How to solve the buy or build dilemma in hospitality property management

History is littered with examples of IT projects gone wrong. 

In the past, the choice between buying off-the-shelf software or building your own meant CTOs faced an agonising choice. On the one hand, ready-made software was cheaper. On the other, it often only focused on one area, for example revenue or channel management, and was rarely improved substantially over time. 

Going after the perfect fit meant spending lots of money, and it was often a spending commitment measured in decades not weeks. Fast forward to now, and the choice for modern hotel and serviced apartment operators has fortunately evolved — but nor is it a binary choice. 

A growing band of technology-focused businesses are finding that neither route offers them the perfect solution any more. In this article we explore the modern dilemma of whether to buy off-the-shelf or build in-house, proprietary solutions.

Back to first principles

Which way a company goes depends largely on how important they believe technology is to their product. That has always been the case. Older companies with a more traditional offering are less likely to want to invest significant sums in the guest experience and efficiencies for staff.

But now, even those operators that take a more tech-oriented approach to their businesses are reluctant to simply build rather than buy. The reason for this is the way software development has evolved since the turn of the century. 

There has been a shift from black box software — which is off-the-shelf and out-of-date the minute you plug it in — to platforms powered by best-of-breed tools that allow business to do two important things they couldn’t do before:

1. Plug in best-of-breed tools from third-party providers, allowing operators to continually compose new iterations of their property management solution

2. Build their own tools and plug this proprietary software into the property management platform to help differentiate their product and guest experience

This is hugely attractive to innovative companies because it unlocks a hybrid approach with limitless potential, and operators pay nothing to have that flexibility should they need it. We’re already seeing a shift to more hybrid approaches in the marketplace with decisions by large hotel operators to flex their approach to property management. For all modern hospitality brands, buying rather than just building now always forms a part of their strategy — the only question is whether they also choose to build alongside.

Who’s flexing their tech stack?

From the outside, serviced apartment operator Limehome, which has 4,700 units across Europe, looks like a hospitality business, not a tech company. But behind that sleek exterior sits a workforce of which 40% are software engineers and data scientists. The company’s founders took an early decision to keep themselves at the cutting edge of the guest experience by building most of their technology themselves. All this is done using the Apaleo open hospitality platform as its foundation. 

Replacing legacy systems 

Operators can also buy off-the-shelf software to replace legacy, in-house systems. Hilton recently started to replace in-house software with HotelKey’s Property Engagement Platform (PEP), which works in tandem with other areas of the operator’s property management platform and acts as a hub for an existing suite of software. In this case, Hilton used third-party developer, HotelKey, as its PMS to make something bespoke that is exclusive to its business and works alongside other tools. This would have been impossible 30 years ago and larger operators are increasingly taking this API-led approach. 

In both these examples, ongoing development is part of the undertaking because technology is never ‘done’ and a competitive advantage can’t simply be bought. Nevertheless, they embody the two paths afforded by modern hospitality property management tools — buying, and buying+building. Either way you look at it, developing an entire tech stack from scratch isn’t something operators attempt any more because it’s unnecessary.

The reason Hilton and Limehome have gone in two slightly different directions is because of their different technology needs. Whereas Hilton enjoys cutting down on wait times at its front desks, Limehome doesn’t have front desks. Its largely staffless model relies on replacing staff with a fully-digital guest journey that replaces in-person customer service with technological solutions that achieve the same result. So, we see how technology can be seen as either an asset or a differentiator that drives the identity of the brand and defines the guest experience.

Where it’s the latter, operators are using bought platforms like Apaleo as a launchpad for innovation. One example is STAYERY. The serviced apartment industry has commonly lacked dedicated tech tools so this serviced apartment brand, based in Germany, fills those gaps in-house. 

“We decided early on that we wanted to implement our own digital guest check-in,” says Laura Neuberger, Head of Marketing at STAYERY, “so we programmed our own check-in kiosk as well as an app (digital guest directory) enabling guests to self-serve themselves, something our target customer is very keen on. Apaleo enabled us to do this because, through their open APIs, we were able to connect our own software easily. That, in itself, is one of the biggest benefits for us because it allows us to bring in our own ideas and be agile enough to say we want to change certain processes.”

Fellow Apaleo client, citizenM, cites the huge amount of data produced these days as another factor driving the buy+build trend.

“We aim to provide guest service beyond expectations, anticipating our guests’ needs, continuously exceeding their expectations, and curating memorable experiences for them,” says CEO Klaas van Lookeren Campagne. “We can only do that if we have a platform that always puts us at the cutting edge. It’s impossible to effectively operate these assets and protect our investment without leveraging the huge amounts of data property management tools now produce.”

Not everyone has a smooth experience when they choose to buy rather than build to begin with. Hiisi, the Finnish holiday home and hotel brand, quickly discovered no off-the-shelf solution was going to work for them, so pivoted to a buy+build approach relatively quickly. This is not uncommon for modern hospitality brands, as the pace of innovation and change required is often rapid.

Markus Veikkolainen, Chief Technology and Marketing Officer, remembers, “While it would have been great to build our own tech solutions from the start, we decided to de-risk in Hiisi’s early days and put off investing in proprietary technology. We figured that since there are so many hotel tech providers who work on these solutions full-time, we should rely on their expertise for now. However, finding the right fit proved more difficult than we’d anticipated.

“We accord the same level of importance to technology and operations which is why we keep investing on both fronts. That works well with Apaleo since it allows us and our agency partners to easily add to the platform. This has reduced our dependence on third parties and has put us on the road to creating our ideal tech set-up.”

Buy+build — the key benefits of a hybrid approach

• Avoid continuous overheads linked to internal technology management

• Access to dedicated support

• Cost efficiency — bypassing expenses tied to hiring and training

• Fast roll-out — fast onboarding, quicker speed to market

• You’re not dependent on a vendor — you make improvements where they don’t

In conclusion

Off-the-shelf solutions are better than they’ve ever been but that’s still not enough for many modern serviced apartment and hotel brands. 

Open, API-first hospitality platforms are enablers of continuous innovation. It is counterproductive to view customisation and personalisation as anything other than ongoing projects, and buy+build challenges the idea of in-house development as one-offs. If you’d like to discover more about buy+build, why not book a demo with one of our specialists today?