Main Highlights
- H2O Hospitality, a hotel management firm, has completed a $30 million round.
- The South Korean and Japanese firm automates front and backend procedures such as lodging bookings, room management, and front desk tasks.
- The company plans to expand its business by adding various types of accommodations in South Korea and Japan in 2021 and 2022.
- H2O will invest in R&D to develop its customer channel solutions and contactless check-in systems based on the demands of each Asian country’s customers.
The epidemic has increased demand for contactless and staff-free operations in the hospitality industry, and H2O Hospitality, a hotel management firm, has completed a $30 million round as a result. The South Korean and Japanese firm automates front and backend procedures such as lodging bookings, room management, and front desk tasks, and it plans to use the money to expand its operations.
Kakao Investment and Korea Development Bank (KDB) led the Series C financing (equal to around 34 billion won), with Gorilla Private Equity, Intervest, and NICE Investment also participating. With Southeast Asia’s joint fund, Kejora-Intervest Growth Fund, also participating in the round, it is clear that H2O Hospitality will be focused only on the Southeast Asian market. In February 2020, H2O Hospitality secured a $7 million Series B investment from Samsung Ventures, Stonebridge Ventures, IMM Investment, and Shinhan Capital.
How will H2O Hospitality use the funds?
According to H2O Hospitality co-founder and CEO John Lee, the company plans to expand its business by adding various types of accommodations in South Korea and Japan in 2021 and 2022 and to enter Singapore and Indonesia in the fourth quarter of 2022 as part of its Southeast Asia penetration strategy.
“H2O Hospitality is presently in discussions with many global hotel chain businesses to collaborate on their digital transformation and operations outside of Korea and Japan,” Lee added. H2O will invest in R&D to develop its customer channel solutions and contactless check-in systems based on the demands of each Asian country’s customers.
By automating all operational flows, H2O maintains lodging facilities without on-site human personnel. H2O Hospitality is Japan’s and Korea’s largest vacation rental management firm. H2O maintains lodging properties without on-site human personnel by automating all operational processes via the property management system (“PMS”). H2O created a calendar that connects and organizes calendars for visitors, rooms, and housekeepers. This provides for a considerable reduction in the fixed costs of operational expenses, improving the facility’s yield.
H2O Hospitality was formed in 2015 in South Korea by CEO John Lee, and it has since gone on an acquisition-expansion frenzy. It made its first foray into Japan in 2017, for example, by acquiring numerous Japanese hospitality management firms. In 2021, H2O purchased two South Korean firms, ImGATE, a contactless hotel solution provider, and Replace, a local creative startup, to strengthen its technological and ESG competency.
Currently, the firm manages around 7,500 lodgings in Tokyo, Osaka, Seoul, Busan, and Bangkok, including hotels, ryokans, and guest homes. The Channel Management System (CMS), Property Management System (PMS), Room Management System (RMS), and Facility Management System (FMS) are all part of H2O Hospitality’s Information and Communications Technology (ICT)-based hotel management system, which enables hotel management to automate and digitize (FMS).
According to the company’s statement, its integrated hotel management system can cut hotel management’s fixed operating expenses by half while increasing income by up to 20%. “COVID had the greatest impact on the hospitality sector, and most hotels sought to reduce their fixed cost level, but it was difficult with their present operating flow,” Lee said, “so they had to go through digital transformation.”
As COVID-19 continues to paralyze the tourism sector, H2O’s income grew by up to 30 percent prior to the pandemic but has now plummeted to 5-15 percent post-COVID-19. These days, revenue drivers are focused on solutions designed to increase the efficiency of their consumers. It’s automatic dynamic pricing (ADR) mechanism as well as various sales channels such as online and physical travel agents in the United States and abroad are the reasons for the growth.
H2O has been onboarding a large number of properties, which has contributed to H2O’s revenue growth over the previous 18 months. H2O was the only firm in Asia, and numerous property owners had begun to sign up since August 2020. “During the epidemic, every single hotel that we onboarded turned around their profit and loss accounts and began to recover their financial loss,” Lee added.
H2O’s Objective
According to Lee, there are presently around 16.4 million hotel rooms in the globe, which produce $570 billion each year. H2O thinks it can digitize all lodging accommodations around the globe since the company’s main objective is not to establish a hotel brand but to enable hotel owners to run their facilities more efficiently.
The present hotel operation method resembles that of “2G phones” before the transition to smartphones, and H2O is transforming the whole hotel operation into a “smartphone.” This is a logical shift for the (hospitality) business, much as switching from a 2G phone to a smartphone was natural for cellphone consumers.
Unfortunately, the cross-border inbound tourist industry for both Korea and Japan remains closed, despite the fact that each local market is still feeding demand into the market. “We anticipate the inbound tourist sector will rebound within a year as vaccination rates rise in both Korea and Japan,” Lee added.
Jun-seok Kang, Managing Director of Kejora-Intervest Growth Fund, stated that they anticipated this new wave of hotel digital transformation trend even before the pandemic; however, COVID-19 definitely accelerated the transition period, and they believe H2O will thrive in the transforming hotel market.
