Time For Technology
New Focus on the Cloud, Mobile, In-Room Technologies
After years of deferring purchases, many hotel owners and operators are once again looking to invest in technology. A lot has changed since the last boom in computer-based capital expenditures, and now the focus is on a number of technologies that have emerged in recent years: cloud computing, mobile technologies for reservations and other functions and in-room technologies. That’s the conclusion of an electronic roundtable conducted by Lodging Hospitality among eight hotel technology thought leaders.
Some of the hotel tech gurus believe while lodging companies and properties didn’t completely freeze their technology investments during the industry downturn, most were hesitant to spend big bucks, particularly on new and what they perceived to be unproven systems and approaches.
“The dampening effect was considerable but the situation has largely recovered,” says John Burns, president of Hospitality Technology Consulting, a Phoenix-based firm specializing in strategic reservations and distribution technologies for hotels. “The downturn created a pent-up interest in replacing or upgrading legacy technology, and the sense of urgency to do so is palpable.”
According to Mark Haley, the impact of the recession on technology spend varied by hotel segment. Luxury hotel companies, which suffered less than properties in other segments, continued to make investments in “strategically important technologies, especially our bread-and-butter practice areas, CRM (customer relationship management) and distribution. These areas were maintained and extended,” says Haley, co-founder and partner of The Prism Partnership based in Boston.
Among other areas seeing increased investment by some hotels, says Haley, were data security, PCI compliance and guest-facing mobility applications. “The IOS and Android mobile platforms have been truly disruptive forces (ask RIM), and the hotel industry has been responding to these forces,” he says.
Several of the experts believe the recession was actually a boon for hotel technology. Jon Inge, president of Jon Inge & Associates, a Seattle-based consultancy, says smart hoteliers were willing to invest in technologies that made them more competitive while vendors continued to develop products that made them more appealing to buyers. Doug Rice, executive vice president & CEO of Hotel Technology Next Generation, agrees the recession served as a catalyst to greater efficiencies in hotel tech.
“Surprisingly, after the initial swoon, the recession seems to have helped innovation,” says Rice. “The big brands got much leaner and smarter in their IT execution. And on the vendor side, the stronger [ones] used the slow years to regroup around next-generation products and were able to move faster without the distraction sales inevitably brings.”
He adds that some hotel companies discovered innovation is easier and faster to acquire than to build it themselves. “And if you do build it, you’re likely to find your competitor will leapfrog you with an even better solution from a third-party vendor,” he notes.
GOOD TIMES ARE BACK
The consultants are split on what effect the industry recovery has had on technology spending and attention by hotel executives. In fact, Les Spielman believes many chain properties and independent hotels are so concerned about increasing RevPAR they’re ignoring technology. This attitude, says the CEO of Los Angeles-based Hospitality Automation Consultants, may even be doing more harm than good.
“Many hotels continue to drive away potential guests by adding fees to the guest in numerous ways, such as high-speed Internet access fees, higher room rates and the dreaded resort fees,” he says. “And we’ve noticed many chains haven’t even been doing data mining or employing other technology tools at their disposal.”
Many of those hoteliers who are stepping up spending on technology are focusing on the basics, including what Haley calls “deferred maintenance or replacement of tactical applications. Those eight-year-old POS terminals just won’t make it through another summer.”
And as Doug Rice points out, failing to pay attention to the basics of technology “can be devastating to revenues.”
“It can be a painful lesson when a big piece of long-term corporate or group business walks across the street for something as simple as poor Internet [service] or bad cellphone coverage,” he says. “That’s happening more and more and, as a result, certain key technologies have gotten proportionally more of recovery capital budgets.”
Changes in technology trends outside the hotel industry also affect what happens inside lodging companies, argue several experts. The distribution process is one example, says Florida-based consultant Chris Hartmann. As he notes, the rapid rise of web technology and the decline in hotel revenues formed a “perfect storm” that enabled third parties to gain control of the reservations process.
“While things have improved over time, there is still a ‘find the cheapest room’ mentality. It affects almost every online purchase and continues to negatively impact hotels and technology spending,” he says. “The impact is on both the revenue side (how low can we go?) and the cost side (if all anyone cares about is price, why spend on tech or other amenities?).”
