Causes of death in the hospitality tech space

Kyra Durko
Aug 24, 2017 · 2 min read

Not much has changed for restaurant operators in the past few decades. Even in the nightlife capital of the world, New York City, there are bars using cash registers instead of POS systems, and recording tabs by hand on pieces of paper. It is not surprising that these obvious opportunities for innovation have been seized by dozens of eager startup founders.

Unfortunately, there have been more deaths in the hospitality tech space than anyone wants to talk about. It has left venue owners overwhelmed and hesitant to try new technologies, even if they are lightyears better than the last concept offered to them. Venue owners receive anywhere from 10 to 100 sales e-mails per day, and many are saying no for the same reasons…

(1) A venue cannot afford to slow down. Most technology is built to either increase traffic, or make a venue more efficient. However, the adoption of most technology also involves training and debugging. No server, manager, or bartender, wants to worry about a new piece of hardware or software malfunctioning at 3am on Friday night.

(2) They are doing just fine. When a startup is finally ready for market, the top venues in the neighborhood are their number one focus. The problem here is that those top venues probably don’t feel the need to adopt what you are offering. Adopting a new technology, as hinted at above, has a cost associated with it even if it is free.

(3) Value is always two-sided. When selling technology, you are selling the value it will provide. Yelp increases opportunity for people to discover your business. OpenTable increases reservations made. However, Yelp also increases opportunity to discover your business is awful (for some people) and OpenTable takes a tremendous cut from reservations that people make because they want to eat at your restaurant not because they want to use OpenTable. Most technology has created just as many losses as gains for its clients.

Understanding these reasons is critical to the success of any hospitality technology company that wants to get even one venue onto their platform. Very few restaurants are rolling in cash, it is a challenging business. Today’s startups have to think outside the box about involving other industry players in their revenue model. On a similar note, growth tactics used by the next successful hospitality tech companies are going to be far from traditional.

To summarize, the next unicorn in the hospitality tech industry will likely have an almost non-existent learning curve, properly target and please their early adopters, and care more about their clients than themselves. Who is it going to be?

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Kyra Durko

Written by

@TwoSigmaVC

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