Having started in the payments sector, Paula Felstead was still rather new to travel a couple of years ago when the chief technology and operating officer heard Hotelbeds still received confirmation for some bookings via fax.
“I was so shocked I actually asked them to repeat it,” she recalled recently. She pictured the message coming from a hotel on the steppes of outer Mongolia or some similarly exotic locale where Wi-Fi sounded more like a question than a tech solution.
She was even more shocked to learn one of the hotels sending fax confirmations was in Barcelona.
“My whole idea that the reason they were relying on faxes was because of a dodgy internet connection was completely blown out of the water,” she said. “It was really a wake-up call to me around how some of the processes in the travel industry have not changed for decades.”
It’s also a vivid illustration of travel’s technology gap — a gap that in the case of Hotelbeds, now part of HBX Group, widened even further as Felstead oversaw the completion in December of a year-long effort to migrate multiple platforms into the cloud.
If you want your business to survive in five years, you need to have the technology enabled to do that.
Klaus Kohlmayr - IDeaS
The commitment in time and resources — not to mention anxiety — required for Hotelbeds to see through its tech overhaul is something more travel companies need to consider, experts in the field say. Given data’s growing importance and availability, it is more important than ever that companies be current in their technology.
“It's a fact of life. If you want your business to survive in five years, you need to have the technology enabled to do that,” said Klaus Kohlmayr, the “chief evangelist” and development officer at IDeaS, a provider of hospitality revenue management software.
Adam Harris, the CEO and co-founder of the cloud-based hotel management platform Cloudbeds, agrees. He’s astonished by the low adoption rate of revenue management services in hospitality, where too many entities allow technical debt to hold them back.
“These companies are not innovating; they’re surviving,” Harris said. “They’re just keeping up with what is going on.”
“It doesn't matter whether you're a small business or a large enterprise company, you need to change, to adapt,” added Richard Castle, Cloudbeds’ co-founder and chief operating officer. “Otherwise, you're going to be irrelevant at some point.”
That’s the fate Hotelbeds sought to avoid in being reborn as HBX Group with a new tech stack Felstead hoped would keep the company ahead of its customers’ needs.
“The tolerance for lower performance is fast eroding, as to be non-existent,” she said. “Everybody wants products to market faster, they want responses faster, they want complete data faster, and I think that's true across every single segment in the travel industry. This is really why HBX made that commitment. The choice really was we can have one year of significant disruption or you can have 10 years of never quite getting there.”
The costs of closing the travel tech gap
To illustrate travel’s technology gap, Cloudbeds’ Harris cites a digitalization adoption index he saw not long ago. It showed that while travel ranked fifth among global industries in terms of size, its standing for digital adoption was only 20th.
“That’s a big gap, and we are not closing it. It’s actually widening right now,” Harris said. “That doesn’t bode very well if we are in a business where the consumer is leading the charge. They are shopping, consuming media, interacting online in technical ways that is so different than what a 20th-ranked industry [can offer].”
You need to change, to adapt. Otherwise, you're going to be irrelevant at some point.
Richard Castle - Cloudbeds
The importance of data, now and especially into the future, increases the consequences for companies that fall behind, said IDeaS’ Kohlmayr.
“Everyone realizes that the amount of data that's being collected is staggering, and it keeps increasing,” he said. “The challenge is how do you actually make that useful, and how do you translate it into something that you can apply.”
The answer? It’s not with an old tech stack.
“We can't really afford to work on old technology or in old data warehouses. We have to be on the cloud because that’s the only way to scale up,” Kohlmayr said. “We have to be in modern environments because they're the ones that have the security and safety that the data guarantees that we need. So every day we have to earn the trust of the 30,000 hotels we work with that the decisions we make get delivered automatically and seamlessly and are accurate and are trustworthy. So that drives all of our investments in technology and in people.”
Such investments don’t come cheaply.
After Amadeus announced in 2021 a three-to-five-year plan in partnership with Microsoft to shift from its private cloud infrastructure, the company announced its gross investment in research and development exceeded €1 billion for the first time the following year. Those figures were up another 20% in 2023.
Of course, Amadeus’ size means its numbers are bigger. Hotelbeds made in incremental strategic investment of €11 million in the tech stack, which Felstead said is around 30% of the company’s annual capital expenditures for technology. The alternative, she believes, would have been costlier in the long run.
“If you don't invest and if you don't solve your technical debt or your limitations, then you will lose customers,” she said. “You will lose loyalty, and it doesn't matter how good your pricing is or even how good your products are. If you're not up, you're not available and you're not responding in a time scale that your customers and partners expect, they will move to someone else because no one is going to wait those extra seconds or those extra minutes. They will go somewhere else.”
