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Expert Commentary

  1. Hospitality Technology Architecture – Carolyn Viens and Amitava Chatterjee, CHTP

    Looking Ahead to the Next Generation

    The hospitality industry is in the unenviable position of having to meet guest needs, owner/franchisee demands and employee expectations—all in the face of threats of terrorism, war and economic uncertainties. Guests seek differentiated experiences. Owners seek more timely access to information. Employees seek improvements in guest-facing applications. Yet, most guest-facing technologies do not contain the functionality and integration necessary to support service excellence. They simply have not kept up with the changing demands. The industry is struggling with a single source of the truth and single image strategies for inventory, guest information and marketing/operational content. How will this evolve? This perspective on the evolution of technology in the hospitality industry advocates a centrally or regionally provisioned architecture to develop an above-property view of strategic property and guest-specific applications.

    Facing Major Challenges

    Hoteliers are forced to simultaneously focus in different directions. Their reactions to these challenges and how effective they are at juggling these factors will ultimately define how well they weather the storm. Key challenges include:

    Commoditization: Brand capital is eroding and hotels are threatened by commoditization. Guests are becoming savvier—they seek differentiated experiences. The brand is no longer the driving force…increasingly more and more guests are becoming brand agnostic—their perception of limited brand differentiation further exasperates the issue. Guests are increasingly looking for niche offerings and personalized services that are delivered consistently.

    Distribution: Relentless rate pressure brought on by rate transparency, online intermediaries and aggressive corporate procurement tactics are compounding the issue. Online intermediaries are driving a wedge between major brands and the brand-agnostic guest. These online channels are often popular with hotel owners who see them as an effective way to move inventory. Some hoteliers are combating this by pushing direct connect strategies to combat the effect in the corporate market, reducing the dependency on the global distribution systems and enabling a one-to-one relationship with the guest.

    Owner/Franchisee Relations: Owners and franchisees seek greater transparency. They want better services from their franchisors. They seek access to operational information in near-real time, giving them a clear picture of how their portfolios are performing. They want a clear indication why they should align themselves with company A B.

    Front Line Demands: There is greater pressure from employees to deliver service excellence, but preparation and training are limited. Employees seek the tools and technologies that are built around the tenet of service excellence—as front line deliverers of service, they seek assistance in meeting and exceeding guest expectations. Unfortunately, systems have not always been built on this principle.

    How Should the Industry React?

    Hotels should differentiate their product through differentiated experiences—transitioning from a focus on the product or destination to a focus on a personalized end-to-end guest experience. They must also respond to changing consumer dynamics by emphasizing niche products and services. Compelling points of difference that make one hotel stand out from another should be identified and marketed.

    The Role of Next Generation Technology

    The industry will rely heavily on a next generation technology architecture to address the challenges hotels are facing at present. This architecture will provide the underlying infrastructure and services that allow hotels to reposition their employees to focus on value-added guest interactions, by automating core transactions and providing consistent access to guest data. It will provide hotels with opportunities to leverage technology advances to improve the guest experience. Technology will be pervasive yet invisible.

    Hotels will have the ability to quickly and flexibly innovate and react to market needs, wants and desires. New concept time-to-market will be greatly reduced, aided by adaptive technology. Hotels will standardize back-of-the-house and key front-of-thehouse functions across business units, brands, regions and properties, by placing them on a single technology platform and implementing a common business process and organizational framework. External linkages will become easier—applications will draw on common standards libraries for information interchange among systems. Complicated, customized interfaces between systems and organizations will be passť. The operational and financial benefits will be enormous— cross-brand employee mobility and training cost reduction are some advantages.

    A logical move for agile hotel corporations, next generation technology applications will be based around an on-demand technology infrastructure. IT services, applications and data will be available as and when needed. Hotel companies will be able to provide transactional-based models to their franchisees, owners and individual properties, which will only pay for services availed. Installing applications will involve downloading and running them within a browser window. Hotels will move to a variable cost structure where financial models are based on a per-use concept. Supporting and managing infrastructure that is not fully utilized will be a thing of the past. This will free up much needed capital which hotels can use to focus on their raison d’etre.

