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Each episode of GAIN Momentum focuses on timeless lessons to help grow and scale a business in hospitality, travel, and technology. Whether you’re a veteran industry leader looking for some inspiration to guide the next phase of growth or an aspiring executive looking to fast-track the learning process, this podcast is here with key lessons centered around four questions we ask each guest.
GAIN Momentum episode #32 - Building Tech Architecture from the Ground Up | with Michael Levie
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Adam Mogelonsky: Welcome to the Gain Momentum podcast, focusing on timeless lessons from senior leaders in hospitality, food service, travel and technology. I am joined today by my co host, Michael Goldrich. Michael, how are you?
Michael Goldrich: I'm doing well. How are you doing today?
Adam Mogelonsky: Fantastic. And our special guest today is Michael Levy. He is the co founder of Citizen M Hotels.
Michael, how are you?
Michael Levie: Very well, thank you for having me.
Adam Mogelonsky: To keep things, not confusing between the two Michaels, I will refer to them as Mr. And by their last name, which is also denoting of the respect that people get in hospitality. I see that there, but it is, uh, I do believe in our industry and, the formal titles are something to be honored.
particularly in this case when I'm [00:01:00] joined by two excellent experts in the field. So we frame this podcast around four key questions, and we're going to dive right in to the first one. So, Mr. Levy, what single piece of advice would you give to vendor companies entering hospitality?
Michael Levie: be aware that we are the most fragmented industry that you can ever find. Number two, know that the average hotelier is not that tech savvy. And number three, we're an industry whereby the vendors have done a great job because we as hoteliers cannot articulate well enough what it is that we need. And as such, it has been a vendor led industry. And, as long as it's OPEX and we think, it might work, we sort of, uh, sign up for it and, uh, lack the ability to understand how it all fits together. And, uh, so I would say [00:02:00] to vendors getting in, most of our tech stacks in, the industry, are, uh, troubled and are complicated.
Adam Mogelonsky: And for context, you're coming at this from a European hospitality background, which is even more fragmented than other parts of the world. So from your experience as co founder and building Citizen M from the ground up, how did you navigate that process of So, choosing vendors and also aligning them with all stakeholders, including the operations teams that had to make those pieces of technology actually sing for the product.
Michael Levie: Yeah, I think, Adam, the key question. We knew, uh, 18, 19 years ago when we founded CitizenM that we wanted a contemporary tech stack, but what is contemporary and how do you organize it? And what your wishes are and what is out there, available were two complete different things. So we sort of [00:03:00] had figured if we have all hotel systems sort of in one. By one vendor, or being able to be lumped together, and then, if we have all our commercial, if you wish, in one, and all on prem, technology in one, then we will have a better, uh, way of, organizing it, and we found what we thought were the first Uh, you know, cloud based, uh, BMS systems that could sit at the core of that tech stack. where basically they were not cloud based, they were just using the cloud to connect. so, you know, it took years for us to get to the stage where we are right now where we truly have a cloud based system. And in the meantime, we have been able to introduce middleware, that sits in the cloud and on prem, whereby we get the speed that we need, we get the connectivity that we need. But it took a long journey, [00:04:00] for us to get there, and we had to help create it and craft it in order to get there.
Michael Goldrich: All right. So I got a follow up question on that one, because you say you shared that it's a vendor led industry, but it sounds to me when you were creating CitizenM, you were doing the leading and trying to identify what you want. So how can, uh, what do you, what do you think was special about your situation that helped propel CitizenM to be so successful?
And what could other hoteliers do to sort of take the control back from the vendors and really drive?
Michael Levie: very good question, Michael, because I think that on the one hand, what started to happen is that the larger chains, you know, chose to do a lot of, in house work, in order to get that control. We were a startup, so we had no choice to be able to do it in site, so we needed to be crafty in finding, you know, right tech partners that had the appetite to create what we needed and, uh, you know, do a joint effort. but I think [00:05:00] that the point of departure was that we knew what we wanted. And we're very articulate about, uh, you know, how we envisioned, that the tech stack should work together, how it should be deployed, and that we needed help on, uh, let's say, the tech side, but not necessarily, the architecture of how we wanted it to work. And, um, that led us to, having, partnerships whereby, uh, you know, SaaS products were built that ultimately, uh, serve now, uh, a lot of other, companies and chains in the industry.