Leaving a door open to innovate in travel tech
Even after a major overall, the demands of tech don’t cease. Technical debt — the outdated iterations of technology that companies keep upgrading or working around rather than replacing — sees to that.
“You’re accumulating technical debt every time you write a piece of line of code,” Harris said. “A month later, it's technical debt, right? There's no such thing as writing perfect code. Ever.”
So how does a company that’s current with its technology prevent technical debt from dragging it down while also still reaching for the stars with new innovations?
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It’s quite the balancing act, say the Cloudbeds founders, who base their approach on a lesson they picked up from Amazon founder Jeff Bezos. Cloudbeds calls it a one-way door or two-way door approach to decision-making.
One-way doors are decisions that are almost impossible to reverse, like quitting a job or selling a company. Once you’ve made that decision, there’s no going back. Two-way doors are actions that can be pulled back if they don’t work, like offering new services or pricing plans. The trick is distinguishing between them to give careful consideration to one-way door decisions while not being paralyzed with indecision on the two-way doors.
At Cloudbeds, a commitment to reliability and performance has become a one-way door principle.
“That's our number one feature. We talk about it constantly,” Castle said. “The larger you get, the more performance and reliability becomes important because you have tens of thousands of customers relying on you, and you're attracting larger customers and enterprise accounts.”
Yet as essential as that focus is, it presents a risk of growing complacent, Harris pointed out.
“There’s a constant balance between how much innovation and how much stability that every technology company in the world faces,” he said. “Like Netflix, for example. Think about the load that consumers around the world are putting on that ecosystem. Well, it makes sense that most of their infrastructure is on stability and to make sure consumers are getting the experience they want now. But they’re not innovating, right? … The user experience hasn’t really changed much in the last five years, and that’s because much of their infrastructure in engineering is just [to] keep doing it online.”
That’s where the two-way door comes into play at Cloudbeds. When the company tries new things, it’s with the understanding that, if they don’t work, the door remains open to retreat, Castle added.
“Building a growing a business is about risk taking, and releasing new product and functionality at a high speed is risky at times,” he said. “That’s why it’s important to be able to fail fast.”
In other words, to pull back an idea that needs more work.
How they do that is also modeled on what they’ve seen larger companies do successfully. While increasing their investment in performance and reliability — no turning back from those — the company can roll out innovations with the idea that they can be shut down quickly if they don’t work, or they test the changes in individual clusters or regions before rolling it out to all their customers.
“You don't want an engineering team that's not taking a risk and getting stuff out there,” Castle said. “So you want to limit exposure and pull back things fast [if they don’t work].”
The payoff for a tech stack rebuild
Hotelbeds never could have become HBX Group without a tech overhaul.
In October the company announced the launch of the group brand that now includes Hotelbeds to support the introduction of new product lines, including fintech products such as travel insurance, payment and multi-currency solutions that will be embedded into the company’s core business. That couldn’t have happened — not easily, at least — without the tech investment.
If you don't invest and if you don't solve your technical debt or your limitations, then you will lose customers.
Paula Felstead - HBX Group
“The intention that we had was while rebuilding our tech stack was to make sure that we would be easier to do business with,” HBX Group CEO Nicolas Huss said. “We wanted a quicker response time. We wanted reduced downtime. We wanted more accurate data, etc. … We built it in a very modern way, something that would enable us to do business in a fluid way, not only for today, but probably for the next five to 10 years.”
The year-long process wasn’t easy on those carrying it out. They had to move not just one platform but multiple platforms into the cloud. Some were easy, if they were already in a different cloud provider. Others, Felstead said, had to be “re-architected, rewritten and migrated” so seamlessly that the company didn’t also experience a large client migration — including those who still used faxes.
The solution? HBX Group built a third system that enabled them to synchronize the old and new systems constantly over the 12 months it took to finish the job. “So it was like we had the old platform, we had the new platform and then we built a third system to keep both of them in balance,” Felstead said. “It’s not for the faint hearted.”
That courage has been rewarded. Even as the process was underway, performance indicators showed the system was 30% faster and 50% more accurate, Felstead said. The improvements have continued. And as costly as the overhaul was in terms of money and labor, she anticipates reaping three to four times the benefit in the future.
“If we have not done that investment, then everything that we're talking about in terms of fintech products, the ecosystem strategy, the market expansion and being able to offer the very best performance and resilience to our customers would not have been possible,” she said. “It's almost like the platform enables us to scale, provide the reach and the performance, which actually is the foundation for the business strategy.”