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Beautiful. That is the one word we can use for the setting of this year’s CIO Summit at the Loews Coronado Bay Resort & Spa in Coronado, Calif. From the opening barbecue along the back patio on Coronado Island overlooking downtown San Diego to the golf tournament on a picturesque course surrounded by rocky mountains, to the variety of attendees and speakers, to the beneficial program content and networking, and on to the dinner cruise through San Diego Harbor on the final evening, it really was a fantastic conference.
Over 45 from the major hotel, casino, cruise line, management and timeshare companies assembled for Hospitality Upgrade’s 7th annual CIO Summit. Attendees traveled from as far away as Hong Kong, the United Kingdom and Switzerland, as well as across North and Central America.
When the 2008 attendees were asked whether they would recommend the conference to others, 100 percent responded, yes. Jake Star, VP technology, HEI Hotels and Resorts, said, “This is the best conference I have ever attended. Unlike so many conferences where I am presented to, this was about discussion. Besides getting to know my peers on a personal level, this conference gave me the opportunity to focus on key issues in my current role, and see how others are addressing them.”
This year’s conference topics focused on IT value within the hospitality industry. From aligning IT within the company’s business goals to identifying revenue growth opportunities and being able to validate them, the sessions proved insightful and valuable.
Sheila Donahoe, VP, chief information officer, Bluegreen, and a first-time attendee this year, said one of the most useful sessions was the panel discussion with the CIOs from Mandarin Oriental, Harrah’s, Starwood and Carlson. “It was a fabulous panel of speakers with a lot of general knowledge and experience to impart upon an audience,” she said. “I like it when the CIOs do the presentations; what works, what doesn’t work, leadership struggles. It was the first time that I sat through an entire conference all day, in sessions full time [and felt like I got a lot of benefit from the conference as a whole].”
Day One: The CIOs Meet The 2008 CIO Summit began with the annual golf scramble. Seven foursomes competed for bragging rights on the Sycuan Resort Golf Course in El Cajon, Calif., a beautiful course that winds through the natural terrain using the mountains and natural rock outcroppings to add further challenge (and frustration) throughout the round. The round was followed by the opening barbecue, where attendees had the opportunity to meet and get an introduction to the planned summit program.
Day Two: The Sessions Begin David Miles, associate director, IT advisory services, KPMG, LLP, and Vimarsh Bakaya, senior research director, Corporate Executive Board, got the conference off to a quick start with a session on IT Value Creation.
A highly interactive session, Miles began by examining the characteristics of an IT environment, and then discussed the typical challenges in creating the ideal future state. “If you don’t have a shared idea of value in the organization, if you don’t have good communication in your organization, that’s probably your problem, or that’s probably going to be your problem,” he said. “The importance of understanding the values of IT from the top, that governance is key to any organization. If you don’t have good leadership, good governance, you are going to have a very difficult time being successful.”
Paula Eylar, VP of technology and systems, Boyd Gaming Corporation, agreed, and said that if you talk to the CEO like IT, he or she won’t get it. “You have to educate from top to bottom in your staff. If you don’t, they won’t be able to help with the business process,” Eylar said.
Gary Thomson, SVP & CIO, Choice Hotels International, Inc., added that his company implemented governance about three years ago. “It was a really tough road and it still is,” he said. “It’s only good from the CEO down, establishing value, setting priorities. It is such a huge deal, but we are still working on it.”
Miles concluded his portion with a discussion of the hot priorities for IT organizations, including improving service levels, improving disaster recovery capabilities, increasing IT security, reducing the cost of ongoing IT maintenance and support, and improving the skills of IT staff.
Bakaya focused on the importance of the value measurement, extending IT’s value perimeter and highlighted identifying the right opportunities.
Todd Thompson, CIO, Starwood Hotels & Resorts Worldwide, Inc., has seen the importance of value measurement first hand. “In my last two roles, I have replaced CIOs who overstepped their bounds and I also believe they led the organization to spend money – way more than they should have. It is better to do a value measure. For the most part, I believe we need to put the business at the lead,” Thompson said.
Darla Morse, vice president, Walt Disney World, added to the importance of keeping IT in the mix. “Assumption No. 1 is that the business knows what they want,” she said. “We have a team that focuses on innovation/technology innovation with finance measuring value; IT should do it. It should result in the balance sheet and it doesn’t.”
Thompson added that Starwood has done a value measure like this. “The company identified where we needed to rise to the occasion. I think it was valuable,” he said.