    The New Hospitality Technology Model

    The new hospitality technology model will place a greater emphasis on enterprise-wide standards. It will employ adaptable, reusable components that can plug into each other—applications will be easily configurable depending upon business size and scope. This new model will be based around a single image of guest information, inventory and content. Users will see the same data regardless of where they tap into the value chain. Hotels will regain control of distribution by limiting the use of indirect online channels; direct connect strategies in the corporate market will become the norm, rather than the exception.

    Application services will be delivered above-property via on-demand solutions. They would include property management, point of sale, sales and catering, HR, back office and financials, resulting in improved services and a reduced technology footprint on property. Advances in network connectivity, reliability and security will allow these applications to be hosted centrally and made available through a browser-based front end. Where connectivity is an issue, local models will be supported —relevant data will be downloaded, used to support business processes, and synched with the central repository the next time network connectivity is made available.

    The next generation hospitality technology architecture will bring tremendous benefit to the hospitality industry. An on-demand, above-property delivery of services will reduce IT costs and infrastructure investment at the property level. Standardized applications and a single image of guests, inventory and content will provide a consistent view across all touch points in the value chain. Linkages with external applications and organizations will be handled via common information interchange standards. Hotel management will have access to a common, centralized view of pertinent operational information that will be made available to them via customizable on-demand workplaces. This is an interesting future indeed.

  2. Taking CRM to a Higher Level – By Dr. Abderrahim Labbi, Kirsti Lindfors and Brad Iverson with contributions from Christopher Rospenda
  3. Cookie cutter approaches are passť. Companies have the opportunity to focus their promotions and differentiate their services.

    The hospitality industry has made great leaps in customer relationship management. It is awash in customer data, yet most loyalty programs take a one size fits all approach to marketing and service differentiation within a given loyalty tier. Despite technological advances and data abundance, hospitality companies largely continue to guess customer value. When asked, most companies consider the upper tier of their loyalty program to be their most valuable customers. Yet, most of today’s loyalty programs are one dimensional, concentrating on room nights or stays. Unfortunately, those upper tier guests are not necessarily the most profitable—they may not even be the most loyal. While they might have accumulated the most room nights, they may not have paid rack rates or contributed to ancillary spend.

    It is evident that significant opportunity remains—cookie cutter approaches are passť and forward-thinking companies have the opportunity to focus their promotions and differentiate their services. Customer equity and lifetime management (CELM) is an approach that promises to answer questions such as:

    • The expected lifetime value of a customer is…?
    • Marketing actions that will maximize lifetime value are…?
    • Customers most likely to defect are…?
    • Defection rates can be reduced by…?
    • Customers should be clustered by…?
    • Customers should be moved to more valuable segments by…?
    • The best series of actions to maximize future benefit are…?
    • How do the risk and reward of various marketing campaigns compare?
    • Which customers should they be targeted at?
    • Marketing budget ROI should be maximized by…?

    Customer Value/Loyalty Tier Misalignment

    Beyond profitability loyalty programs have other shortcomings—certainly the road warrior who may achieve numerous nights while changing brands is not truly more loyal than the infrequent traveler who sticks to his/her brand preference. Moreover, lifetime value is a critical shortcoming of the current loyalty measurement system. The truth is customers with similar spend patterns today, may vary considerably in their lifetime value.

    Armed with an imperfect understanding of customer value and behavior, most hospitality companies use a one size approach to marketing and service differentiation within a given tier. Front desk staff focus on upper tier guests, when they should concentrate on customers expected to generate superior lifetime value. Marketing campaigns are likely to blanket an entire tier, offering discounted rates even to those highly loyal customers who are price-insensitive.

    Clearly, loyalty tiers alone do not provide sufficient means to measure customer value, target marketing campaigns and differentiate service.

    One Size Doesn’t Fit All

    How can hospitality companies move beyond the one size fits all approach to loyalty tiers? How best can customer data be leveraged to help hospitality companies focus their promotions and differentiate their services? CELM is one approach and begins by obtaining answers to a few questions.

