STARTUP FOCUS: H2O Hospitality leading digital transformation of hotel management

South Korea’s hotel management platform operator H2O Hospitality is leveraging on South Korea’s IT and management power to set a new global standard in digital hotelier.

“The hotel business has lagged behind other businesses in digital transformation,” said H2O CEO John Lee. “We will work hard to change the essence of the hotel business by using our self-developed hotel management platform.”

The technology-based hotel management startup entered Japan in 2017 and has been growing as a major hospitality platform in the country. “Hotel management was all about real estate management, so we should find ways to increase real estate returns,” he said. “While seeing the growth of Airbnb that operates regionally dispersed rooms, we thought a platform that manages rooms of different hotels together could be a high-returning hotel business model.”

Although the company achieved a rare success in Japan as an overseas startup, it has faced unexpected crisis due to the Covid-19 pandemic. “The Covid-19 crisis has dealt with a huge blow to the hotel and tourism industry, and we were hit hard by the cancellation of the Olympic Games in 2020,” he said.

But it weathered the storm better than others because it has benchmarked Starbucks’ leasing structure that allows landlords and tenants to share the cost and profits of business together. It means that if it could not make any profits, it doesn’t have to pay rent, unlike master leasing where a tenant has to pay fixed rents for a long period of time regardless of the business performance.

The company could maintain its business amid the crisis as its cleaning company has been designated by the Japanese government to perform disinfection work and idle hotel rooms are used for medical workers, Lee said.

Its competitors went into chain bankruptcy due to the pandemic, but it could see an opportunity in the crisis when customers are increasingly prefer clerkless hotels. It has integrated all hotel management systems including channel management system (CMS), property management system (PMS) and revenue management system (RMS) to ensure digital and automated operation of all works including room reservation, check-in and check-out and housekeeping. “Thanks to the automation, we could reduce fixed cost by 50 percent and increase sales by 5 to 15 percent,” he said.

The number of hotel rooms managed by H2O exceeded 7,000 in March, with 150 rooms in Korea, 7,320 in Japan and 20 in Thailand. It has set a goal of increasing the number to 10,000 by the end of the year. “Our CS operating team has been building up their expertise to differentiate themselves from other hotels over the past four years,” he said.

Lee said he aims to grow the company as the world’s biggest hospitality platform. “Our short-term goal is to manage 50,000 rooms, 2 percent of 2.5 million hotel rooms in Korea, Japan and Thailand,” he said, adding that it also plans to enter the Southeast Asian region including Vietnam.

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