Time to Invest: Predicting What’s Next for Technology in Hospitality

Time to Invest: Predicting What’s Next for Technology in Hospitality


3/1/2012

Douglas C. Rice


One of the biggest challenges for any technology executive is predicting the landscape of toolsets and IT infrastructure that will be available in the future. If you make the right choice, today’s investments may last for 10 or even 20 years. In contrast, the wrong choice could force you to replace core elements of your systems strategy in half that time, or less.

The hospitality industry is largely a consumer of these building blocks, which include such things as network protocols (think TCP/IP), materials (silicon, copper, fiber), data protocols (SQL, ODBC), operating systems (Linux, Windows, iOS, Android), and presentation and messaging protocols (HTML, SOAP). These are not developed for hospitality; rather they serve a wide variety of consumer and business needs. The building blocks just referenced are familiar names in the industry now, but how can you determine what the building blocks of the future will be?
One of the best lessons I learned from a wise person many years ago was that if you want to predict the future, find out where the big money is being invested. In technology, this means learning where the industry giants are investing their billions in research and development (R&D) – companies like Microsoft, Intel, Apple®, Cisco, Google, Oracle, IBM and AT&T, to name just a few. When many of them invest in the same building blocks, you can count on those building blocks becoming mainstream and supportable for many years to come. If you were watching these barometers, you foresaw the end of the mainframe era. You also saw the Internet coming years before the dot-com boom began, and you anticipated the mobile app revolution.



A Window to the Future

One of the great privileges I enjoy from the vantage of running on of the hotel technology industry’s largest trade associations is frequent opportunities to see the world from the vantage point of many different industry technology leaders, including those that focus on hospitality, as well as those serving the broader technology space. HTNG’s regular face-to-face meetings of industry technology leaders offer great insights into where technology industry leaders expect to go in coming years, and how hospitality technology providers view those trends. These insights provide clues as to which investments will be future proof and which will be risks.

The Cloud

Despite that no one really even agrees on the meaning of the word, there is no question that the cloud is by far the biggest area of investment. Microsoft, Amazon, Force.com, Apple, and now even networking companies like Cisco are placing huge bets on moving complexity and cost up the wire, away from the user and into data centers where they can benefit from scalability, shared support resources and load balancing. You can argue that much of the money being spent is on marketing hype rather than technology, and there is undoubtedly some truth to that point of view. But these companies would not spend money on marketing if they didn’t expect sales, which means they expect to deliver product. We are only in the early days of the cloud revolution currently, but the amount of money these companies are spending ensures that it will catch on.
One of the most important aspects of this, from a hospitality perspective, is the development of cloud service brokerages. In an industry where the dozens of different systems controlling a hotel must be mashed together from different parties – at a minimum this includes the building owner, the management company and the franchisor – if services are going to be cloud based, there must be cloud-level interoperability. Brokerage services can be thought of as cloud-based middleware that ensure robust and reliable communication between cloud-based systems operating in different clouds. They are what will enable a cloud-based CRS running in the Force.com cloud, for example, to easily connect with a cloud-based PMS running on Microsoft Azure. They can also allow a hotel company to engage a single vendor to manage the aggregation, integration, customization and governance of cloud services. Intel is one of many companies making big investments in the cloud services brokerage arena, which by definition are independent of any single cloud services provider.
This is good news for hospitality. It holds the promise of relieving the hotel owner of responsibility for managing the operation and integration of premise-based systems, with associated costs for deployment, equipment and maintenance performed by on-site or locally based staff. There is a healthy debate as to which technology services must remain premise based to avoid major problems in the event of network outages. But the number of hotel technologies that are proving to be robust in cloud deployments – at least in parts of the world with good Internet access – are growing every year as obstacles are overcome. There is a distinct possibility that every aspect of hotel technology except for end-user devices and portions of the network infrastructure may ultimately move to the cloud.



Mobility

Turning from infrastructure to hardware, it’s hard to deny that the big money is moving to mobility. Apple may have been the first of the megacompanies to figure this out –arguably, they became a megacompany by doing so – but other giants like Samsung, Microsoft and Amazon have also been leading the charge. Tablets have not yet fully replaced PCs in business travel, but the gap is narrowing rapidly. Indeed, the form factor of notebooks is getting smaller as that of tablets gets larger. We are fast approaching the day when the difference between the two is the presence or absence of a paper-thin keyboard.