    How much money is spent implementing and running loyalty programs? Are hidden, misappropriated and unknown expenses skewing the value or impact?

    Are loyalty tiers leveraged accurately? Does the loyalty program attempt to capture a greater share of the customer’s wallet? Are peripheral spend patterns accurately captured, with the objective of enhancing the understanding of customer wants and needs? Are the highest tiers of the loyalty program populated by the most profitable or most frequent guests?

    IBM Research developed mathematical algorithms that help provide answers to these questions and are used for the analysis, simulation and optimization of loyalty program data based on the observed and expected lifetime value and volatility (risk) of customers. They help segment, understand and predict current and potential high value customers. Subsequently, one may use optimization tools to forecast the sequence and timing of marketing campaigns to maximize the customer portfolio’s value/risk ratio.

    The CELM Approach

    Using mathematical finance for asset valuation (over variable time horizons) and portfolio optimization techniques, the bridge between CRM and financial engineering is made possible by considering the customer base as a portfolio of financial assets and managing them accordingly. Future customer value over variable time horizons are calculated using advanced probability modeling techniques. Thus the financial profile, or value and risk (volatility), of the customer over a given time horizon is understood.

    Portfolio diversification and hedging techniques are used to determine how to optimize available marketing dollars across the customer portfolio, with the objective of maximizing ROI. This approach is radically different from common campaign management methods, which do not consider correlations between different customer profiles and the mutual or delayed effects of multiple campaigns. Thus, this approach supports setting up and budgeting marketing plans (i.e. sequences of campaigns) vs. individual campaigns.

    The approach models the relationship as a journey through various critical states in the customer lifecycle, and suggests actions and budgets for each state/time in the journey to maximize lifetime value and minimize risk.

    Predicting the Impact of Future Marketing Action

    Numerous factors can be considered with the model providing different targeting policies for a given customer depending on: 1) the given time horizon, 2) the available targeting budget, 3) the risk appetite of the marketing manager (aggressive, risk-averse, neutral, etc.), and 4) the types of available marketing actions (options).

    The benefits that result from applying CELM reside in the areas of segmentation, customer dynamics, portfolio optimization and service differentiation.

    Segmentation: CELM helps define customer groups based on demographics and transactional behavior (value/loyalty/recency/frequency) or customized (business) segmentation rules.

    Customer dynamics: CELM helps identify customer transitions (the probability to move to a higher/lower value state), estimate customer lifetime value and risk (volatility), predict the impact of future marketing action sequences on customer lifetime value, identify optimal future marketing policy and assess historical and optimized marketing policies.

    Portfolio optimization: CELM helps allocate limited marketing funds to maximize return on investment and minimize risk (uncertainty).

    And while the approach has so far been used primarily to enhance marketing campaigns, the customer insights gained provide the opportunity for differentiated service, including the ability to use targeted marketing and service differentiation in conjunction, as a focused series of steps designed to increase customer value.

    The results of CELM exercises can be dramatic. As reported in The New York Times, Finnair started working on a CELM project using “mathematical modeling and optimization algorithms to increase customer loyalty, reduce marketing costs and improve response rates among members of its frequent-flyer program.”

    The airline was able to increase the level of customer understanding with superior insight into buying patterns and the effect a given set of marketing campaigns would have on a particular customer segment. Armed with this understanding, subclasses of loyal, high value customers were identified (customers who might no longer receive many marketing offers as doing so simply added cost and drove down margins), while additional sub-classes of attractive, moldable customers, ripe for incentives, were also pinpointed. During the initial project Finnair reported that the technology had “reduced marketing costs by more than 20 percent and improved response rates by up to 10 percent.”

    Clearly, customer equity and lifetime management provides an opportunity to move beyond one size fits all approaches to customer value, campaign management and service differentiation—and can offer hospitality companies the opportunity to leap-frog the competition and enter the next era of CRM.