Adam Mogelonsky: So looking at this one to one, you're talking about finding vendors and growing with them. And of course, when we look at technology, the big thing is cost. So, when you were Looking to grow with a piece of technology. Did you factor that into the price you were able to negotiate for potentially reducing the SAS fees that were charged to your hotels?
Michael Levie: in all honesty, we [00:06:00] didn't, Adam, because I think that our role was to help create, you know, that particular piece of software that we needed for our organization, and we're willing to be the first SaaS customer, and as a developing partner, you already get a lot of, let's say, your needs, you know, within a SaaS product, which cannot be custom, so you're in a little bit of a lucky space. And to be real honest, where needed, we were also ready to support the tech companies that took a risk on us before they started generating, you know, beyond us income from their SaaS product.
So it was a little bit of a balance and, uh, more pioneering together than, than anything else. keeping it very clear and clean, obviously, that, uh, you don't intertwine within the companies, but, that there's the appropriate support.
Adam Mogelonsky: I think that reinforces something that's been a common theme of our podcast here, which is the importance of [00:07:00] customer service. And really, for a lot of times, you could end up being a small fish in a very big pond or a big fish in a small pond. And the big fish in the small pond seems to be what you're suggesting from a customer service standpoint in terms of having your needs met whenever the technology breaks, or you need support on using a specific feature.
Is that correct?
Michael Levie: Yeah, I think so, with one caveat maybe is that, you know, at times there are issues with the systems, which is customer support that you need. Most of the time, it is feature related, whereby our industry demands certain features because it specializes to the chain or to the hotel, and I don't believe that. Uh, I believe anyone can use a SaaS product and adapt their business processes easily in order to handle a customer. [00:08:00] So it's not always that we have to copy off what we have done in the past, because That's the most comfortable way for us to work. So, if it is a breakdown where we really need service components, then the answer is yes, it's important to have weight in the organization or a good relationship with your suppliers.
But when it comes to bespoke work that everybody feels is needed, I don't believe that. We as hoteliers can very easily work with, you know, 95 percent of the SaaS products out there if we're just a little bit smarter and savvier in adjusting.
Adam Mogelonsky: So it's very interesting you're talking about things breaking down and your words on customer service because that does dovetail into our second question, which is, Michael, what are some of the challenges or setbacks you've experienced when rolling out a new business expansion or partnership?
Michael Levie: Yeah, I, think that, the volatility of, tech companies, in our [00:09:00] space and maybe, you know, in general. So, uh, you know, as startups, they're volatile in order, you know, for their ability to make it and break through and get to, uh, some kind of stability. Once they have found that stability and they have a good growth rate. Uh, they usually get swallowed up by a larger, you know, tech company that incorporates them. And you as a customer, you know, notice those changes quite a bit. We've had, uh, you know, twice that week, endeavored into a PMS where those PMS's were acquired. And then all of a sudden you're in a complete new environment. That, um, yeah, could change quite a bit, not only service, but also your, freedom, your ability, your flexibility that you're required. And, I would say that is the most difficult. So where do you find, control over a vendor that what it is that you buy stays alive, continues as [00:10:00] normal life cycle? And whereby the business rules don't change on you by it being acquired. And that, that is very difficult.
Michael Goldrich: Yeah, because I would think with a brand like Sibson M, you know, you're very unique experience that the guests had with your brand. And you need the technology to be able to deliver on that because it was very innovative. And if the vendors are starting to merge and some of the features you expected to have, all of a sudden they can't deliver on your brand promise. Then that causes a lot of friction and challenges. So did you encounter any of those type of issues?
Michael Levie: yeah, I think, you know, just to give you an example without, you know, going into the name vendors, uh, we, uh, you know, ended up with a PMS that's set in a tech stack where we did not want it to be the system of record, nor to merge and purge, you know, uh, guest profiles. And the vendor was not, when we started out, the vendor was very willing to work with us.
When it [00:11:00] was acquired, it became a non negotiable, uh, we could not switch off that feature in the PMS. So in the end, you need to go and work around, which is a big pain. But, for us it was just absolutely ridiculous that, we as a gap, you know, as, as a customer had bought the system with that flexibility and post, uh, you know, a takeover, that flexibility was taken away, which did not serve our tech stack. And yes, we're maybe a different setup than most, hotel organizations, but it was not an outrageous, ask, uh, at all.