For hospitality, this creates both opportunity and challenge. Mobility gives us the ability to communicate with our guests and staff in real time. This capability can be used to both define new service models and revenue streams, and to improve existing ones. Today’s challenge is that mobility requires massive investment in wireless infrastructure and bandwidth. (More about that challenge in the third trend.)

The key takeaway for hospitality is that when you invest in user interfaces, it will typically be wise to design for mobile devices first, rather than for PCs. Certainly this is true for applications that face guests, but also for staff-facing applications where the staff is or could benefit from being mobile. This includes a large proportion of front-of-house, back-of-house and guest-facing hospitality applications.

Don’t bet on a particular operating system, the leadership in this area will change based on competitive dynamics outside the control of anyone in hospitality. Multiplatform toolsets such as HTML5 are widely supported and are becoming de facto standards for deployment of applications across multiple platforms. While not yet perfected in all environments, it’s the clear winner in overall investment by mobile operating system and device manufacturers.



Cellular Offload

Mobile devices create the need for massive bandwidth. iBAHN collects extensive data on these trends, which it has generously shared with the industry, and the data is downright scary: bandwidth requirements are roughly doubling every year, with mobile devices leading the way.

Many hotels have shortchanged the investment in upgrading bandwidth and supporting Wi-Fi infrastructure, believing that the migration of mobile devices to 4G/LTE cellular technologies will solve the problem by ultimately reducing or eliminating Wi-Fi. But a look at where the megacarriers are investing proves this assumption completely false.

Carriers such as AT&T, Verizon and Sprint realized in 2007 to 2008 that the data tsunami was coming, and there was simply not enough cellular radio spectrum for them to outrun it, even given future advances in cellular technology through LTE and beyond. Carriers such as these and their counterparts in other countries know they cannot satisfy the demand for mobile data with cellular technologies, at least not in densely populated areas. Their strategies for satisfying the need are based on moving cellular traffic to terrestrial networks – meaning Wi-Fi. Virtually all major carriers in developed countries are aggressively investing in what they call offload, meaning they are building out or gaining access to Wi-Fi networks, and enabling their devices to roam onto these networks automatically. If you have an AT&T smartphone and leave wireless enabled, and walk into a Starbucks, McDonalds, American Airlines Club room or Hilton-branded U.S. hotel, you have probably already experienced this. These few examples exemplify the economics: in congested areas, it is far cheaper for a cellular carrier to build or fund a Wi-Fi network, than to install an additional cell tower and/or buy additional spectrum.

This is good news for hotels, because it means that cellular companies have an economic reason to help fund hotel Wi-Fi networks. In New York and San Francisco, where cellular coverage is saturated, some carriers have gone so far as to offer free Wi-Fi networks to certain hotels, because it was the least expensive option for them to satisfy the needs of their customers. Hotels in less congested areas won’t get free Wi-Fi networks anytime soon, but many hotels can now find, at a minimum, willing investment partners to help offset the cost of a Wi-Fi network in return for the ability to route cellular traffic through it. In remote areas, the cellular network may be sufficient to meet consumer needs. Urban and suburban hotels are well positioned to benefit from this trend, but will need to forge appropriate alliances with carriers to do so. Over time, carriers expect roaming models to develop, enabling phones from different carriers to offload to a single Wi-Fi network, with payments to the provider of that network based on traffic volumes or other factors.

There are many risky bets in technology, but a few safe ones. When you are making decisions on investments, strive to determine the major trends, and then invest in solutions that align with those trends. If you aren’t looking at the cloud, expecting the user interface to migrate to mobile devices, or thinking about how your hotel can benefit from carrier investments in Wi-Fi, you’re probably missing the boat.



Douglas C. Rice is the executive vice president and CEO of Hotel Technology Next Generation.







www.htng.org

Benefits from BI in Hospitality

Every Business today take advantages of Business Intelligence solutions, so Hospitality is one of them.
I tried to spot the most important benefits that hospitality industry has from Business Intelligence:


- Profile Guest & Business Segments by any combination of criteria. Break out, analyze and compare these segments on demographics, stay patterns, etc.

