Poll suggests how lodging leaders can monitor IT costs

In the 19th century, British Prime Minister Benjamin Disraeli gained fame for identifying three types of lies: “lies, damn lies and statistics.”

“There are some easy figures the simplest must understand, and the astutest cannot wriggle out of,” he added. His views apply to lodging, too.

For our industry, occupancy, average daily rate (ADR) and revenue per available room (RevPAR) statistics are part of the common language and benchmark our operational performance. But there is a notable gap in information on what we spend on technology to achieve, enhance and support that performance.

Survey Background

Each year, at budget season, the hospitality chief information officer and chief financial officer face off, each with his or her own set of assumptions on what should be the appropriate level of spending for a given year; neither has a reliable, trustworthy set of spending benchmarks to work from.

Today's CIO has to do more with less and increase value from IT expenditures. Establishing accurate spending benchmarks will allow CIOs to assess their spending on IT from the perspective of external market competitiveness as opposed to internal cost containment — a distinction critical to delivering strategic value from IT investments.

The Hospitality Industry IT Benchmarking Survey was born to fill this gap in existing spend data for the industry. The survey is the result of research conducted at the 2005 CIO Summit, an annual gathering of CIOs from hotel, timeshare, cruise ship and casino industries, and reaffirmed at the 2007 CIO Summit. Results of research conducted at these summits indicated, as the top chart reflects, that 57 percent of CIOs agreed that comparative spend data available to them was poor, 95 percent indicated they were likely to complete a comparative spend survey, and 76 percent indicated they were very likely to complete one.

In addition to questions regarding the perceived adequacy of industry-specific data to support IT spending comparisons, the CIOs were queried about additional uses for the data, with 73 percent (bottom chart, page 51) saying they would use the information to identify best practices and areas for improvement within their companies; 54 percent said they would use the data to support requests for certain budget items.

Surveys of this type specifically targeting the hospitality industry have been attempted before and have failed to produce credible results. This effort joined three firms: Hospitality Upgrade magazine; Hospitality Financial and Technical Professionals (HFTP), a global association of hospitality professionals; and KPMG LLP, a global network of professional firms providing audit, tax and advisory services. The survey goal is to build an operational tool for the industry that CIOs, CFOs, vendors and others can use for benchmarking and budgeting.

Methodology

Once the need for such a benchmarking survey was identified at a CIO gathering, an advisory board of seven CIOs was formed to shape the data. Represented on that board: MGM MIRAGE, Global Hyatt, Starwood Hotels and Resorts, Omni Hotels, Accor North America, The Marcus Corporation and Royal Caribbean Cruise Lines (RCCL).

The CIOs offered insights into the metrics they needed to quantify the value and impact of IT spending and the way in which those had to be collected and reported, reflecting the varied ownership models in the industry and the need to isolate spend by market segment served.

To capture the expenditure variations among those ownership models, survey questions were divided by company type into today's principal ownership models: Brand Franchisors, or companies that report system-wide revenue that includes franchise revenue and expense, as well as Owned/Managed companies that report revenue and expense meeting these criteria, including the owned and managed portion of the Brand Franchisors portfolio. The second breakout of data critical to the CIOs was spending by market segment served. Data capture was further stratified by market segment, including luxury, full-service, resort and select service.

The expanded data capture gives the survey 603 data points to report on rather than the typical 250-300 collected by similar benchmarking efforts.

The initial release of the survey was limited to North American participants and companies had eight weeks to respond.

Survey Results — Owned and Managed Companies

The table at right presents an overview of the survey results for Owned and Managed companies. Seventy-five percent of respondents to the initial survey fell into this type, offering a richer data set to report on. The results offer a glimpse into some very interesting pieces of data the survey has produced.

Wide IT spend variations exist among industries, with Banking and Financial Services leading at six percent, Media and Entertainment at 3.7 percent, and Distribution with the lowest reported figure: 1.1 percent. As the table below demonstrates, the median spend for hospitality during the same period was 1.32 percent, two-tenths of a percent higher than the lowest-spending industry included in the 2006/07 Gartner Information Week IT Staffing and Spending Report.

Other interesting numbers in the chart are available to the industry for the first time including the breakout of Median IT Operating Budget Per Room ($541) and the Median Number of Rooms Supported Per IT FTE (281).

The following chart looks at a breakdown of IT operating budgets across various classifications of spending stratified by companies that spend less than one percent of revenue on IT, one to two percent, and more than two percent.

Conclusion

These results are from the first year of the survey; the 2007 Hospitality Industry IT Benchmarking Survey under way will give the richer data set needed for expanded analysis of the drivers for spending, such as improving employee productivity, operational efficiency and customer satisfaction.