After Michael St-Laurent, director of information technology for Gemstone Hotels & Resorts, asked about the staff resources and time requirements of a measure like this, Thompson replied that it took less than a week with two or three people, and was not staff intensive.
Barry Shuler, SVP and CIO, Ritz-Carlton Hotel Company, made an excellent point to which most in the audience could relate. “When IT organizations actually reduce IT costs, we can get the credit. When the business side has a reduction, our business partners get the credit; we never get the credit. I’m not bitter,” he said to roars of laughter in the audience. “When IT is a big component, just once, I would like them to meet me half way and speak my language,” Shuler said.
Bakaya added that the IT department does have to take the initiative for this reason. “I want them to see the dollar spend on IT is more important than the dollar spend on other departments. IT will have to kick start this (valuation/performance evaluation),” Bakaya said.
In closing, Gary Thomson then asked, “What does it cost to do a value measurement (relative to the size of the organization)?”
Bakaya said it can be tough for companies to find the funds, “It varies by revenue and size, but there is no way (most companies are) going to spend 1 percent of revenue on value measurement.” That is the challenge of value measurement.
Next, in another very popular session, attendees got to hear from four CIOs about creating and enabling value for their organizations. The four are from very different companies and have very different processes and approaches to the market’s business challenges and the IT function. Nick Price, CIO/CTO, Mandarin Oriental Hotel Group Ltd.; Tim Stanley, CIO and SVP of innovation, gaming and technology, Harrah’s Entertainment; Todd Thompson, CIO, Starwood Hotels & Resorts Worldwide, Inc.; and Paula Winkler, VP, CIO, Carlson Hotels Worldwide, served as this session’s experts.
Price began with his description of value. “I think there is only one accurate definition of value; the value through which our customers judge us,” he said. “In the luxury business, value is not cheap. If you are going to invest in anything, invest in service,” he added. “It is the people that are remembered. We look for opportunities where we can be smarter than other companies. You have to innovate. Customers are innovating their lives all the time. We have to keep up with them. Know the customer. It would be nice when you check in if they would say welcome back. It is not the fault of the people at the hotel. It is the system's (fault). It is a missing element that we need to focus on.”
Price said Mandarin Oriental has invested a lot in interim systems, and said it was because the company is creating a brand. “As a luxury player, you can’t follow, you have to lead. You can’t copy luxury and succeed,” Price said.
He also referred to an even bigger investment in his opinion. “Invest in the right people,” he said.
Stanley agreed with Price. Stanley said that after he joined Harrah’s, “It was clear that customer service drove value.” It was also clear that growth was a goal. “Part of the strategy,” he said, “was software: CRM, business intelligence, service, customer relations and the like.” Stanley’s goal included: creating and delivering creative and innovative new capabilities. “For people coming into an exciting business creating value is not an easy task.
“In 2003-2006, we began to manage and acquire aggressively,” Stanley said. “Some of the (systems) we had put in place then became the payoff. The gaming industry has done relatively well over the last 8 to 10 years. For us, partnerships have been a key factor. These have paid huge dividends,” he said. "Harrah’s is using partnerships to drive new value and new innovation."
Next, Thompson discussed value at Starwood. “Every company is going to be a bit different. All have different business models – we really focus on IT being a differentiator,” he said. “We look at technology strategically. “IT doesn’t matter at the end of the day. What matters is guest satisfaction. What matters is revenue,” Thompson said.
“I tell my people, ‘If what you are doing doesn’t contribute to revenue enhancement, then don’t do it.’ At the end of the day we are looking at ways to be smart about costs.”
Thompson said it was beneficial for all departments to look at value. Starwood used an outside firm to measure how it was doing costwise in IT. “Whether you are finance, whether you are legal, you should be (measuring) ,” he said.
Thompson continued. “We have a combination of business-aligned teams underplayed with natural IT disciplines that allow us to deliver value – how we look at value from a company perspective and an IT perspective, and how to go about delivering value,” Thompson said.
Then came the Carlson viewpoint. “We look at value from an organizational perspective and then from an IT perspective,” Winkler said. “The company is 70 years old and we have had three very different types of leadership (in that span of time)." Carlson leverages technology across the business unit. “Carlson is currently in a period of transition while developing its three-year plan, which should focus on global expansion," Winkler said.
“We look at value in two ways,” Winkler said. “First, is the value you can deliver to the business that in the end the customer may or may not see. (Second), is the value we can deliver as a leader to our team. The IT team is pretty integrated into our business, so very little strategic planning is done without someone from IT in the room, which helps tremendously,” she said.
