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Staying power

By Paula Arab | December 1, 2015
Staying power
Arnon Levy

Under Arnon Levy’s leadership, Calgary-based GuestTek has conquered the world of interactive technology for the hotel business

By the time Arnon Levy graduated from the University of Calgary with a bachelor of commerce, he had two successful businesses under his belt: a lawn-mowing venture from high school and a T-shirt company at college. Levy had also held down enough paid jobs to know that he didn’t want to work for anyone but himself. So in 1996, with $65,000 in backing from a family friend, he launched a small Internet company from his basement.

What began with a vision of giving business travellers an alternative to web cafés has grown into the world’s largest provider of in-room connectivity and entertainment technology for the hotel industry. If you travel for work, chances are you’ve used GuestTek Interactive Entertainment Ltd.’s high-speed Internet, video on demand and other services, which are available in 86 countries. Calgary-based GuestTek serves more than 3,900 hotels with a total of 850,000 rooms, including the Hilton Hotels & Resorts, Hyatt Hotels Corp. and Marriott International, Inc. chains.

The company boosted its geographic footprint significantly last year with acquisition of iBAHN, its major rival. Already the dominant player in the Americas, GuestTek gained global reach through the deal.

Founder, President and Chief Executive Officer Levy, a self-described aggressive but empathetic leader who doesn’t take no for an answer, has succeeded by growing the business carefully, forging strong partnerships and investing in technology that keeps GuestTek ahead of the competition.

The iBAHN takeover was approved in a Delaware bankruptcy court after the Salt Lake City, Utah-based company filed for bankruptcy protection, citing a loss of contracts with Marriott International Inc., its biggest client, and patent litigation costs. Losing the Marriott business stemmed from the chain’s need for a vendor that could provide consistent standards at all of its hotels worldwide.

Purchasing iBAHN has given privately held GuestTek the power to do that just. The company added 350,000 rooms at 1,400 hotels through the acquisition, which included international iBAHN affiliates not part of the bankruptcy case.

“iBAHN was really strong globally,” Levy notes. “They built a great infrastructure in Europe, the Middle East and Asia,” he says, explaining that GuestTek had the hospitality market cornered in North and South America, from Canada to Argentina. “So for us, this became a perfect position to take two pieces of a puzzle and put it together.

“Now we have full global coverage,” Levy says. “That means I can go to every one of my customers – Hilton and the [other] big chains – and say to them, ‘I can give you the exact same look and feel for everything that is technology in the room: phone, TV, movies, high-speed Internet. You can have the exact same standards anywhere in the world.’”

Like many multinational companies, the hotel majors struggle with quality assurance. “The biggest hardship that these big chains have is to provide consistency across the lineup of brands,” Levy says. “This way, they can go out there and create a standard for the first time ever. They have one company that can deliver the exact same service and the exact same product around the world. That’s what’s giving us the edge, and that’s what’s giving us massive growth with the iBAHN deal.”

GuestTek made another key acquisition in 2014 when it bought TelNet Corp. after entering into a partnership with the Worthington, Ohio-based telephony provider that allowed it to add voice to its range of services. The company’s OneView Voice iACT solution is a cloud-based system with more features for a lower cost than many similar offerings.

GuestTek has come a long way since its modest beginnings during the dot-com boom of the 1990s. Levy started with just one customer, Calgary’s Palliser hotel; he then secured its sister property in Winnipeg. From there, GuestTek signed the entire Canadian Pacific Hotels chain, now Fairmont Hotels & Resorts. Radisson and Hyatt followed.

The strategy during the early days was to grow “slowly, slowly, slowly,” Levy recalls. He also partnered with the hotel sector, hiring consultants to work alongside GuestTek’s research and development experts.

“We really concentrated on technology and on having the best technology out there,” Levy says. “We also really concentrated on hiring people from the hospitality industry who knew how to service people from the hospitality industry. So we really knew our customer and knew what they needed, and the service that they needed.”

In the wake of the 2000 stock market crash, which hammered GuestTek’s bigger competitors, Levy’s measured expansion paid off. “When the bubble burst, the only company left standing was GuestTek,” he says. “Coming out of the dot-com days, we were the only company left out there that was actually profitable.”

GuestTek launched an initial public offering on the Toronto Stock Exchange in 2004. Leading up to the IPO, the company had enjoyed six years of steady growth, a curve that Levy describes as “a beautiful hockey-stick kind of scenario. At the same time, our technology was way more advanced than everyone else’s.”

Early investors in the flotation, Levy’s parents among them, were handsomely rewarded. Those who put up $15,000 made $1-million, says Levy, who had stepped down as CEO a year earlier to make way for a new growth strategy and a more senior leader.

But going public proved troublesome. After debuting at $10.25, GuestTek’s stock price had dropped to $2 in eight months. It eventually recovered to trade around $7, but due to a failed buyout by the major shareholder in 2007, it dropped as low as 10 cents by 2009. Meanwhile, Levy had launched a hostile takeover in 2004 and was back in charge thanks to a partnership with M.P. Technologies, Inc. of Japan, which became a 58 per cent shareholder. The company remained public until 2009, when Levy bought out his Japanese partners and followed that with an insider takeover of the company. He picked up all of GuestTek’s remaining outstanding shares for 50 cents apiece.

One lesson that Levy learned from that experience was how to be better prepared than the enemy when walking into a hostile situation. “Our ability to move and make decisions a lot faster gave us a massive advantage,” he says.

Another lesson: He would never take his company public again. “I sleep a lot better at night,” Levy says. “It’s a simpler life. Do I still have issues getting to sleep? Yes.” Today, “controlled growth” keeps him awake, he says. “It is addictive to see your company grow.”

To ensure that its technology stays on the leading edge, GuestTek keeps investing in R&D. The company’s Trifecta offering is a “triple play” solution that combines its OneView Internet, voice and media systems; the latter delivers free-to-guest programming, video on demand and interactive television. This product suite is unique because it’s integrated. For example, if the phone rings while a hotel guest is watching a movie, the film automatically pauses when the guest answers and restarts when the guest hangs up.

In the years ahead, in-room technology will increasingly be tailored to individual needs. GuestTek is already there with its OneView platform, which can customize its entertainment offerings according to a guest’s user profile and past viewing preferences, right down to the language they probably speak. This service, now available in the higher-end hotels that GuestTek serves, will eventually become standard. “We’re taking the portfolio that the guest has with the hotel company and customizing that room experience for them,” Levy explains.

Looking back, the GuestTek Founder says he has no regrets. “I wouldn’t do anything differently. I did a lot of wrong things, but if I didn’t do those wrong things, I wouldn’t have got a lot of other things right.”

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