Michael Goldrich: All right. So then for that type of situation, now going back into it and before you would pick that PMS again, knowing what happened, how would you mitigate and make sure that that didn't happen? I mean, would you still go with the same PMS and put some hooks or would you go with a larger one that wouldn't be swallowed that maybe doesn't deliver exactly what you want?
Michael Levie: you [00:12:00] always get into, uh, you know, sort of catch 22, right? Because, if you're with the big, uh, stable vendors, then maybe you do not get the latest technology. If you go for the latest technology, you end up with startups or smaller organization where you take a risk. And I don't think that there is a contract that should protect you.
It is the relationship that should protect you. And that is something that frustrates me quite a bit is that, if you buy a SaaS product, and if that fits into a, tech architecture. you should have a vendor relation that allows you to, solve issues if there are any. And, in most situations, either they grab back to contracting or, or rights that they have. and when it becomes too large, uh, it becomes pretty rigid and, uh, that, that is very uncomfortable. But if it's too small. You run, again, the risk of, either survival or, [00:13:00] you know, other influences. And to be real honest, uh, we've also experienced that, had so many demands in developing that, you pull out of joint, uh, sort of a SaaS product build, right? So there's so much focus on the first customer. That the next customers, you know, have maybe a different need. So it's very difficult. It's not an easy process. But I think that as the past two years or so, there are now a great, uh, systems available in the industry at various levels. That allow you to sort of apply a middleware layer into the structure, whether it is an enterprise or maybe a little bit lower at the platform that you have to use, you know, basically the vendors and the connects that that particular platform has. But with the middleware, you get the opportunity to sort of. [00:14:00] neutralize, uh, data neutralize systems in one same, architecture. And with that being available, I think the choice has become more towards the hotelier that if you Decide on a tech architecture and you have a need to strengthen that architecture to provide uh, the digital support that you need today in both data and and cleaner and richer guest profiles. The technology is there right now. Uh, what is lacking is our guts to dive into it and actually make that move because we need to untangle that. Years and I'm not, years, years and years of workarounds, and we go all of a sudden from, you know, basically restrictive thinking to a world of opportunities where we can again, create what we need in order to serve our business.
So we're in a fortunate situation, [00:15:00] but I think that that, chasm is not being taken by a lot of organizations and companies. Simply because it's safer not to do it. It is a huge task to unwind and take apart the spaghetti we have created. And, uh, the only way that we have seen it done effectively is actually if you make it into a project and have a project management come from outside and even staff that, project from outside so that your own tech teams in the organization can stay stable or do not have a major peak. And, you know, once you have specialists on, you know, unpick that, basically work arounds from years and, sort of lift you to a new architecture, you're in a better position as an organization.
Adam Mogelonsky: So when we're talking about new architecture and looking forward to the, I guess, blue ocean strategy of what is available to hoteliers and, and hotel [00:16:00] companies now, Mr. Levy, what do you see as the biggest opportunities for growth in hospitality for 2024 and beyond?
Michael Levie: Yeah. Like, like I said, Adam, it is, the availability of systems right now at various level of cost. So, obviously, you know, uh, like with everything there is, levels of, quality or levels of flexibility that you buy yourself, but I think that at all levels it's available. So if you're just a small chain with a few hotels, even a single larger, independent, unit that needs to tie their, their architecture together. if you're in the mid chains, you know, that maybe sit anywhere between 15 to 50 or 75 hotels, uh, there are good middleware solutions. And even for the extreme large ones, there are now enterprise systems. [00:17:00] And, I believe that if you really look at cost for cost and compare. most probably at first, it looks like the new solutions are an additional cost to your tech stack. But I think when you look closer, you see you can drop quite a few services that you had to take, you know, separate. And there's a little bit of a, cost that comes back to you. but where I believe that most of the. Uh, reward sets in that you can seriously change your business model. So if you all of a sudden in all your hotels can have a good digital experience and, and go touchless. Well, that allows you to change your whole front desk reception and entrance of the hotel thinking. it might, uh, you know, allow you to think differently in providing your food and beverage services or any of the other services provided in the hotel. Your [00:18:00] staffing, it might, uh, really allow you to gain, either inefficiencies in labor. efficiency and expenses and maybe, uh, the most importantly respond better to the new guest demand. you know, let's, face it. Our guests when they're not staying at hotels are, spoiled, right? Because in banking and aviation and retail, I mean, you know, we take our phone and, and we're off to the races, right?