Dr. Dan Connolly of the University of Denver sees other implications from the explosion of consumer-based technology. He calls it the “escalation effect.” As enhancements to consumer technology continue to increase, hotels feel a need to keep pace, resulting in an ongoing need to increase IT budgets.
“Additionally, IT-related expenditures tend to span multiple budget areas,” says Connolly, who is associate dean for undergraduate programs and an associate professor of information technology at the university. “For example, e-commerce and digital marketing initiatives may span both the IT and marketing budgets. In other words, while spending is increasing, it may not always be part of the IT budget.”
No one seems to have a clear-cut answer on what are the highest priorities of hotel owners and operators in making technology procurement decisions. While, as Hartmann says, all tech spending needs to be judged from a return on investment perspective, it’s sometimes a hard metric to quantify. And while investment in energy management may provide an easy cost/benefit analysis, it’s more difficult to grade the ROI of flat-screen TVs, especially a 40-inch screen versus a 32-inch model.
The key, believes Inge, is customer satisfaction and the effect guest feedback has on bookings.
“ROI is essential, but it is seldom expressed in financial terms,” he says. “You must know what outcome you want from an investment, but that can just as easily be to prevent erosion of occupancy (by upgrading the WiFi network, for example) as it is to produce a calculated financial gain. For that reason, initial cost is usually a lower priority; if the reason for making an investment is clearly understood, the cost to achieve it is acceptable.”
Rice of HTNG has seen a shift in how hotel owners view and budget for technology purchases. A few years ago, he says, not many technology investments could pass owners’ ROI tests. As a result, management companies moved technology from hotel capital expenditures budgets to operating budgets to avoid owners’ budgeting processes.
“With technology increasingly driving customer satisfaction for transient, corporate, and group business, owners are starting to understand that failing to invest in necessary technology can seriously damage revenue, which the right investments can restore,” he says. “And once they decide to invest, owners are more inclined to favor CapEx models. Of course, this is happening just as the vendor community has largely shifted to OpEx models.”
ON THE CLOUD
The big buzzword in hotel technology is recent years has been cloud computing, an all-encompassing term that in essence means moving software applications and data storage from a hotel’s computers to off-property servers hosted at company headquarters or by a third-party vendor. Despite the headlines generated by the cloud, the consultants don’t believe the concept has yet to meet its promise for the hotel industry.
“Cloud technology has been the talk of the industry for quite some time, but it is still evolving with slow adoption rates,” says Connolly. “The concept offers great promise and benefits to companies in terms of cost savings, staffing, and simplicity, but there are still fears and concerns. Some are legitimate; others are perceptual.”
So far, says Inge, while single-vendor cloud solutions are available, applications that include complex combinations of systems from multiple vendors have yet to be proven. The problem, he says is that “integration between systems in different clouds remains a challenge, both technically and from cost and support viewpoints.”
Adds Jules Sieburgh, president of his own consulting firm based in the Washington, DC area: “There is still a great deal of confusion between cloud and client-server solutions, as well as a great deal of concern about true cost and time savings as well as security and access control.”
Doug Rice sees the adoption of cloud computing by the lodging industry as an evolution. We’re now near the end of what he calls the “marketing hype” phase, and as companies like IBM, Microsoft, Oracle, Amazon and Apple continue to invest in the technology, “the hype is transitioning to real, nuts-and-bolts capabilities.”
“It’s easy to find examples of cloud PMS, POS, PBX, e-mail, and other applications,” he says. “They don’t work for every hotel yet, but one by one the barriers are being addressed.”
Mark Haley strongly believes in the potential of cloud computing for hotels, citing the advantages it brings: dramatically lower cost of ownership, more relatable performance, faster implementation cycles, fail-over capabilities and more.
“True cloud computing offers all of that, but on steroids. In a true cloud, buying platform as a service (PAAS), neither the software vendor or the client cares about hardware, operating system, database or data communications,” says Haley. “The cloud handles all of that, while the vendor concentrates on the software and the hotelier concentrates on the guest.”
MOBILITY IS KING
Unquestionably, the ubiquity of mobile devices and the wide adoption of mobile commerce have radically changed how hotels market to and service their guests. And as John Burns points out, hotels have had to tailor versions of their content and processes to the mobile access and distribution channel. Failure to do so means hotels can be left out of consumer decision and buying processes.
