November 17, 2020

Expanding Our Footprint in Hotel Property Operations Software: Our Acquisition of ProfitSword

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Hospitality software is a fragmented space. Even more specifically, the property operations software that supports back of house business at hotels is particularly interesting. There are many point solutions that bring more and more data to property managers, but it’s hard to get an accurate picture of one property or a group of properties.

We first got into the Hospitality space with our acquisition of Transcendent in 2019. Transcendent offers an operations management software that helps companies track assets, improve workflow, and increase return on investment. What we’ve learned with Transcendent is that hotels operate differently than any other type of property and property owners need access to relevant and up to date information to run their property efficiently and effectively. What we also learned is that general business operations software doesn’t cut it for these property managers. They need tailored solutions. 

Which is why we’re excited to announce our acquisition of ProfitSword - a hotel property operations software that provides business intelligence and data management software for the hospitality industry. ProfitSword was founded in 2001 by Tili Findley and Mike Patton. As support services in hospitality, particularly accounting, moved from a decentralized environment to a centralized environment, property managers did not have the tools to properly manage and communicate their financial performance. Today, Tili, Mike and the ProfitSword team have designed an advanced operational and reporting business intelligence software suite including: ProfitSage, ProfitPlan, ProfitPace, ProfitDaily, ProfitWizard, and ProfitAbility which are now in use by more than 3,000 properties across the U.S. ProfitSword will remain a separate business from Transcendent, over time sharing learnings and best practices.

Tili and Mike will transition out of the business while the rest of the leadership team remains. Rob Ryan of ASG will join ProfitSword as their new Chief Revenue Officer. I sat down with Rob to talk about the recent acquisition, how COVID plays a part in this business, and why he’s excited about the future of ProfitSword and ASG.

Q&A with Rob Ryan, Chief Revenue Officer of ProfitSword

Why Software for Hotel Property Management? 

The hotel property management software space has been a very compelling opportunity for ASG historically and it continues to be even more so in the midst of the pandemic.

There is an urgent need for real time decision-making, especially for anyone managing multiple business units (hotels), which has only been magnified by our current situation.

For owners, property level management, sales teams, etc. to thrive in this competitive environment, they must all make fast, informed decisions. To do so, they rely on a staggering amount of fragmented data across many systems. This data includes daily operational metrics to properly adjust rates, staffing, inventory levels, etc. The problem is, it can be weeks before the operator even sees the information in any sort of useful state. 

The team has to:

  1. Export from the data all their different point solutions 
  2. Calculate and submit their KPIs 
  3. Reconcile minute discrepancies across teams with back-and-forth emails
  4. An analyst compiles it all into a dizzying set of Excel spreadsheets to match the exact format each separate decision maker wants to see. 

The time for action has long passed. The data is stale and the opportunity is lost. 

Most groups still operate looking in the rearview mirror. Hotel operations are fragmented with high pressure to run efficiently, especially now. Those with the right software in place spend less time compiling endless reports and more time serving their guests and optimizing performance through real time analytics and decision making. 

Why ProfitSword?

I’ve worked with dozens of amazing SaaS companies over the years, but I’ve yet to see, let alone have the privilege to join, such an incredible team of people-focused rockstars.

The ProfitSword team has focused on crushing one thing for 20 years and has done it exceptionally well. ProfitSword is the leading business intelligence platform for the hospitality industry and is the only platform to combine real time accuracy with unparalleled flexibility.

The secret sauce? ProfitSword’s people and their hyper-focus on deeply knowing our partners, both the pain points and the wins. As I’ve been introducing myself over the last couple weeks, the common theme across partners I’ve spoken with can be summarized in what our newest partner told me: 

While everyone else was saying ‘No, we can’t do that for you,' the ProfitSword team always responded with ‘We’ll find a way'.

While other BI tools exist that can integrate with select source data, ProfSword is unique in that we have the ability to integrate across ALL tools to give real time visibility. We currently support automated integrations with over 175 separate business management systems, and this incredible team is always on the lookout for new ways to serve partner needs.

There is so much potential for growth in this space, primarily in the form of product and market expansion. 

On the hospitality side, COVID-driven consolidation has created untapped opportunities to more fully serve our existing customers in the other facets of their businesses, including internationally. ProfitSword has also begun exploring adjacent markets, most recently Senior Living, to drive efficiencies which are desperately needed in our new crisis.

How has this industry fared during COVID-19?

This may seem an odd time to double down on the hospitality industry. As I’ve told friends and family about my new role with ProfitSword, the immediate response from many has been “Are you sure? Hasn’t COVID-19 hit hotels pretty hard?” To which I respond, “Yes, and they need us now more than ever.”