Everything is easy. In a hospitality land, everything is complicated and, we talked about fragmentation that obviously makes it different, uh, difficult, but I think also, our lack of adaptation and, you know, improvement in the tech stack.
Adam Mogelonsky: So, to chime in here, and I'm, I'm big on looking at things in a long historical context. And right now you're talking about creating a touchless experience and how that is eventually going to free up services to focus on other things and reduce. [00:19:00] And I want to, give our listeners some context here. I want to focus on the work that Citizen M has done to be a early adopter of the in room tablet solution in all rooms.
To give some context to sort of that. That evolution from purely using in room phones and PBX systems through to having this, this new feature, which was an additional cost at the time, but also an additional reason to choose a Citizen M hotel because you had this great new amenity in the room. So I'm wondering if you could just unpack for us and tell us about That vision that you had for putting in room tablets, how to make that happen in terms of the technology and how to justify the upfront costs when the outcome was less tangible?
Mm-Hmm.
Michael Levie: Yeah, very good question, and I think you can, you know, approach it from many different angles. So let me try to do a few [00:20:00] so it starts to make sense. So, first of all, Citizen M is a mid market product, but we call it affordable luxury because everything we do, what normally in a mid market hotel also has a mid market finish on everything, We, you know, could be compared to, uh, you know, the most, lush additions or Ws or, or anything.
We just play in a, in a lower segment, which then translate in a smaller room and whereby our, uh, let's say lobbies become living rooms and whereby we integrate services differently. And for that, we wanted to make sure that, either we compensated for room size with features and, uh, make sure that, aesthetically pleasing, but also intuitively everything would be there. And as such, the idea was born that everybody is using their smartphone so much. And the smartphone was actually just You know, taking off when we [00:21:00] started CitizenM. And, as such, we said, listen, let's start with a tablet and let's create room controls. And what it allowed us to do is, create in every room, A room controller and that room controller converges over a network that was affordable for us. And we could tie into that room controller, a hardwired door lock. So you know, it's in the wall instead of on the door, uh, we were able to do, you know, window treatments, you know, electric. We could do the temperature setting, lighting settings if it was with the RBGs and, basically were able to, put the controls on an iPad and make it easy for a guest intuitive to, to organize it. And by having a small, uh, room, you could totally mass customize it to your own needs. And, our systems and the data [00:22:00] between those systems communicate so well that if you leave a room with certain settings, once you check into any other citizen around the world, those settings are simply picked out of your guest profile. and put back and even the system will look for a room that was the closest to the temperature that you left your room on which is great from an economic and from an environmental point of view but it's so easy to accomplish when you have all that information and so I think that it was firstly thought of as how can we give the guests something completely cool that they can mass customize and and get some fun in the room. You know, so it would really take on the atmosphere and, settings. We even have on the, iPad, settings of mood whereby temperature, your window treatment, your light setting and the color setting, music all sort of ties in and provides [00:23:00] you just, you know, what mood you're in, whether it is, you know, getting up in the morning, whether it is. A little bit of work or, or romantic or whatever it may be. So that we introduced from a tech point of view, it gave us a lot of information, about the room itself. So, there is not a guest that has to call on anything in the room, not working because everything is wired through the room controller. So we see what our lights are working. We see what our systems are up and running, and we're one step ahead of the guest and in troubleshooting. You're also a step ahead. So we all of a sudden were able to centrally control out of one location in the world, all our room inventory. And like we understand now with Tesla, doing upgrades, you know, we basically deploy it and it is in all rooms.
So we do not have to fly throughout the world and sort of, you know, upgrade everything. it's done, uh, in an [00:24:00] efficient manner, and we were able to, uh, centralize our knowledge, if you wish, and centralize, the nerve of the company organizing that all. So it became very efficient, funny enough also from a cost point of view.
