This pandemic has increased demand for staff-less and contactless operations in the hospitality industry. H2O Hospitality, an unmanned hotel management company has now closed a $30million round. It automates both front and backend processes, including room management, accommodation reservation, and front desk duties. The startup, which is based in South Korea and Japan, will use the funds to expand its business.
Kakao Investment, Korea Development Bank (KDB), Gorilla Private Equity and Intervest led the Series C round. NICE Investment also participated. The round was also attended by Southeast Asia's joint fund Kejora-Intervest Growth Fund. This is a sign of H2O Hospitality's focus on the Southeast Asian Market. H2O Hospitality raised $7 million Series A round from Samsung Ventures and Stonebridge Ventures in February 2020. Shinhan Capital was also involved.
H2O Hospitality plans to expand its business by offering different types of accommodation in South Korea, Japan and Indonesia in 2021 and 2022. H2O Hospitality CEO John Lee said that the company also plans to enter Singapore in 4Q 2022 to support its Southeast Asia penetration strategy.
Lee said that H2O Hospitality is currently in talks with several international hotel chains companies to help them with digital transformations and operations outside of Korea and Japan.
Lee said that H2O will invest in R&D in order to improve its customer channel solutions, contactless check in systems and customer channel solutions based on the customer needs of each country within Asia.
Lee stated in an email interview that we need to develop and customize the system for each accommodation and circumstance to achieve successful hotel digital transformation, even after COVID-19.
H2O Hospitality was founded in South Korea 2015 by CEO John Lee, and it has been on something of an acquisition-expansion spree. H2O Hospitality entered Japan in 2017 by, for example, acquiring Japanese hospitality management businesses. H2O purchased two South Korean companies, including ImGATE (a contactless hotel solution company) and Replace (a local creator startup), in 2021 to improve its technology and ESG expertise.
The company currently operates around 7,500 accommodation units, including guest houses, ryokans, hotels, and guesthouses, in Tokyo Osaka, Seoul and Busan.
The H2O Hospitality's Information and Communications Technology-based hotel management system enables hotel management automation and digitization. It includes the Channel Management System, Property Management System, Room Management System, Room Management System, and Facility Management System.
According to the company's statement, its integrated hotel management system can lower hotel management fixed operating costs by half and increase revenue by up to 20%.
COVID-19 was a major blow to the hospitality industry. Many hotels wanted to lower their fixed costs, but this was not possible with their current operations, Lee said. They needed to undergo digital transformation.
Lee answered a question about how the pandemic had affected H2O, as COVID-19 is still freezing most of the tourism sector. He said that H2O's revenue was up by 30% prior to the pandemic but that it has dropped to 5--15% after COVID-19. These days, revenue drivers are built around tools it created to increase the efficiency of its customers. He cited its automated dynamic pricing tool (ADR), as well as a variety of sales channels such online and offline travel agencies, both domestic and international.
Lee also mentioned that H2O has been boarding a lot more properties, which has contributed to H2O's revenue growth over the past 18 months. He claimed that H2O was Asia's only company and that many property owners have begun to join the program since August 2020.
Lee stated that every single hotel we boarded during the pandemic saw their profits and losses reversed and began to recover financial losses.
According to Lee, there are approximately 16.4 million hotels worldwide that generate $570 billion annually. H2O believes it can digitize all lodging accommodations worldwide. The company's primary goal isn't to build a brand for hotels but rather allow hotel owners to run their properties more efficiently, he stated.
Lee said that the hotel's current operation is very similar to that of 2G phones. This was before smartphones came along, and H2O has made the hotel operation a smartphone.
Lee stated that this is a natural transition for (hospitality) industries as it was for cellphone users to move from 2G to a smartphone.
Lee stated that the Japanese and Korean cross-border inbound tourist markets are still blocked, even though both countries have strong demand.
Lee stated that the inbound tourism market (Korea, Japan) will rebound within a year if both countries have more vaccinations.
Jun-seok Kang, Kejora-Intervest Growth Fund's Managing Director, told TechCrunch that the new wave in hotel digital transformation was already coming before the pandemic. However, COVID-19 certainly expedited the transition period and we believe H2O can thrive in the changing hotel market.