“Hit hard” is an understatement, especially when you consider that earlier this year the industry forecasted record low occupancy rates-- even lower than the Great Depression--week after week.  According to Marriott’s CEO, by the end of March the financial impact was already worse than post-September 11 and the 2008 financial crisis combined. We’ve seen mass furloughs and layoffs and some properties suspended entirely. Among ProfitSword’s customers, we’re already seeing gradual improvements each month, but most do not expect demand (occupancy) to fully recover to pre-pandemic levels for at least a couple of years.

As we look more closely, however, we see the pandemic has also created a fascinating phenomenon among hotels. At the risk of oversimplifying, I believe we’re seeing a divergence between two groups. 

The first group, operationally less mature and without real time data tools, struggles to stay afloat and attempts to drive up occupancy by the one lever they have visibility to control - deep discounts to their price (average daily rate, or ADR). They tread water as long as they can but failure to identify a problem immediately can prove fatal.

The second group has access to the power of real time forecasting, through a robust BI tool like ProfitSword. This group faces the same challenge of low demand, but they have a solid handle on all their revenue and cost levers for that very day. ProfitSword’s partners can not only see plainly when things are becoming off balance in their ProfitSage dashboard, but they are also notified when ProfitSword’s award-winning machine learning capabilities detect any less obvious issues by comparing ratios to other similar properties. 

In short, our partners are using this time as a refiner’s fire to expose and cleanse themselves of costly inefficiencies. They are working ON their business, while they weather the storm IN their business. 

A clear example: On one hand, the aggregate US hotel occupancy in mid-October was 50.1% with an ADR of $97.69. On the other hand, our clients’ aggregate for the same timeframe, was closer to 40% occupancy. But here’s the kicker… they have an ADR over $120. The ProfitSword suite has allowed them to find the optimal mix, using “what-if” scenarios,  to maintain higher prices while still managing their costs on a daily basis. We show them how to do more with less. They closely monitor their KPIs against benchmarks. As occupancy rates continue to rise, they will know the exact time each property is ready to scale back up their teams, and they will be more efficient and ready to scale once they do.

In meeting with our partners, it is clear that ProfitSword’s value proposition is stronger the more our partners need to tighten their belts. We are their cost-saving mechanism.

I don't know what I would do without your product, especially during this time - Client Area Director of Finance
When this all happened, ProfitSword was put at the top of the crucial list to not cut back on - Client CTO

What’s next for ProfitSword? 

First, we are monitoring several emerging trends we believe will play out in our favor and increase our total addressable market as inefficiencies in the previous hotel model have been exposed. 

  1. High interest from smaller players. Property management companies historically too small for our target market feel the impact more acutely (Excel is no longer sufficient). They are wanting the cost savings ProfitSword provides. We are exploring creative ways to serve their needs without compromising on quality of service.
  2. Consolidation of the rest. The smaller companies that cannot stay afloat are being purchased by larger companies, many of whom are already our partners. One partner, for example, has acquired 6 new portfolios just in the last couple of months for almost $3 billion, adding 197 properties. They just announced another acquisition that will add 22 more shortly.
  3. Larger players rethinking their homegrown systems. These systems are typically not automated and require a heavy lift from an entire team. The pandemic has demanded rapid upgrading to many homegrown products, and we expect it will prove too costly to do so continuously when we can do it for them. That was the case with our largest recent partnership.

From a product standpoint, we are on a mission to make everything even easier for our partners starting from their first engagement with us. We are revisiting our product packaging to streamline the buying process. We have several very exciting enhancements coming shortly. 

With ASG’s support, ProfitSword has already embarked on steps to dramatically enhance the underlying infrastructure and security to pave the way for the next generation of the platform, which will be even more customizable to fit their needs.

What’s next for ASG’s Hospitality Vertical

We are extremely excited about the addition of ProfitSword to our ASG Hospitality vertical and how this expands our ability to further invest in hotel property operations software, which will be even more mission critical on the other side of the COVID-19 pandemic.

As for what’s next? We want to continue our abilities to offer leading solutions to our customer base.  Some of that will include investing behind technologies we already own (as Rob mentioned the further investments in ProfitSword’s technology), while also looking to expand as the needs of the customer expands through other software solutions. 

We're leading the charge of reducing the number of software vendors a hotel has to buy from by continuing to offer our customer base a more expanded product set. We look forward to continuing to support this important audience both with current solutions and future opportunities.


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