Ken Barnes asked the panel, “How do you justify what owners (franchise community) have to pay for these projects?”
Winkler said, “One is from the corporate perspective to lower costs. Most of the dialogue now is between the owner and the franchisees… One tactic: Sit in the owner’s chair to see how the task affects their business.”
Thompson said, “My hope is that we think like an owner, or if we don’t, ask them (on IT advisory board), ask how we are doing, and where we can do better.” One of the attendees questioned what the companies are doing now that they have been asked to do more with less.
Thompson said, “We went to our vendors last year and renegotiated our contracts and probably saved over $20 million last year.” Winkler added that Carlson has started to look at some open source applications.
Price said it can be tough to make too many changes. “It is very difficult to swap out any type of application because you are going to have to live with it for at least 10 years. I don’t necessarily have a problem with old stuff, but we will be on the newest release of it,” he said.
After a quick break, the program resumed with an interactive exercise. Working in teams, each group was asked to develop and present a business case for a strategic initiative that focused on operational innovation. The guest judges for this session were Todd Thompson and Tim Stanley.
Jake Star, VP technology, HEI Hotels and Resorts; Mike Hulley from TATA Consultancy Services; Richard Rabinoff, director hospitality technology, Xanterra Parks & Resorts; Jeremy Ward, SVP/CIO information technology, Kempinski Hotels; Shelia Donahoe, VP, chief information officer, Bluegreen; and Chuck Marratt, director of information technology, MTM Luxury Lodging, comprised the first team to present its idea. In their case, the IT system was not compliant and needs to comply by 2016. Their recommended plan was to replace the CIO with someone who has international experience in 2009. They would develop partners, pick a system, create a business plan, and map how to comply with IFRS, and figure when these things would bring savings to the business. Their goal – to figure out how to get to 25 percent ROI.
Group two was led by Tim Rand, CIO, Silversea Cruises, and included: Barry Shuler, Ritz-Carlton Hotel, Jules Sieburgh, HFTP president-elect; Paula Eylar, Boyd Gaming; Tina Stehle, senior vice president and general manager, Agilysys, Inc.; and Peter Engel, director of technology, The Marcus Corporation. This group decided to recommend centralization of its server, with a goal of taking all properties off the property-based server. The advantage of the recommended centralization would be a much better disaster recovery and a secure bunker. The ROI would become apparent over time.
Day Two: Mid-day Break-out Sessions There were three breakout sessions offered: “Going Green–An Inconvenient Truth” with Barry Shuler, SVP and CIO, Ritz-Carlton Hotel Company; “Better, Faster, Cheaper, Smarter and Virtual” with Dan Roberts, director of Solaris, OpenSolaris and Database Marketing, Sun Microsystems; and “International Financial Reporting Standards (IFRS)” with D.J. Wilkins, partner, IT advisory services, KPMG, LLP.
In the Going Green session, Shuler had the opportunity to discuss some steps Marriott International has taken to answer the call to go green at its Frederick, Md., data center. “Overall, our company is very committed at a very high level,” Shuler said.
The company has replaced over 10,000 laptops and desktops with more efficient devices, it recycled 2,400 computers, printers and cell phones by donating them to charity, and the company promotes a fair amount of telecommuting, which saves money and reduces the amount of physical space needed.
Carol Beggs, VP technology, The Sonesta Collection, brought up the fact that Sonesta goes through 500,000 amenity bottles per year and asked if Marriott has looked at a better way to provide shampoo and conditioner. Marriott has researched bottles that look like plastic but are made from a different material, but their shelf life is much shorter and they cost a bit more. “Four to five months ago we switched to these types of bottles for water,” Shuler said. “They cost a half cent more, and we had to switch vendors for them.”
Beggs also asked what Marriott was doing at the property level regarding energy management and energy savings. Shuler explained they are looking into fully automated drapes, lights, individually monitored heating and cooling units and IP networks.
And, like many companies, Marriott has implemented programs where guests can decide whether they would like their towels and sheets changed every day or less frequently. When asked about the guest response to these types of programs, Shuler said it can be challenging. “It depends on the brand. As Nick (Price) pointed out, it’s all about luxury, so we take away from the luxury by bringing it up (giving options like changing out towels to the guest).”
Aside from initiatives like Spudware at its corporate office – plates that are made from potatoes but look like plastic – the company even promotes environmental activity through its guests by accessing different volunteer opportunities within the community for guests to participate in during their stays; the Give Back Getaway program at Ritz-Carlton is one example. “They pay us for it. They pay for a half-day excursion to help others,” he said.
