenance staff.
Property managers typically access the Rhythm app through a dedicated iPad app, which provides a more comprehensive experience where they can dive from overviews of each department into more detailed views of each department. They can also monitor arrivals and departures, reassign guest rooms, create cleaning and maintenance tickets, assign various tasks to team members, and even view real-time ratings and service response times. Through the Rhythm app, property managers can also check in guests, view important information like payment status, and change reservations on the fly with just a few clicks – no clunky computer required at the front desk.
"As a GM, it's important that the tools we use enhance the guest experience, not hinder it. Life House's Rhythm product allows me to check in guests remotely while they enjoy a drink on the patio, communicate with them via text message during their stay, and manage housekeeping in one place. It's intuitive and easy to learn, making training new employees a breeze. This allows us to focus on what we do best, serving our guests," MarcAnthony Crimi, regional general manager at Life House, told Hotel Tech Report.
When property managers assign tasks, they are typically assigned maids and maintenance staff on the go who access the app through the iPhone app. These team members typically don't need to view comprehensive property analytics, just see what tasks are assigned to them and then be able to easily communicate with their property manager and mark those tasks as completed. Access to a streamlined app across all departments allows property managers to work more efficiently and ensure nothing is overlooked.
"The job market knows what the Life House brand stands for," says Jeff Broaden, CEO of Stonehouse Capital, "especially those recruiting for GM positions know that working at a Life House property will provide a better quality of life and employee experience."
From a guest experience perspective, Rhythm is also the central repository for guest inquiries for all Life House hotels. Automated messages are sent to guests via text message before and during their stay to help them navigate the accommodation with important information and offers. Team members can send custom text messages to guests directly from their profile in the app. General managers can then review all communications and even view a snapshot of their lodging's service response times to continually improve over time. The app even stores pre-made templates to save team members time answering frequently asked questions.
The Life House team has made significant investments to ensure that the on-site team experience is as simple and intuitive as picking up an iPhone, which in turn enables staff to be more relaxed, consistent, hospitable and responsive to guests' needs.
Adopting a first-principles approach to asset management, revenue management and marketing
Life House owners also rave about back office operations and financial analysis capabilities. Thanks to Life House's proprietary financial operations software, not a single hotel managed by Life House has back office staff on property, nor is there a need for outsourced accounting and finance, as this function is handled centrally at the corporate level.
Owners can keep up to date on performance via live revenue reports and monthly financial reports in their owner portal. They can rest easy knowing that Life House's corporate asset management team is constantly working to optimize their P&L.
"Not only do we increase the financial performance of our hotels, but we also increase the predictability and consistency of that performance – we have found this to be incredibly helpful and lucrative for our hotel owners looking to refinance or sell their hotel. " says Rami Zeidan, founder and CEO of Life House.
The company's tech-first strategy not only creates efficiencies, but also results in significant revenue increases for partners. Helping owners navigate the increasingly complex distribution landscape with their proprietary revenue management and marketing system ( RMMS ).
Life House developed the revenue management and marketing system to fully automate all pricing and ad offers for its hotel partners. Traditionally, these tools have existed separately as a revenue management system and metasearch management platform – but Life House believes the two require deeper integration to ensure hotels don't overspend during times when they don't need to generate demand. This ultimately helps improve direct booking mix and increase return on ad spend (RoAS).
Tech-First hotel management company Life House has developed proprietary revenue management and marketing software to drive results on autopilot for hotel owners
Tech-First management companies like Life House are typically more digitally savvy than traditional management companies, offering algorithmic revenue management, conversion-optimized booking funnels (website + booking engines), and automated metasearch bidding, all managed at the enterprise level. Looking at a portfolio-wide average, Life House internal data shows that the RMMS product has driven 70% of direct bookings, dramatically reducing OTA costs for most owners making the switch.
"Life House's all-in-one revenue management & marketing software is a full-funnel approach that combines live market and OTB booking trends with customer conversion features. We use automated marketing systems to create and identify scenarios where high-interest customers can be navigated away from OTA channels to direct bookings, resulting in higher net revenue performance," said Peter Lopez, VP of Revenue at Life House.
What's next for Tech First Hotel Management?
As a pioneer in tech-first hotel management, Life House is rapidly growing with 18 more hotels actively in its pipeline. The strong economic value proposition of Tech-First Hotel Management and the company's ability to onboard new properties within 30 days means we're likely to see dozens and, over time, hundreds of Life House properties follow suit.
Hotel owners everywhere face the relentless wave of disruption. We are now at an inflection point where owners are facing dramatically higher distribution and staffing costs, so they are looking for a new kind of management company that not only does things the way they always have, but manages hotels today's dynamic and challenging environment.