  4. Experts from PMS Yesterday, Today, and Tomorrow – By Keith Gruen delivered at (EHTEC) on February 20, 2007 at the Hilton Amsterdam in Amsterdam, the Netherlands

    Ladies and Gentlemen, this industry is moving very, very slowly

    I can say this with some authority, having been away from this industry for 10 years. I was away, in fact, until yesterday, when I came to this conference as a guest to see what’s going on in the industry. It’s been a fun and interesting one-and-a-half days – seeing so many people and so many companies I haven’t seen in ten years. Never mind that almost none of these people are with the same company they were ten years ago. Some left hotel companies to work for vendors. Others left vendors to work for hotel companies. This industry is like a family and that’s part of what made it a fun industry to be involved in.

    On the other hand, maybe this is one of the reasons that this industry hasn’t progressed much in ten years.

    Perhaps this industry needs a jolt from the outside from time to time

    I’m not really here to talk about ASP, but I would like to tell you briefly what the rest of the world has to say on ASP. By “rest of the world” I mean other industries. The two main reasons why hotel companies choose against ASP are:

    1. Security
    2. Potential Downtime

    The 2 main reasons why other industries do choose ASP are:

    1. Security
    2. Potential Downtime

    Yes, you understood me correctly. The rest of the world is adapting ASP systems for the very same reasons that hotel companies avoid them.

    You could have added functionality to evolve into a CRM. Or at the very least a Sales & Catering system. After all, it’s a natural expansion of the product. But you didn’t. You all said: “oh, that’s not our area.” Well, it could have been! You might say that hotel companies prefer best of breed anyway. Well, looking outside this industry, this is not exactly the case. Other companies in other industries also need software to manage their operations. They don’t buy best of breed; they buy huge software applications called ERP from companies such as SAP or Oracle. An ERP includes everything from financial accounting, inventory, payroll, supply chain management, production planning, CRM and so on. Where’s the hotel ERP?

    Whether you believe it or not - whether you like it or not - ASP is here to stay.
    It will be the only way we deliver software in the future. So assuming you’ve finally become an ASP vendor, the split between CRS and PMS must disappear. There will be no point in having separate systems.

    So PMS and CRS – and likely CRM as well - will merge and this new system will be the most critical piece of technology that hotel companies use. Think of all that functionality which has to be in this central system. It will have to include all the typical PMS features such as check-in, check-out, guest invoices, housekeeping, and night audit.

    Now who is going to develop this? Who is going to deliver this software? Well, it’s easier (not easy, but easier) for PMS companies to add CRS functionality to their system, than for CRS companies to add PMS functionality. Just think of room numbers. You PMS people know all about room numbers. CRS’s generally don’t even have a field for room number.

    So that’s the chance for you PMS vendors. If you want to get back in the game big time, if you want to take on Pegasus and Micros, you better start thinking of this ASP based combined PMS and CRS, because you can do it better than anyone else out there. Yes, it will take some guts, it might take some financing, and it will take some hard work. But this is how you can become king again.

    The thing is you can’t do it alone. Even with the best technology, you need some pioneers among the hotel companies. You need some customers out there willing to take risks. You need some people willing to believe in this future and go for it.

    Looking back at the Fidelio success, we didn’t do this in a vacuum. We needed some hotel groups and hotel managers to take big risks. Some virtually risked their career on us. Early adaptors such as Mövenpick, Swissotel, and Steigenberger chose Fidelio when we were quite unknown. Famous properties such as Peninsula Hong Kong, the Ritz in Paris, Victoria Jungfrau in Switzerland gambled on Fidelio as well. These hoteliers made daring decisions by choosing Fidelio, knowing that we didn’t cover all their requirements. Yet they believed that we would be able to deliver. And we did our best not to disappoint any of them.

    So is there any hotelier out here willing to bet his or her uture on a small and unknown vendor with a revolutionary but unproven solution? People used to say “nobody every got fired for buying IBM.” Well here, it’s more like: “nobody ever got fired for buying Micros.” But then again, nobody makes a difference by buying Micros.

    So let’s see some more daring hotel companies. Let’s see some daring consultants. How about you HFTP Hall of Famers? Come on people; show us that you’re still willing to make a difference!

  5. Hospitality begins at check-in - By Doug Kennedy

    Despite all the technology advances in front-office systems, at most hotels the check-in process itself has de-evolved into a scripted, robotic and heartless business transaction.