Jon Inge sees a ying and a yang to the explosion of mobile technology. On the positive side for hoteliers, the limited screen sizes on mobile devices encourages clarity in user interfaces, which can favorably be transferred to desktop screen designs. “The flexibility of software mash-ups is also leading to some very interesting combinations of data and functionality,” he says. “And the software apps that succeed are those that present the most useful information at the right time in the most appealing way, and those may not be the apps that generate and store the data.”
On the other hand, mobile applications present a challenge to hotel marketers. The convenience of mobile devices encourages spontaneity by users and, combined with the ease in which they can compare more than one hotel choice, makes forecasting and revenue management more difficult for hoteliers.
Looking to the future, Mark Haley sees further application of mobile technology on the operations side of the business.
“As this sector continues to evolve, and it will very rapidly, look for more staff-facing tools that are true applications: line-busting apps in the lobby, remote check-in from the airport limo; red flag alerts with data behind them for managers,” he says. “And guest-facing applications will have tighter integration to CRM systems and be oriented to on-property, not before, effecting the guest experience more directly.”
IN THE GUESTROOM
Consumers’ fascination with their mobile devices has also led to major changes in guestroom technology. Les Spielman feels most strongly about this transformation, saying, “Mobility is the most disruptive technology to enter the hospitality industry since the advent of the PMS,” he says. “The cost and maintenance of durable traditional [in-room] technology will decrease, being replaced by the guest’s BYOD (Bring Your Own Devices).”
But this trend brings its own issues. As Doug Rice notes, “The good news is this means hotels will be able to spend less on content; the bad news is they’ll have to spend more on bandwidth.”
Also, he says, the success of the iPad has rendered many hotel WiFi networks obsolete almost overnight. As he explains it, the iPad radio unit has a weaker signal than do laptops, so the hotel WiFi network must compensate by giving it proportionally more capacity. And whereas consumers at one time just traveled with one laptop, many guests—particularly couples or families sharing a room—now arrive with multiple laptops and tablets.
“Put these factors together, and the effective coverage of hotel WiFi access points was reduced almost overnight, in some cases by 75% or more,” says Rice. “This can be fixed, but it requires big investments. And this is just the beginning of the trend; bandwidth demand continues to double every year.”
Just as consumer technology expands and changes constantly, so do the challenges and solutions facing lodging owners and operators. Hoteliers need to be careful in directing their investments to the right technologies that both produce ROI and satisfy guests. Here are the views of some of the consultants in the roundtable on the challenges and opportunities ahead in hotel technology.
• “The two biggest challenges are not new ones: people and money. We constantly struggle to attract and retain qualified people to the hotel industry, particularly to the technology sub-sector. We also will continue to compete with room renovations and new carpets in the ballroom for capital dollars, which speaks to the manifold problems inherent in the separation of ownership and management, common in the hotel industry. We need to fix that model of investment.”—Mark Haley, The Prism Partnership
• “Challenges remain in the areas of integration between the many systems needed to run a property well and efficiently. Detailed operational and guest profile information requires complete and accurate data consolidation, and we still have a way to go to achieve that. We also still need better ways to present the most appropriate parts of a guest’s profile and history to the hotel staff interacting with them.”—Jon Inge, Jon Inge & Associates
• “[There’s an opportunity in] moving complex technology above property, where it can ultimately be managed more cost-effectively and with fewer malfunctions. There are relatively few technologies where this won’t happen; the main question is when. In most cases, the answer is soon.”—Doug Rice, Hotel Technology Next Generation
• “Providing consistent levels of service while reducing costs and being as flexible as possible is a challenge. And replacing location, location, location with broadband, broadband, broadband.”—Jules Sieburgh
• “It will be a challenge to convince owners that investments in new systems will result in significant operational performance improvements.”—John Burns, Hospitality Technology Consulting
• “I suspect the greatest opportunity is understanding guests, both past and future, and communicating effectively with them on an individual basis. Just as Google has mastered providing the ads with each search that seem most relevant to each individual user, hotels need to mine as much data as their guests will allow them to deliver them the best possible service, when they’re looking for a hotel, during their reservation, then pre-, post- and during their stay. It has to be done in the open and with guest permission, but if done right, it will revolutionize the relationship between hotel and guest, and (hopefully) undo the ‘get me the cheapest room’ mentality.—Chris Hartmann LH
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