4 min read

Cloud Computing: Explained for the Hotel Industry


Jordan Hollander in Operations

Last updated November 11, 2022

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Have you ever wondered what exactly it means when something is “in the cloud?” No, we’re not talking about the weather! Cloud computing is indeed a confusing topic, especially for hoteliers who might not understand how it’s relevant to our industry. But if you want a more efficient, streamlined back office and happier guests, then “the cloud” can help you meet your goals. Furthermore, if you don’t like spending a big chunk of your budget on software, you’ll be happy to know that cloud-based applications are usually a lot cheaper than traditional systems. In this article, we’ll explain exactly what “the cloud” is and the advantages of cloud computing, and we’ll show you how cloud-based technology, such as Cloudbeds, can help hotels deliver great guest experiences.

What is Cloud Computing?

We hear a lot about “the cloud,” but what is it? Where is it? Sorry to rain on your parade, but “the cloud” doesn’t have an address. It’s really just a metaphor for the internet. In short, cloud computing is when you use programs, store files, or access data via the internet rather than on your hard drive. If you’ve ever edited a Google Doc or uploaded files to Dropbox, then you’ve leveraged cloud computing. Writing in a Word document or storing photos in the “Pictures” folder on your computer’s desktop are not examples of cloud computing because they use only the local storage on your device.  

One of the biggest misconceptions about cloud computing is that files and applications don’t live on physical storage servers.  When an application is “cloud based” it means that it lives on third party servers. For example, a cloud based hotel software company like Cloudbeds might choose to rent space with a company like Rackspace to host their application (and yours) or alternatively they might use a service like AWS.  AWS tends to be more scalable for fast growing applications but as end users your guests won’t notice the difference so it’s really a matter of preference.

Some applications use a mix of cloud computing and local storage. If you use Microsoft Office, you might create a PowerPoint on your laptop (local storage), but when you save the file, it gets uploaded to your Microsoft OneDrive, which is housed in the cloud.

The Evolution of Cloud Computing

How did we arrive at cloud computing as we know it? “The cloud” wasn’t created overnight; instead, decades of technological evolution led to cloud computing.

  • Let’s jump back to 50 years ago, when IBM was one of the only tech companies providing a comprehensive suite of services: not only hardware and software, but also training and maintenance.

  • Since IBM owned the entire bundle of tech services, they charged their business model to subscriptions that included maintenance, but in 1968 they separated their hardware, software, and services to avoid an antitrust lawsuit. Microsoft received the contract to build IBM’s operating systems.

  • In 1980 Congress added “computer program” to the definition list of U.S. copyright law, which led to the beginning of software licensing. This ruling was significant because companies like Microsoft could now sell each individual copy of its software (like Windows) without needing to also sell hardware, which was a requirement previously.

  • Shortly after, the next big wave of tech companies, like Oracle, Sun Microsystems, Hewlett-Packard, and SAP, came to prominence. These companies offered a mix of hardware and ongoing services, which would charge high fees upfront for the cost of the hardware and subscription-style payments for ongoing support.

  • Because software is a zero marginal cost product, all of the costs are upfront and each incremental user only generates revenue - no cost. Microsoft was able to reduce the upfront cost of software by offering its products on a subscription model, which made software accessible to millions of companies that couldn’t afford it before.

  • Although Microsoft’s software became extremely popular, the software still required installation, and the installations were often buggy, expensive, and time-consuming. In 1999 Salesforce sought to eliminate the troublesome installation process and became the first true cloud computing player, with software that didn’t require installation and ran on Salesforce’s servers.

  • While Salesforce was growing among corporate clients, a company called Atlassian was unintentionally the last big innovator in cloud computing. Mike Cannon-Brookes and Scott Farquhar started the company with their project management software called Jira.  The two founders weren’t trying to hit it big and wanted to keep the company lean, so they made their software available online for trial so users could start using it without ever talking to a sales rep. This strategy allowed Atlassian to grow quickly, and they eventually added a subscription model in what later became known as the “Freemium” model. Though they weren’t seeking wealth, Atlassian is worth now $32B.

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Benefits of Cloud Computing

While the history of cloud computing is fascinating, you don’t need to have a deep understanding of it to realize its benefits. Cloud computing provides several advantages over traditional computing:

  • Avoids costly and painful installations

  • Requires minimal upfront investment

  • Allows software companies to focus resources on R&D/innovation

  • Eliminates negative depreciation (in fact, the software gets better with age, since updates can be made at any time) 

  • Offers the ability to cancel at any time (plus has lower switching costs for buyers)

  • Pushes software companies to consistently earn customer loyalty with innovation and great service

Cloud Computing in the Hotel Industry

You can probably think of a few ways that cloud computing is already impacting your day to day personal life, but how does it fit into the hotel industry? No discussion of cloud computing in the hotel industry would be complete without mentioning Cloudbeds, the first property management system startup in years to serve 1 million beds with its software.

Since Cloudbeds is cloud-based, it has been able to grow extremely quickly without needing clunky on-premise installations. Hotels that use Cloudbeds log into it directly in a web browser like Internet Explorer or Chrome. This is a big advantage for hotels because you can access the application on any device. Gone are the days when a system was only installed on certain computers; with a cloud-based system like Cloudbeds, you can sign on securely via any web browser - even if you’re off-site.

Another reason for Cloudbeds’ rapid growth is that their software can easily integrate with other tools. Cloudbeds has an extensive marketplace of integration partners, including Whistle, TrustYou, and Oaky, that it can connect to via an API. Because everything is located in the cloud, a hotel doesn’t need to download any programs or plug-ins to add a new integration. These add-ons can offer upgrades and analyze reviews, among other things, so you can improve guest service and even earn incremental revenue.

When a system is cloud-based, it can innovate faster because changes can take effect immediately. There’s no need for users to download updates. Over the years, Cloudbeds has expanded its property management system to include their PIE revenue management tool, a channel manager, a booking engine, and more. Hotels that use Cloudbeds receive the updates automatically so they always have the most cutting-edge version. At the same time, users can submit feedback to Cloudbeds about any bugs or glitches, which the Cloudbeds team can resolve quickly.

So what does cloud computing mean for a hotelier? Implementing cloud-based software can make your operations more efficient, save time for your employees, and create more positive guest experiences. If you’re still using traditional software that’s installed on hotel computers, it’s time to consider switching to modern, cloud-based software that’s constantly innovating. In addition to enjoying all the benefits of a cloud-based system, you may even save some money in your IT budget! And since cloud-based software doesn’t require a lengthy installation process, your hotel can implement a new system seamlessly. While you can’t control the weather, you can use the cloud to help you meet your hotel goals.