Adam Mogelonsky: Yeah, because you're raising it as, I thought it was just a value add, but now you're talking about this additional layer of almost predictive maintenance coming in and saving money along the way. And it's, it's almost, I, was that a part of your initial vision? Did you, did you have that idea when you first set out to have the in room
Michael Levie: Well, to be real honest, I think that what we set out as partners to do, you know, that being a hundred percent with the first hotels coming online, you never reach a hundred percent of everything that you tried to do, but in the process you learn so much more so you do other things. And let's be honest. we can have some knowledge about something, but you need to have depth of knowledge. [00:25:00] And when we had grown to the point where I had MacGyvered too much together and, I went to, uh, Nick Price in the industry and I said, Nick, can you audit me? And once he had audited me, I said, congratulations, now go and clean it up.
So he and I worked very closely together to get to next stages and that helped a lot. I believe that, to have a balance of four organizations of CIO knowledge and CTO knowledge. Uh, that's really what allowed us to do well, because you need both, and they need to work hand in glove, and if you cannot afford to have both, then organize it with an outsourced solution, but I believe that a lot of the, tech decisions that today need to be made by hoteliers. is not only the CIO, you know, you have the CMO or, brand or marketing need to be involved, commercial needs to be involved, [00:26:00] you need to have finance involved, you need operations involved. So it's almost a C suite, decision. And I think that too often vendors go out and still sell to a CIO or to a CMO or to Particular, you know, C suite, executive, where basically, today the tech stacks are such a profound structure that our organizations need to rely on, that, everybody needs to be involved. And I am, a big believer that there's only one that can be ultimately in charge, and that's the CIO with a CTO in order to lead our organizations to the right decisions. But it involves all of us, as executives to support that and, and provide our, uh, share of, requirements, needs and, and desires in there for us to be able to, to get to the next stage.
Michael Goldrich: So, I mean, as I listened to what you do with laptops, I mean, [00:27:00] the, um, iPad about 18 years ago, now fast forward to today, today is like voice control. Like a lot of what you talked about that the iPad controlled, you can control the voice. and even now they're talking about bringing in AI to kind of, as Adam was talking about, the kind of the predictive part. So, If you were in the same situation now, how would you, I mean, cause a lot of what you talked about can actually leverage this technology, but again, people can, are concerned about the creepy factor about who's listening and what people are doing with the information. Is that anything that was considered then?
Like, how would you mitigate that today? Right. So
Michael Levie: address the creepy factor that if, in, when we started Citizen M, if we would have listened to everybody what we shouldn't have done, uh, we would have never created the company. So sometimes you got to believe in what you need to do and go out and do it. that's first of all, and don't listen to everybody else. I do believe that, [00:28:00] Once you have made the right steps and you have, flexibility and you have, like I said, possibilities within your, tax tag, uh, when COVID popped up and all of a sudden touchless became, important and everybody started already sort of on their digital journey, we were able to roll out touchless within, you know, two, three months of COVID throughout the entire organization. So, today we operate 37 hotels that, you know, with the click of a switch, I mean, maybe it sounds too easy, but we were able to roll this out in, in literally a few months. And I think that that flexibility is important. novelties? Yeah, the world keeps on changing. So, voice? Should you be there already?
I believe that, the iPad, I believe that. was in all the rooms, but believe it or not, we had wall switches for everything as well. Why? Because not everybody was as comfortable. And I believe you need to have always [00:29:00] two minimum, but maybe three choices that people can pick from. So, I would say that maybe we will do a testing with voice, but, till we're comfortable, we will not add it as a full feature. and when it comes to AI, I'm predictive. I would say, maybe we should first focus a little bit on getting our guest profiles beyond three fields. And we should be able to, you know, get data flowing and, truly take advantage of the detail that APIs can bring along in between systems so that we start to collate the right data. And to be real honest, We were not ready for that either. We ended up hiring a data analyst. We, brought a different breed of people in to help us and get us to where we are right now. And we started, I would [00:30:00] say maybe, uh, 12, 15 years ago with the BI department and our business intelligence second to none. And it sits in every aspect, tentacle of the organization. And to become really, a database decision making organization is quite, you know, unique in our industry. But it has huge benefits.
