H2O Hospitality secures $30M Series C to expedite hotel digital

The pandemic has sparked greater demand for contactless and employee-less operations in the hospitality sector, and now unmanned hotel management company H2O Hospitality has closed a $30 million round on the back of that boost. The South Korea and Japan-based startup automates front and backend processes including accommodation reservation, room management and front desk duties, and it will use the funds to continue expanding its business.

The Series C round (equivalent to approximately Won 34 billion) is led by Kakao Investment and Korea Development Bank (KDB), Gorilla Private Equity, Intervest and NICE Investments. The Kejora-Interwest Growth Fund, along with the Joint Fund for Southeast Asia, also joined the round, a sign that H2O Hospitality will focus exclusively on the Southeast Asian market. H2O Hospitality has raised $7 million in a Series B round in February 2020 from Samsung Ventures, Stonebridge Ventures, IMM Investments and Shinhan Capital.

According to H2O Hospitality co-founder and co-founder of H2O Hospitality, H2O Hospitality will further expand its business by adding a variety of accommodations in South Korea and Japan in 2021 and 2022, and Singapore and Indonesia in 2022 in line with its Southeast Asia penetration strategy planning to enter. CEO John Lee.

“H2O Hospitality is currently in talks with several global hotel chain companies to partner with their digital transformation and operations outside Korea and Japan,” Lee told .

H2O will invest in R&D to advance its customer channel solutions and contactless check-in systems based on the customer needs of each country in Asia, Lee added.

“We need optimal system development and optimization for each accommodation and situation to lead a successful hotel digital transformation even after COVID-19,” Lee said in an email interview.

H2O Hospitality was founded in South Korea in 2015 by CEO John Lee, and has been on an acquisition-expansion spree. It entered Japan in 2017, for example, by acquiring several Japanese hospitality management companies. In 2021, H2O acquired two South Korean companies such as contactless hotel solutions company, ImGATE, and a local manufacturer startup, Replace, to increase its technology and ESG capability.

These days, the company operates approximately 7,500 accommodations, including hotels, ryokans and guest houses in Tokyo, Osaka, Seoul, Busan and Bangkok.

H2O Hospitality’s Information and Communication Technology (ICT) based hotel management system, which enables hotel management to be automated and digitized, includes Channel Management System (CMS), Asset Management System (PMS), Room Management System (RMS), and facility management. System (FMS).

Its integrated hotel management system can reduce fixed operating costs of hotel management by up to 50%, while increasing revenue by up to 20%, according to its statement.

“COVID-19 hit the hospitality industry the most and most hotels wanted to reduce their fixed cost levels, but this was impossible with their current operating flows,” Lee continued, “they had to undergo a digital transformation” .

When asked how the pandemic affected H2O as COVID-19 still freezes most of the tourism industry, Lee said H2O revenues have grown by up to 30% before the pandemic, but that percentage has been attributed to the COVID-19 pandemic. After -19 has dropped to 5-15%. 19. Revenue drivers these days are based around tools built to improve the efficiency of their customers. This includes its automated dynamic pricing (ADR) tool and diverse sales channels such as online and offline travel agencies domestically and overseas, he added.

Lee also pointed out that H2O is encompassing a lot of assets and this has also contributed to H2O’s revenue growth over the past 18 months. They claim that H2O was the only company in Asia, and many property owners have started onboarding from August 2020, he explained.

“Every hotel we took during the pandemic changed its profit and loss statements and began recovering its financial losses,” Lee said.

According to Lee, there are currently about 16.4 million hotel rooms in the world that generate $570 billion a year. He added that H2O believes it can digitize all accommodation in the world as the company’s main goal is not to build a hotel brand but to allow hoteliers to operate their properties with better efficiency.

Lee explained that the current hotel operating process looks a lot like “2G phones”, which was in a phase before turning to smartphones, and that H2O is shifting overall hotel operations to “smartphones”.

“It’s a very natural transition for the (hospitality) industry because it was also natural for cellphone users to transition from 2G phones to smartphones,” Lee said.

Unfortunately, the cross-border tourism market for both Korea and Japan is still on hold, although each domestic market is still fueling market demand, Lee noted.

“We are confident that the inbound tourism market will recover within a year as vaccination increases for both countries (Korea and Japan),” Lee said.

Joon-seok Kang, managing director of Kejora-Intervest Growth Fund, told : “We knew this new wave of hotel digital transformation was coming even before the pandemic; However, COVID-19 has certainly accelerated the transition period, and we are confident that H2O will thrive in the changing hotel market. “

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