- Identify your best guests & uncover those with the highest potential for additional nights or services

- Perform Drill Down & Side-By-Side Analysis or filter on any variable with no limitations to “dimensions” and no cubes to rebuild

- Compare alternative target segments or multiple characteristics side-by-side, even if they overlap

- Track Performance across time: Guests, Return Rate, Length of Stay, Frequency, Recency, Room Rate, upgrades, etc. Track by: Division, Product Line, Guest

Segment, Booking Source/Channel, Geography/Property…any variable on file

- Identify Challenges & Opportunities to quickly spot where your business or guest segments are excelling or under-performing. Monitor changes and easily drill down to see the factors driving this performance

- Access Executive Dashboards tailored for at-a-glance & measuring performance, right at the fingertips of managers across your organization

BI in Hospitality

Success in the increasingly competitive hospitality industry is dependent on prompt knowledge of what’s going on in the operation. The need to know customer information: who they are, what they buy, and how likely they are to come back again, can be elusive. Additionally, the time-sensitive nature of business metrics makes it difficult to answer certain questions such as: What are daily sales results on an individual property? What are the average expenses per day? What are labor costs? What is the daily cash position? The sheer volume and time-sensitive nature of events in the hospitality industry can be overwhelming. Hence information becomes the essential ingredient to success in the hospitality industry.


A Business Intelligence solution enables analysis by exception and gives decision-makers of multi-location organizations a robust way to decipher and analyze information gathered at each level. BI tool helps aggregate, process and visualize data from disparate sources, multiple applications, allows decision-makers to quickly identify and address trends or potential problems. BI enables decision-makers to move from speculative decision-making to fact-based decision-making based on knowledge.

Business intelligence is simply the people, processes, and technologies that turn data into information. It is the key strategic opportunity for successful hospitality corporations.

Information Challenges in Hospitality Industry:

- Enormous amounts of data in multiple, disparate systems makes single enterprise wide view becomes challenge

- Revenue management is dynamic and constantly changing resulting complexity in pricing optimization and forecasting strategies

- Tremendous challenge in meeting customers’ expectations and preferences due to constant pressure of capturing, analyzing, and creating the right message / offer using the right medium and at the right time

Why BI:

- Essential tool for protecting market share

- Identifying unproductive rate strategies

- Uncovering new revenue opportunities

- Beat the competition

- Dynamic MIS & ad-hoc Reports to understand your current market position

- Illuminate future performance trends

- Compile detailed picture of competitive environment (who is traveling & from where)