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Sally Kelly is senior manager of KPMG LLP. Richard Siegel is president and publisher of Hospitality Upgrade. For a copy of the 2005 Benchmarking Survey results or to participate in the 2007 Benchmarking Survey contact rich@hospitalityupgrade.com.

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For further information on The Benchmark methodology, data collection and analysis process contact sakelly@kpmg.com.

ASP/WEB-ENABLED SOFTWARE

		CRS	F&B accounting	Activities scheduling	Timeshare/resort management	Corporate reporting	POS	Hosting	Back-office accounting	PMS	Maintenance/facilities management	Sales and marketing/event management
Agilysys	— Circle 101		•				•	•
Amadeus	— Circle 102	•			•	•	•	•	•	•	•	•
Aptech Computer Systems	— Circle 107		•			•		•	•
AutoClerk	— Circle 108	•								•
BarTech Systems	— Circle 109		•							•
Birch Street Systems	— Circle 111		•					•	•		•
BookingCenter	— Circle 114	•								•
Card Scanning Solutions	— Circle 117						•			•
Catalyst Technology	— Circle 118	•				•						•
Centrada Solutions	— Circle 119	•	•			•		•	•	•	•	•
(Ez) Revenue Management	— Circle 135					•		•
Genares Worldwide	— Circle 143	•								•
GuestWare	— Circle 148					•		•			•
Hotel Concepts	— Circle 150	•				•		•		•	•	•
IDT Group	— Circle 153					•						•
Innes Systems	— Circle 155			•						•		•
InnPoints Worldwide	— Circle 157	•								•
IQubz	— Circle 160					•						•
IQWare	— Circle 161	•		•	•		•			•		•
Micros Systems	— Circle 171	•					•	•		•		•
Milestone Internet Marketing	— Circle 172							•
Mintek Mobile Data Solutions	— Circle 174										•
M-Tech	— Circle 176					•					•
Multi-Systems Inc.	— Circle 177									•
Newmarket International	— Circle 179											•
Northwind Maestro	— Circle 180	•		•	•	•		•		•		•
Novexsys	— Circle 181					•		•		•
Pegasus Solutions	— Circle 190	•		•	•	•		•
Phase2 International	— Circle 191			•	•	•		•			•	•
PriZem International	— Circle 196					•			•
SoftBrands	— Circle 213	•			•	•	•	•		•		•
SynXis	— Circle 215	•

WEB MANAGEMENT

		Website design	Website maintenance	Website analysis	Search engine optimization	Distribution channel management	Data mining	Linkage management	E-mail list services	E-mail campaign management	Booking engine development	Pay-per-click campaign management	Remote updated local website access
Amadeus	— Circle 102	•	•								•
Amerisafe Industries	— Circle 105	•	•	•	•
Aptech Computer Systems	— Circle 107						•
Autoclerk	— Circle 108				•	•					•
Booking Center	— Circle 114						•				•
Digital Alchemy	— Circle 128									•
Energy Authority Internat'l	— Circle 131	•										•
EZYield	— Circle 136					•
Fire2Wire	— Circle 138	•	•		•				•				•
Genares Worldwide	— Circle 143	•	•	•	•	•	•	•	•	•	•	•	•
IDT Group	— Circle 153						•		•	•
Innes Systems	— Circle 155	•	•	•	•		•		•	•	•
Inn Points Worldwide	— Circle 157										•
IQubz	— Circle 160						•		•	•
IQWare	— Circle 161					•				•	•
Keylink Solutions	— Circle 233											•
Lodging Interactive	— Circle 167	•	•	•	•	•	•	•	•	•	•	•	•
Micros Systems	— Circle 171					•					•
Milestone Internet	— Circle 172	•	•	•	•	•	•	•	•	•	•	•	•
Multi-Systems Inc.	— Circle 177					•					•
Northwind Maestro	— Circle 180					•	•	•			•
Passkey	— Circle 232	•							•	•
Pegasus Solutions	— Circle 190	•	•	•	•	•	•	•	•	•	•	•	•
Phase2 International	— Circle 191	•	•	•	•		•		•	•	•
Resort Media Group	— Circle 200	•	•										•
Safety NetAccess	— Circle 205	•	•						•			•
Sceptre Hospitality Resources	— Circle 208	•	•	•	•	•	•	•	•	•	•	•	•
SynXis	— Circle 215	•	•	•	•	•	•	•		•	•	•	•
Tantus Networks	— Circle 216	•
TIG Global	— Circle 234	•	•	•	•	•		•		•		•	•
Topaz Hotel Services	— Circle 223		•								•
TravelCLICK	— Circle 224	•	•	•	•	•		•		•	•	•	•
Vizergy	— Circle 227	•	•	•	•	•				•	•	•	•