Adam Mogelonsky: So, getting back to C level people and targeting all their various needs and then talking about voice, whether to go there, stick with iPad, etc. That's a perfect dovetail into our last question to close out with. So, Mr. Levy, what problems would you advise entrepreneurs to focus on solving in order to quickly scale within the hotel industry in 2024?
Michael Levie: Yeah, I would say, don't focus on what you have right now and try to fix that or try to evolve on [00:31:00] that. I would say go out and see what systems are there that if you had a clean slate you would endeavor into.
So, if you had all the choices, you were not stuck in any system, what would you like to do? And, get support of that, because that's a very specialized, uh, knowledge, and, uh, I think that, there are companies that have that knowledge on the inside. But it's more that don't have it on the inside than that do have it on the inside. And once you have figured out what it is that would be your ideal setup, then see how you can get there.
And I believe that today, with the SaaS systems out there, and the cost associated to do it 100 percent right, it's amazing. You can, uh, basically get out of your current legacy tech stack and get into a new world. But what comes with it is that project management that we spoke about earlier. [00:32:00] And when I said, you go from restrictive thinking to a world of possibility. Really, what happens is a mind shift. So everybody that thinks in what cannot be done or the limitations of systems, now you need to get people that are dreamers, visionaries, people that want to try things, people that, you know, look differently into the world. So it is a mind shift also in your team and it requires often not only some tech replacement, but it also requires Some of the driver changes, if you wish.
So it does affect your management and the ability of management to get there. And often it is the current management that can maintain and, you know, sort of keep you afloat. But they're not visionary enough to get you to the next stage. And once you would have it, they would hold you back because they We want still the same processes [00:33:00] or the same business processes facilitated instead of looking at what is new and can be done. So it's a different world.
Michael Goldrich: I've experienced that too, where you have these visionary thinking. However. Uh, there's one usual obstacle that I've encountered in pretty much every organization I've encountered, and that's the attorneys, the general counsels, and their fear of risk and, being very conservative.
How do you, with that kind of dreaming, visionary approach, but then you have the risk adverse, uh, attorneys that are kind of like, no, no, no, how do you kind of deal with that situation?
Michael Levie: Well, we started so small that we didn't have an in house lawyer to really, you know, put a lot of arms away, uh, you know, so that we couldn't get to what we wanted. But, I do believe that, the lawyers, our, our legal teams are there to look at the doom scenarios and go through every scenario and protect us. [00:34:00] And I think that we, should learn to listen to them, but not listen to no, you cannot. But ask them to articulate better what it is that is their concern and see if we can solve that. And in many cases, I believe that what we hear, no, it's not allowed, or no, you cannot do it, whereby people then turn around and walk away and are satisfied with that. And I believe it takes, you know, a little bit more tenacity to go back and say, okay, now, why is it that it is an obstacle or an issue? How can we mitigate it? Can you come with me? and work with me with the tech vendors in order to solve that. And, uh, we have been able to solve pretty much everything. now, that is easy said because we own and operate. So, obviously, if you have HMA and franchises and you get the legal protection system, uh, you know, basically the fragmentation that we spoke about, it's [00:35:00] quite different. It's not my world, so I'm the wrong one to comment on that. But I would almost say is that if we're not stubborn enough to push for, right solutions, and as hoteliers get smarter that we need it. then we will restrict ourselves and are bound by what we hear around us, what cannot be done. And we're pretty good at that because we don't want to take risk. And to become, a leader in an organ or in, in, in an industry, if you want to outperform the industry, well, you don't do that by not taking risk.
You need, you need to go out there and, be a maverick at times.
Adam Mogelonsky: Yeah, and I think that's, uh, that's a good word to end on is maverick and just visionary thoughts, which we could talk a whole hour about as well in terms of just what's required to actually have that mindset shift and to actually sell your vision and put that into numbers, whether they're forecast, pro forma, or actual.
In real, uh, looking back [00:36:00] historical data. So, uh, Mr. Levy, Michael, I can't thank you enough for coming on and sharing your wisdom and, uh, your war stories as well, and founding Citizen M, co founding Citizen M and a lot of the tech architecture work you've done to make that such a unique product.
Michael Levie: Thank you so much for the opportunity and I wish everybody to get to the other side of the chasm and think in possibilities. It's cool out there.