Darla Morse, vice president, Walt Disney World Resorts, asked how they educate the guest about these programs. Shuler explained that aside from the collateral in the rooms, they have a PR engine working through different media including YouTube. Plus, he said, it helps that the CFO is a huge believer in this. “He has allowed the funding to do these programs,” Shuler said.
While Paula Winkler reminded the group of the potential for new tax rebates on green initiatives, Tim Stanley asked if Marriott has seen a cost savings by implementing some of these programs. “At this stage, we’re not seeing massive savings. It’s more about the public image,” he said. “Some things have cost money. We have had to change vendors in some cases.”
Price asked, “Moving 10 years on, do you think green will be a pervasive thing or will we be greened out?” Shuler said he thinks the green initiative will be around for while. “I think it’s going to be the price of admission in 10 years,” he said. “I don’t think it’s a fad. I think it is here to stay.”
Shuler added that it isn’t just Marriott that is implementing these types of initiatives. “I don’t think we are really ahead on this, we are just doing a better job of publicizing it,” he said.
Next door, Dan Roberts, director of Solaris, OpenSolaris and Database Marketing, Sun Microsystems, led a session that explored two emerging technology trends: predictive self-healing and virtualization.
Some of the new technologies/virtualization solutions in place that Roberts discussed include: hard partitions, virtual machines, OS virtualization and resource management.
Roberts explained that OS virtualization can significantly ease OS migration. The difference between four systems, and one system with OS virtualization, is the four systems have 32 CPUs, 136 rack units, 8,800 watts, 28,872 BTUs and an OS support cost of $21,600. The single system with OS virtualization has one CPU with 32 threads, two rack units, 275 watts, 1,535 BTUs and an OS support cost of only $3,780.
In the other break-out session, D.J. Wilkins, partner, IT advisory services, KPMG, LLP discussed the International Financial Reporting Standards (IFRS). According to Wilkins, SOX, the legislation that mandated extensive changes to financial reporting requirements, may soon have a new successor in IFRS, a high-quality comprehensive globally accepted set of accounting standards.
While the SEC has not mandated a firm timeline relative to U.S. companies migrating from U.S. GAAP accounting to IFRS, the change is coming. Over 100 countries already either require or allow IFRS.
After the break-out sessions came to a close, mystery facilitator, Richard Tudgay, VP of technology, Omni Hotels, hosted an interactive session about the CIOs themselves and their companies to see how they compared to their peers within the industry. Attendees used an automatic response system to answer several questions as a group. Topics included job security, who the different CIOs report to, does outsourcing work, and percentage of IT spend wanted.
Day Three: The Summit Ends The final session on Friday morning, “In God We Trust, All Others Bring Data,” with Mike Gorman, managing director, customer marketing, Continental Airlines, proved highly enlightening.
The company’s CRM model is an enterprise model developed for service. Gorman said, “The primary driver of customer satisfaction is interaction.” Gorman shared some examples of how Continental went from a period of being worst then to first, is now in more international cities than any other airline, through its commitment to the power of data to offer business intelligence.
He explained how Continental was No. 10 out of 10 in 1994, but is currently at the top of the list. As Gorman said, “We knew we hit bottom when we made David Letterman’s Top Ten List on MLB player demands.” The No. 10 listing was, “No team flights on Continental Airlines.”
The company’s 2007 revenue went up 78 percent from 2006, and now travels to 278 airports worldwide, extremely good performance compared to its competitors.
When asked by Gustaaf Schrils, VP global technology for InterContinental Hotels Group, about the fees airlines are charging for extra bags, Gorman explained that because of the fee, people aren’t bringing as much on the planes – another advantage.
On that note, the attendees grabbed their extra bags and headed for the airport. The discussions both days ranged from specific at the property and corporate level to brandwide globally, and all had the opportunity to interact and share even more information with their peers at this year’s summit.
Tim Rand, CIO, Silversea Cruises, Ltd., said, “For the last five years, this has been the place where I make the industry connections that I trust. I meet my peers from around the world and we get to share best practices in a way that improves my business.”
Richard Rabinoff, director of hospitality technology, Xanterra Parks & Resorts agreed. “By not attending, you’re forfeiting an amazing opportunity to listen to, share ideas with and interact with the leaders of our industry, in an environment that’s relaxed, generally convivial and extremely conducive to this very exchange of ideas,” Rabinoff said.
