Hotel IT Departments Fight for Relevance
By Mike Kistner, President, Chief Executive Officer & Chairman of the Board, Pegasus Solutions
I recently had to give a prediction for the future of IT in the next five years to Computerworld magazine for their list of premier leaders in IT. They asked me to offer my boldest, most out-on-a-limb prediction. Mine was that the traditional IT department operating in a specific industry will cease to exist as IT will continue to migrate towards the community model. If you work for a major hotel company in an IT position, the nature of your job will change, period.
My evidence? The Industrial Revolution. For the hospitality industry to accommodate today’s demands, often using yesterday’s systems, it comes down to division of labor. Also known as economic specialization, division of labor is defined as assigning specific, circumscribed tasks and roles to those best suited, or skilled, to fulfill them, which ultimately leads to the rise of total output and trade, i.e. capitalism.
Demand increases from a transaction volume and complexity standpoint
The recent positive business trends we’ve been reporting in The Pegasus View continue to prevail. Booking volumes for the combined channels of global distribution systems (GDS) and alternative distribution systems (ADS) have, at times, reflected double-digit growth over the prior year, with future bookings through September indicating similar good news.
In both channels, which reflect business and leisure travel respectively, it is undoubtedly consumer demand that is the driver. Decreasing supply growth is certainly a key ingredient, but RevPAR gains are clearly being fueled by higher occupancy. Increasing demand, from a transaction volume and complexity standpoint, necessitates a new look at hotel reservations technology.
In the world of hospitality IT, property management systems (PMS), back office systems, central reservation systems (CRS) and many other core periphery systems never accounted for the volume or the business complexity being placed on them today – we’re processing as many as five billion transactions a month with look-to-books increasing more than 50% above what they were a year ago. As the industry comes out of the economic trough, advanced hardware, applications, and delivery models will enable suppliers and distributors to optimize their revenues and reach new markets.
Yesterday’s systems – legacy technology and the design-build-run development model
While “yesterday’s systems” alludes to legacy technology, it might be better suited referring to yesterday’s development model, which was design-build-run. In the interest of better, faster and cheaper (because how else can you increase total output and trade?), we should be designing, building and controlling – letting those better suited or skilled than us handle specific technology tasks. This is where we arrive at software as a service (SaaS), above property and cloud computing, three concepts that have been gaining considerable ground in the hospitality industry since the economy significantly declined in 2009.
What was once only affordable to large chain hotels in terms of advanced features and functions can now be delivered to all segments via transaction-based business models. For organizations already in this model, the next step is the integration of platforms in a service-oriented architecture. Many systems today are interfaced, but full integration allows the sharing of information seamlessly.
A rise in total output and trade for a hotel can be achieved by addressing a variety of factors – from distribution and availability/ease of booking for new guests, to loyalty programs and optimizing the actual guest experience to generate repeat business. The ultimate rise, however, is achieved by addressing all of these factors, and then some, collectively.
The intersection of CRM, PMS and CRS translates to a guest-centric model
The organizations that can most effectively cater to guests’ needs, from their decision to book until it’s time to check-out, will capture guest loyalty and, ultimately, market share. The three systems most crucial for optimizing the guest experience are: CRM (customer relationship management) system, PMS and CRS. Contrary to the practices of many, it isn’t enough to just possess sophisticated technology. In order to achieve superior guest satisfaction these systems must work together seamlessly in a truly integrated environment, providing real-time interaction.
For instance, advanced systems are able to alert multiple departments of an incoming guest’s various preferences. This allows the front desk to assign the perfect room and be ready with frequent stay program amenities upon check-in. The concierge can order tickets and set resort or spa appointments prior to, or right at, arrival. Housekeeping is able to receive a report detailing a guest’s need for an allergen-free pillow and specific items stocked in their mini-bar. Room service can be prompted with a queue of pre-orders to ensure food is fresh and on time. Through cloud computing the thermostat can pre-set itself to the guest’s desired temperature and the television can be tuned to her favorite station. Every one of these actions is possible even before the guest has stepped off the plane.
That is the power of seamless systems integration, and the true meaning of a guest-centric service model, which ultimately facilitates the delivery of a highly personalized and positive customer experience. Not only individual operators, but the industry at large, must work toward a technological environment that can seamlessly surpass guest expectations, and do so effectively and cost-efficiently.
Are you a technology company or a hospitality company?
Recently, we announced a relationship with HP that positions us well for taking advantage of this “software as a service” model. Shared platforms will result in innovative solutions that can help hoteliers better understand and track their customers’ preferences, identify new sources of revenue and increase operational efficiencies. Other companies are forming similar alliances, openly cooperating, both within and outside the hospitality arena.
In August of last year, CIO magazine led a story about CIOs evaluating shared IT infrastructure and applications with a look at discussions by the Hotel Technology Next Generation (HTNG) board about appropriate areas for shared services in hotels, including shared property management systems, reservation systems and networks.
In discussing CRSs the top hotel companies have invested in and implemented, the author also discussed the mundane transaction-processing created through extensive aggressive shopping, an area where costs could be cut through a shared, industry-wide system.
The article also featured a prophetic quote from Todd Thompson, CIO at Starwood Hotels & Resorts Worldwide, about driving down operating costs and freeing resources for more ground-breaking endeavors, which also speaks to the fate of today’s large IT department. A quote many an IT professional would be wise to note.
"Do we want 100 people working on developing and maintaining a hotel reservation system? Or do we want 100 people focused on building innovative solutions for our company?"
Change or die? Maybe. Those who recognize the opportunity to change their organizations to take advantage of today’s technology will need to do more than a technology refresh. They will have to reassess how they sell and distribute inventory to take full advantage of optimizing today’s technology. Purchasing more CPUs, mainframe capacity, or rewriting a Graphic User Interface (GUI) is only a temporary treatment of the symptom. Organizations will need to address the cause to compete, and the time for addressing the cause is now, before your IT department becomes a burden to your organization, and while you can still answer the question, “Are you a hospitality company, or a technology company?”
Mike Kistner is Chairman, President and Chief Executive of Pegasus Solutions. He joined Pegasus from Best Western, where he was CIO and SVP of distribution. Mr. Kistner holds a BS from Northern State University, Aberdeen, S.D., and a MS in Information Systems from Colorado State University. He is the past Chairman and current member of the e-commerce committee of the AH&LA. From 2000 to 2005, he served as Chairman of the Open Travel Alliance (OTA) and has been recognized as one of the leading CIOs in the hospitality industry. Mr. Kistner can be contacted at 480-624-6450 or firstname.lastname@example.org Extended Bio...
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