John F. Davis III, the well-known industry veteran who founded and built the industry’s global reservations network on which virtually every hotel operates today, is on track for building yet another standard for the industry. Only this one is aimed at saving hotels money on the back end of the house versus the front end travel-booking networks.

Davis recently retired from Pegasus Solutions, Inc., which he launched in 1989. Under his leadership as chairman of the board, chief executive officer and president, Pegasus became the world’s larges hotel technology provider, with more than 2,000 employees, 2007 revenues of $175 million and customers that included nearly every hotel company in the world.

In November of last year, David decided to focus on yet another way to serve the industry as a major investor and CEO of BirchStreet Systems, the leading provider of e-procurement and back-office automation solutions for the hospitality industry.We had occasion to catch up with Davis to discuss how he intends to revolutionize the purchasing platforms of the hospitality industry and why BirchStreet is right for the times we live in.

Why did BirchStreet Systems attract your attention?

Today, if you’re an owner or operator of a hotel or resort you have to focus on costs and how management controls can be put in place to monitor costs that affect your bottom line.What Pegasus did for the industry was to help hotel companies around the world to reduce their costs on the front end of a hotel’s operations, in reservations processing and distribution. And where I see the opportunity for BirchStreet is to do the same for the back end of hotel operations, namely managing purchasing and procurement costs. BirchStreet, whose software was developed by its founder and current president, Doug Sanborn, already has had extraordinary success in establishing the company as the leader in providing back-office procurement technology specifically designed for the hotel industry. The client list, which includes Hilton, Hyatt, Marriott, Omni and Interstate Hotels, is a testament to that success. Currently, more than 1,800 properties in over 25 countries, utilize BirchStreet to access and manage more than 130,000 suppliers, processing nearly $1.5 billion in purchasing transactions annually.

And how do you see it assisting the industry in the harsh economic times we live?

The BirchStreet System helps hotel chains/brands, management companies, individual properties, franchisees/owners, country clubs and restaurants leverage collective buying power, improve operations and lower costs by streamlining purchasing, inventory, food-cost management and accounts payable functions across a variety of geographic regions and property types.

Aren’t there already a number of similar procurement systems out there? And what makes BirchStreet different from the rest?

Yes, there are several, but none have been designed specifically for the hospitality industry. Other purchasing systems and networks serve all types of industries, whereas the software for BirchStreet had been built from the ground up for hotels and resorts. We also operate in concert with the popular hotel supplier purchasing marketplaces/networks like Avendra, which ties in with BirchStreet’s software. Our software actually augments and enhances purchasing programs like Avendra or Hilton Supply Management, which have negotiated supplier discounts. With BirchStreet’s software, hotel companies can ensure their properties are taking advantage of the negotiated contracts and discounts, and keep track of any last-minute price changes or substitutions. And the fact that we are a web-based platform using the ‘Software-as-a-Service’(SaaS) model is extremely important in that it allows hotels a great deal of flexibility with virtually no on-site requirements beyond access to the Internet. No longer do hotels need to own and maintain expensive computer servers on-site. Everything is controlled centrally by BirchStreet as the property’s back-of-the-house manager to allow customers to customize the controls they want in terms of managing their purchasing systems and cost controls.

Can you give some real examples of the cost controls and actual savings that can be achieved?

Every customer of BirchStreet has wonderful things to say about the system and how it provides them with important management controls. What’s important is the bottom-line results, which show that by installing the BirchStreet System, we will save them five to 10 percent of their annual procurement costs—or more. Within days of implementation, many of our customers immediately start recognizing savings. It is not uncommon to achieve 100-percent payback within a couple of months. For example, one of our hotel customers identified that the annual savings it achieves through better purchasing of its breakfast buffet items alone pays for the entire system for a year. All of the savings on top of that are just gravy, heading straight to the hotel’s bottom line. Here are some of the ways we see it working to management’s benefit at the hotel level.

• For chain hotel operators it allows individual properties to assess if their property is benefiting from the chain supplier master contracts that offer special purchasing discounts with suppliers versus what the industry calls ‘rogue suppliers’ who are not in the network.

• Where local suppliers are a preferred route, the BirchStreet System allows for customization for use of local suppliers who might not be in the master contract network.

• Most importantly, it establishes management controls over the purchasing system, which are easily monitored by owners, operators, CFOs or operating staff. And also allows them to help with supplier negotiations when contracts come due.

Who is the ultimate customer for BirchStreet Systems?

There are three to four levels of customer. The hotel chain, the management company/operator, the owner. Or anyone responsible for the bottom line of a hotel’s operations.

Melinda Bush, CHA, is president and chief executive officer of Hospitality Resources Worldwide, management and market development advisors to hotels and resorts. She serves on boards of several private and public companies and was named Outstanding Woman of the Year by the Travel Industry Association of America. Reach her at mail@melindabush.com.