    Few commonly asked questions are:
    "Checking in?”
    “Your Name?”
    “Here you go.”

    How silly the question “Checking in?” must seem to an arriving guest, as he or she stands in the lobby, luggage in tow and credit card in hand. I’m sure more than one guest has been tempted, as I have, to reply sarcastically “No, I’m not checking in, I just stopped by the front desk lobby with my luggage to check out your artwork. I’m actually a connoisseur of hotel lobby artwork and I heard you had some great pieces in your collection here.”

    How to go about:

    Welcome every guest upon arrival
    Avoid asking obvious questions, instead, offer assistance
    Bring out the best in guests, vs. reacting to their demeanor
    Properly end the transaction
    Personalize your wrap-up remarks according to the human interaction that the guest just had
    Welcome guest one more time

  6. The 5 Hottest Hospitality Tech Trends – Microsoft

    Hotel rooms that can access everything from your favorite food to your musical preferences - while running on technology that's clever enough to repair itself - might sound like a page torn right out of a pulp sci-fi novel.

    No more "20 questions" at check-in. Remember all those queries when you pick up your room key, such as, What kind of newspaper do you prefer? Would you like a poolside or oceanside room? Asking such questions eats up hotel employees' valuable time and, after a while; guests get tired of answering them. New customer relationship management (CRM) tools allow a hotel to gather guest preference information from various systems at property level and distribute them throughout the company. So your hotel knows what you like, right away.

    TVs that deliver music, movies - and much more. Today's leading-edge hotels have in-room systems that do far more than allow guests to watch their favorite first-run movie. They can also control in-room music, provide gaming options, display your bill - even control the thermostat and lights.

    State-of-the-art media and services delivery are offered today through the Microsoft Media Center by using plug-ins. See some of the latest plug-ins to Media Center at Windows Marketplace. For more on direct media delivery for in-room services and entertainment, see the latest on Microsoft IPTV.

    Find yourself (and pay for lunch). People in the hospitality industry have found a variety of uses for new radio frequency identification (RFID) technology - from helping guests find each other at a ski resort to allowing them to pay for a meal. That's because, increasingly, this technology is gaining traction with hotels and resorts in the form of cashless payment systems that can be used on-property and, more and more often, off-property as well.

    Back-office systems that are actually on speaking terms. Hotel guests might not have noticed this (and if it was done right, they shouldn't have), but applications that handled property management, food and beverage, and sales and catering functions often couldn’t communicate with one another easily. Now they can.

    Self-healing hotel technology. A hotel's information technology (IT) systems are typically managed in a reactive way, which is to say that when something breaks down an IT person is called upon to fix it. But bringing systems offline to repair them can affect the whole operation - think of the long check-in lines when the credit-card systems aren't working. The solution. A dynamic platform that constantly monitors a hotel's systems for problems and fixes them before they affect the whole property.

    A large multi-concept fine dining chain has added a system to keep an eye on its restaurant-level systems and enterprise servers. This system controls everything from the deployment of operating systems to the handheld devices the company's employees use. System problems and failures are reported to the IT help desk as they occur; minimizing the time it takes to get mission-critical systems back online.

  7. Hoteliers turn to the network to reduce costs and raise revenues
    – James A. Martin


Small and medium-sized hotels (those with up to 1,500 employees) are deploying advanced, network-enabled technologies to increase customer loyalty and revenues, streamline IT resources, and reduce operating expenses. The hoteliers are implementing in-room broadband services and IP phones, wireless LANs, networked management applications, and more.

Leisure and business travelers alike are coming to expect hotels to offer high-speed, secure Internet access throughout the property. "We have to deliver or be left behind," says Jeff Jones, food and beverage director of Hawthorne Inn & Conference Center in Winston-Salem, North Carolina. Hawthorne Inn recently deployed free wireless Internet access to its common areas (conference rooms, lobby, and restaurant) as well as to all of its 155 guest rooms.