KPI for Hospitality Business

Important Calculations (BI) for Hospitality



Key Performance Indicators (KPI) for Hospitality industry help remove the guesswork from managing the business by checking the numbers that tell what’s really happening.
There’s a business saying: ‘If you can’t measure it, you can’t manage it!’ Real, responsive management needs reliable and truthful figures on which decisions can be based. If there are problems, you can take corrective action quickly. If you are having success, you’ll know to do more of what you’re doing! Good figures also give you a wider understanding of your success – sometimes if it’s a quiet month (when your suppliers are telling you that ‘everyone’s quiet!’) you’ll see that some of your KPIs are actually improving (ex. sales per head).
KPIs in Hospitality industry can be categorized for functions like Reception, Housekeeping, Maintenance, Kitchen, Restaurant, Sales, Store, Purchasing, etc.
Staff KPI:
- Wage Cost %: wage costs as a percentage of sales
- Total Labour Cost %: not just wages but also the other work cover insurance, retirement and superannuation charges and other taxes that apply on your payroll
- Total Labour Hours: how many hours worked in each section. This is useful to compare against sales to measure productivity
- Event Labour charge-out: Hotels usually charge-out service staff at a markup on the cost of the wages paid. Are you achieving a consistent mark-up?
- Labour turnover: number of new staff in any one week or month
- Average length of employment: another way to look at your success in keeping staff. Add up the total number of weeks all your people have worked for you and divide this by the total number of staff
- Average hourly pay: divide the total payroll by the number of hours worked by all staff
Kitchen Management KPI:
- Food Cost %: measured by adding up food purchases for the week and measuring them against your food sales
- Total Food Costs: how much was total food bill? Sometimes a useful figure to show staff who think you are made of money
- Food Costs per head: see every week how much it costs to feed an average customer
- Kitchen Labour %: measure kitchen productivity by comparing kitchen labour against food sales
- Kitchen Labour hours: how many hours worked in this section? Compare against sales to measure productivity
- Stock value: food stock holding- It should be less than a week’s use, but can slip out if you are storing frozen food
- Main selling items: weekly sales from POS or dockets & know the best sellers and map these on the Menu Profitability
- Kitchen linen costs: cost of uniforms, aprons & tea-towels can be a shock! How many tea-towels are being used each day?
Front House Management KPI:
- Total Sales Per Head: total sales divided by number of customers. This may vary between different times of the day
- Number of customers: simple! A good measure of popularity
- Food, Dessert, Beverage Sales per head: how much your menu appeals to your customers (do you have all the choices they want), & how well your staff are selling.
- Seating Efficiency: how well are tables being turned over while still offering high quality customer service
- Basket Analysis: how many items do lunch customers buy? What else do morning coffee drinkers order? Grab a pile of dockets and look for ordering patterns
- Linen costs: uniforms, aprons etc.
- Front of House Labour %: how many hours worked in this section? Compare against sales to measure productivity
- FOH Labour hours: how many hours worked in this section? Compare against sales to measure productivity
- Customer satisfaction: Feedback forms, complaints and other methods that are hard to quantify sometimes but worth making an attempt.
- Strike rate: if 500 people came to hotel last night & only 100 ate at the bistro, your ’strike rate’ would be 1 in 5, or 20%
- RevPASH Revenue per Available Seat Hour: take the total number of ’seat hours’ and divide total revenue for a period by this number
Bar & Restaurant Management KPI:
- Sales per head: how much your beverage and wine appeals to your customers and how well your staff are selling
- Gross Profit on sales: difference between what you sold and what it cost you. The sales mix can influence this heavily
- Average Profit % on sales: useful to see if your sales are holding steady, although ultimately the actual Gross Profit (real money) will matter the most
- Stock value: It’s worth checking with your suppliers and seeing how much you can order ‘just in time’
- Stock turnover: how fast is your cellar stock selling?
- Carrying cost of stock: what is the cost of financing the stock?
- Sales / stock-take discrepancies: Alcohol is security problem, & keeping an eye on ’shrinkage’, staff drinks and stealing a constant problem
Banquet Sales Management KPI:
- Number of customers: simple! A good measure of popularity.
- Visits by your top 100 or 200 customers: they provide a huge proportion of your sales! Track their frequency and spending – these people are gold!
- Sales per head: across all areas
- Marketing and advertising costs: total value of spend, always trying to measure it against response
- Response rates: how many people responded to different campaigns and what effect did this have on profit?
- Press mentions: keeping your eyes open for favourable mentions
- Bookings: in the current week and month and coming up. Also in peak times, eg Christmas.
- Event inquiries: No. of inquiries about large bookings & functions, especially if a campaign to promote them is on
- Sales inquiry conversion rate: No. of inquiries that turn into actual sales. why so few people were ‘converted’ – was it the quality of the promotional material, skill of the sales staff, pricing or make-up of your function menus and facilities?
Finance & Admin Management KPI:
- Cash position at bank: how much do you have available after reconciling your cheque book?
- Stock-take discrepancies: measure of efficiency of each department, but also of administrative systems in place
- Total accounts due: how much do you owe?
- Total accounts payable: needs careful management if you have accounts, eg large restaurants
- Return on Investment: profit business makes can be measured as a percentage return on the amount invested in it
- Taxes owed: to know how much is owed at any one time so it is not ’spent’
- Sales & costs: actual figures compared to what budgeted for a period
- Administration labour costs: strong and skilful administrative support will be essential to manage the KPIs listed above!
- IT efficiency: how much down-time for IT systems? How accurate is the POS system?
Other KPIs:
- Revenue per available room
- Average daily rate of rooms
- % of occupancy of rooms
- Average cleaning costs per room
- % of reservation requests cancelled with / without penalty
- % of rooms with maintenance issues
- % of cancelled reservation requests
- Average number of guests per room
- Average length of stay of guests
- % of non-room revenue
- % of cancelled rooms occupied
- Kilowatt-hours (kwh) per room
- Number of hotel guests per employee
- Gross operating profits per available room
- % of guests who would rank stay as exceeding expectations
- Waste per night per occupied bed space
Provided by: Maia Intelligence, edited by: Besim Ismaili