A special thank you goes out to Sally Kelly, KPMG, LLP, for arranging the program content; CIO Summit sponsors: Capton, NCR/Teradata, Agilysys and TATA Consultancy Services; event partner: KPMG; our founding association partner: HFTP; and transportation sponsors: MTech and Datavision Technologies.
- Kris Burnett, Hospitality Upgrade
IT Value Creation – The CIOs Nick Price described Mandarin Oriental as a public company with revenues a “shade north of one billion,” including 21 hotels and 23 under construction with the majority owned by a single company. “We are a luxury company that happens to be in hospitality. I regard my life as an enabler (of value creation),” Price said.
Tim Stanley said Harrah’s Entertainment, soon to be Caesar’s Entertainment is 72 years old and is still going strong. “In the last five to eight years, Harrah’s has almost tripled the size of its company,” he said. It is managed by three groups and brings in revenue of close to $10 billion.
Thompson, said that Starwood has 1,000 properties globally, with half outside North America, and over 400 properties to be built in the next three years. Starwood brings in $19 billion in revenue system wide. The company has a staff of 1,200 in IT with half above property level and half at property level (not including franchisees), and is a public company that spends about $250 million annually on IT.
Paula Winkler, said that system wide revenue reached $26 billion for Carlson, a private company with 1,000 properties, 60 percent of which are outside the United States.
After the descriptions of how different the four were, some more personal questions were posed to the panel. When asked what turns him on spiritually and emotionally, Price responded, “What turns me on is people, actually. Conversations. Good friends, good community. Boring people, telling the same story more than once is a turn off.”
Thompson was asked if heaven exists, then what would you like to hear, and he responded, “I think what all of us would like to hear; come on in.” He then described his heroes as, “People from humble circumstances who work hard and make a difference.”
Stanley was asked what he would do if he wasn’t in his current position. He responded, “A CEO or be involved with something as an interesting startup. But, I wouldn’t want to go back and do IT in the traditional sense.”
The 2008 CIO Summit attendees included: Ron Hardin, Davidson Hotel Company; Rodney Thiel, Benchmark Hospitality International; Paula Winkler, Carlson Hotels Worldwide; Tim Rand, Silversea Cruises, Ltd.; David Barbieri, Red Lion Hotels Corporation; Michael St-Laurent, Gemstone Hotels & Resorts; Mike Uwe Dickersbach, Thayer Lodging Group; John Cahill, Denihan Hospitality Group; Shannon Knox, Luxury Resorts; Gerald Lampaert, Dolce Hotels & Resorts; Tony DelMastro, Loews Hotels; Richard Tudgay, Omni Hotels; Wayne J. Fields, MBA, Pacific Monarch Resorts, Inc.; Rajiv Castellino, Great Wolf Resorts; Ira Greenfield, Extended Stay Hotels; Martin Scheidl, Orient Express Hotels; Gustaaf Schrils, IHG; Ken Barnes, White Lodging Services; Carol Beggs, The Sonesta Collection; Nick Price, Mandarin Oriental Hotel Group Ltd; Barry Shuler, Ritz-Carlton Hotel Company; Jeremy Ward, Kempinski Hotels; Richard Rabinoff, Xanterra Parks & Resorts; Jake Star, HEI Hotels and Resorts; John Edwards, Millennium Hotels; James Lingle, Sage Hospitality Resources; Kris Singleton, Kimpton Hotels & Restaurants; Paul Major, Aspen Skiing Company; Todd Thompson, Starwood Hotels & Resorts Worldwide, Inc.; Tim Stanley, Harrah’s Entertainment, Inc.; Darla Morse, Walt Disney World; Brian Garavuso, Diamond Resorts International; Sheila Donahoe, Bluegreen; Peter Engel, The Marcus Corporation; Alexander Danon, Grupo Posadas S A B DE C V; Walter Zalewski, Al J. Schneider Company; Paula Eylar, Boyd Gaming Corporation; Gary Thomson, Choice Hotels International, Inc.; Jim Lamb, Hyatt Corporation; Nelson Garrido, Noble Investment Group; Chuck Marratt, MTM Luxury Lodging; Yu Jin, Four Seasons Hotels & Resorts; Vivek Shaiva, La Quinta Inns, Inc.; Vineet Gupta, Fairmont Raffles Hotels International.
Mining Restaurant Data: Know your customer.
Michael L. Kasavana, Ph.D., NCE, CHTP, Summer 2010 Read
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