Amy Cravens, senior analyst for market research firm In-Stat, notes that the costs to install a wireless LAN are minimal,

because hotels may only need to add wireless routers to an existing LAN. Increased guest loyalty and consequent higher occupancy rates can help defray the costs-and, in some markets, hotels can charge guests for use of the wireless network.

Subtracting Costs, Adding Revenue Streams

In the past, most hotels had two separate networks: a traditional private branch exchange (PBX) phone network, and a data network that handled the property management system (PMS). Now, to reduce operational expenses and create new revenue opportunities, many hotels use a single converged IP network to deliver data, telephony, high-speed Internet access, wireless access, and interactive multimedia.

The Hotel Beau-Rivage in Geneva, established in 1865 and still run by the founders' family, installed a converged IP network in 2005. The network provides video on demand for guests and IP telephony for guests and staff, and supports the PMS and other back-office applications. Clement Leblanc, the hotel's administrative and IT manager, says the IP network "erases the maintenance costs" of traditional PBXs and brings the hotel new revenues from video on demand and fee-based in-room broadband access. He also notes that the IP network allows the Beau-Rivage to easily and cost-effectively introduce new services. "Our next project is to provide guests with videoconferencing," he adds.

Reinventing the Hotel Phone

Easy-to-use IP phones let hoteliers provide guests with a wealth of services. For example, V/IP Suite, a hospitality solution from Istanbul-based software provider Nevotek, allows people to use the IP phone's screen to get real-time information such as current weather conditions and airline schedules. Tankut Turhan, Nevotek's chairman, says that the software also allows hotels to use the phone displays to:

  • Broadcast information about local attractions and restaurants, taking pressure off the concierge

  • Advertise promotions for hotel restaurants, spa facilities, and additional stays

  • Generate advertising revenues from local businesses, such as a promotion announcing special menu items at a nearby restaurant

What's more, the "wow factor" of IP phones encourages guests to make calls, restoring a revenue source that cell phones had all but extinguished, according to Tom Colman, IT purchasing manager of the privately owned Crowne Plaza Hotel at the Dublin airport. By using the IP telephony system provided by PlanNet21 Communications, a Cisco Gold Certified Partner, the hotel can offer affordable long-distance rates to guests, he says.

Making an IP Investment The costs to convert to a converged IP network depend on the networks already in place, the new applications, the number of users, and other criteria. There are many variables, but on average, a hotel that has 100 rooms can expect to invest approximately $200,000 in a fully converged IP infrastructure, estimates Turhan. The investment usually pays for itself within three years, he says. For example:

  • The hotel will have a single network infrastructure to support, instead of two or more

  • Your existing IT staff can be trained to manage the data, voice, and video system

  • Managed service providers and value-added resellers (VARs) can help you design, deploy, and manage the IP network, instead of hotel staff needing that expertise. For instance, the entire IT infrastructure at the 40-room Tulip Inn Knowledge Village hotel in Dubai, United Arab Emirates, is outsourced to Dubai Internet City, a government-supported managed service provider recommended by Cisco

Before planning its new network, a hotel should arrange for a complete site assessment from a VAR or managed service provider, recommends Mike Linville, COO of Bald Eagle Technologies, the Cisco SMB Select Partner that helped Hawthorne Inn. "It's important to make sure you're implementing the right technology, that your network is secure, and that you have enough wireless access points," he says.

Deployments of network infrastructures with IP phones, videoconferencing, and interactive in-room entertainment are expected to increase for hotels of all sizes, according to Nicolas Florange, deputy manager and senior engineer of PSideo SA, a Cisco Registered Partner in Switzerland. "Soon, being at the forefront of technology won't be a big differentiator," Florange says. "Instead, having the technology will be a requirement to survive."

For five to seven star chain properties, it encompasses the entire spectrum of a hotel’s operations at property level and Head Office central MIS.
For medium size properties from 50-250 rooms, which require reduced functionality at a lower price and yet manage its operations efficiently.
For small to medium size resort or city boutique hotels with less than 50 room, it provides better features than off the shelf software at a competitive price and yet scale up to sprint when required.
For fine dining and table service restaurants, it is a fully integrated solution with POS, Financial, Cost control and Guest Experience.
SevenSeas Computers LLC