A Grain of Salt and H2O Hospitality Gets You 2.5 Star Bliss


Some days ago H2O Hospitality announced having secured $30 million in Series C funding in order to help hotels evolve digitally. With the coronavirus pandemic upending the industry, H20 Hospitality steps up their game to automate front and bankend hotel processes. Here’s our scoop and a bit of a critique on this well funded hotel tech startup. 

The South Korea-Japan-based startup innovates to automate everything from reservations and room management, to ordinary front desk duties. According to the news from H20, these new funds will be leveraged to power R&D, to expand the company’s market footprint, and to launch newly developed hospitality technologies. 

This round, led by Kakao Investment. The Korea Development Bank (KDB), Gorilla Private Equity, Intervest, and NICE Investment indicate that H20 Hospitality will probably focus primarily on the Southeast Asian Market. In another round last year, the startup took capital from Samsung Ventures, Stonebridge Ventures, IMM Investment and Shinhan Capital in February 2020. H2O Hospitality co-founder and CEO John Lee told TechCrunch

“H2O Hospitality is currently speaking with several global hotel chain companies to partner with their digital transformation and operation outside of Korea and Japan. We need optimal system development and customization for each accommodation and situation to lead successful hotel digital transformation even after COVID-19.”

According to their website, H2O Hospitality represents about 50 hotels, and other accomodations. TechCrunch says they manage 7,500 located mostly in Japan, Thailand, and South Korea. According to their dogma, the company wants to “provide a space guests can feel satisfying hospitality without face-to-face communication.” And here is where the conventional view of hospitality diverges into a sort of strange make believe. Let me explain. 

H2O Hospitality just raked in almost $40 million dollars to create an almost totally automated hotel operations systems, but nowhere on their website is there evidence of their value proposition. There’s a Google map with some pinpoints on it. There’s a bit of texts in non-native English describing how stunningly awesome H2O Hospitality is. But, beyond some links like this one to the Japan site, there’s nothing, NADA, no pertinent information that would help any hotel figure out what it is they do. Oh, there are images of some H2O Stay hair conditioners, shampoos, and a body wash though. $40 million bucks and these guys cannot throw up a pretty and useful website?

Okay, I want to be fair. It seems like what H2O is doing is rebranding cheap, clean hotels across the region. I think. the  H2OStay IKEBUKURO rooms are all about cleanliness, and a sort of clinical vibe I guess the founders figure everybody is looking for now. But the effect for me, reading a story about them on TechCrunch, is a kind of WTF is up with investors these days. H20 Hospitality is a bit like a cloning of Tune Hotels with a Big Brother wannabe vibe? $22 bucks per person, per night? No wonder these hotel owners want automation, they can only afford to pay housekeeping on this revenue. And the TC story says H2O reclaims about 50 percent of fixed revenue costs, while adding about 20 percent to revenue. 

Get this. The Ikebukuro hotel offers a “Semi Western-Style Room” for only around $5 more per person per night! Excuse me, but WTF is a semi-western room? A bedroll with a cowboy hat thrown on top of it? Silly me, I tried to find this hotel in Tokyo using H2O’s listed address, and could not. I guess my map skills are just not there yet, but I do wonder for those less skilled who speak English and are hunting cheap rooms minus humans at the front desk. As for the millions in investment, all I can tell you is that Kakao Investment says they are “Making a better world with people and technology.” 

But it seems to me this startup is about eliminating people from the equation. The power of the tech niche in hospitality also comes through if you consider that TechCruch, PhocusWire, Fortune, and Skift covered this funding news in similar ways. What this means is that there’s a PR standing behind nudging the narrative along. Probably from Kakao Investment, unless I miss my guess. And not one of these media outlets has looked beneath the surface to see what H2O is really about. And lastly, what is a tech writer supposed to think when he runs across another company called H20 Global that offers a much better user experiience and super nice accomodations in Barcelona? The overall effect of digging into H2O Hospitality’s value proposition is a kind of “WTF is this?” if I am totally honest.  And to try and do my due diligence was not an easy task, I assure you. 

H2O Osaka location
A Google Street View of the neighborhood Agoda places H2O accomodations

I found an H2O listing on Agoda for Osaka, Japan after some effort. What I found, if the Agoda listing is correct, was a cracker box not far from the Namba Yasaka Shrine in downtown, for 113 Euro per night. The listing is here, and the neighborhood is in the Google Street image above. The hotel/apartments have mixed reviews predominantly below expectations. I wonder if this is because there are no people involved? Sorry, it had to be said. And I recall the days when TechCrunch founder Michael Arrington, me, Mashable creator Pete Cashmore, and others could be found actually digging to see underneath technology. Ahh. Those were the days.

That said, and after having read all the fluff on TechCrunch and the other sites, H2O Hospitality seems like a nice fit for the 2.5-star and below hotel/accomodations out there that are about to go broke. Person-less hospitality is a real no-go, unless some Korean or Japanese company can install cyborgs to replace the human contingent. I’ll create a bigger report on this issue later on, but for now readers should take all these funding reports with a grain of salt


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