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April 18, 2013
CIO/CFO Column: What Keeps Me Up at Night
David Sjolander

Many hospitality business processes, such as accounting, payroll and purchasing, are no different than in other industries and can be automated with standard, generic applications.  Other processes, such as guest management and point of sale, require industry-specific functionality.

This dichotomy has led hotel companies to use a variety of applications, some generic and some industry specific. As a result, they spend a great deal of time and money with system selection, vendor management, integration and ongoing maintenance. Hotel computer rooms are full of servers running single solutions. In many cases, integration is too costly or difficult, and data is re-keyed from one system to another or it is not transferred at all. Besides inefficiencies, this leads to errors in guest service and missed revenue opportunities.

At least two vendors, Cenium (built on Microsoft Dynamics) and Indra (built on SAP),  are offering a new approach with a fully integrated system created specifically for hospitality, but built on enterprise resource planning (ERP) platforms.  Your company may already use an ERP system, such as Oracle, SAP, Epicor, Infor or Microsoft.  These systems are meant to integrate business processes and data flow across the organization, and are typically not industry specific. However, they are highly customizable and usually involve a significant implementation and integration effort to meet the company’s business needs. (For clarity, the Infor ERP is not required to run the Infor hospitality solution.)

Creating an industry-specific add-on to a generic ERP application may be relatively new to hospitality, but it has become commonplace across many industries. Can this approach be successful in hospitality?  Hospitality Upgrade recently hosted a roundtable of industry consultants to pose that question and others.  What follows is a summary from the consultants listed at the end of the article.

One of the most common complaints by hoteliers is dealing with many applications from many vendors.  Interfaces are often expensive and problematic.  Sometimes vendors point fingers at each other rather than focus on solving the problem. Unless you are using hosted (Software as a Service) applications, each system often needs its own server.  It is unlikely that a hotel will ever be able to source all of the technology it requires from one provider, but using an ERP-based platform is a big step in the right direction:  a single vendor instead of perhaps five or 10, and one integrated suite of applications designed to work together rather than being cobbled together with interfaces that periodically fail.

Real-time Knowledge
If there is one central database for all business critical processes, information should flow better between users and functions and be more accessible across the guest lifecycle. In an environment with disparate systems and limited data flow between them, service hand-offs are often missed, and revenue opportunities are lost.  For example, unless a hotel has efficient manual processes, the reservation system may not inform the reservations agent that he is booking a room for a guest who walked out on his bill three months ago. Likewise, revenue opportunities can present themselves easily when all systems in the guest cycle dynamically query the central guest database. How many different guest profiles do you have in different systems, and how often is the right data in the wrong place?

User Experience
Most hotel computer users regularly switch between several applications with dissimilar look and feel. ERP-based systems follow the user interface design for the core ERP, thus eliminating the problem. Training is easier, and users will more often stay in one application, saving time and more efficiently performing their jobs.

Many have heard the horror stories of ERP implementations involving huge costs for business process modeling, customization and integration. It can take years before a company is operating smoothly on a new ERP. With the ERP-based solutions being offered, much of this customization work has already been done. The vendors have created a starting point for every hotel customer, which will be tweaked during the implementation. Your definition of tweaked may be slightly different than the vendor, but it is reasonable to expect that 70 percent to 80 percent of the customization has already been done. The power and flexibility of the ERP may encourage you to customize the system further, but that’s a decision you can make.

Downward Scalability
Every property management system (PMS) is a suitable candidate for a single hotel implementation. Is this true with an ERP-based system?  Maybe, but it would need to be a large, complex hotel. Many of the benefits of ERP will be more fully realized in a multi-property environment where all of the hotels and the corporate office are using the system. 

The products on the market are modular to a degree, but it may not make sense to install just the vendor’s ERP-based PMS, for example, and pass on everything else.  Again, many of the benefits come from the whole – not the individual parts. Having said that, you may want some of it and not all of it.  Does it make sense to source the components you want from the ERP vendor and other modules from another company?  Is it even possible with the system you have selected? What if you already have an ERP, and you are interested in a hospitality application built on a different ERP?  Is it feasible to implement this without switching your base ERP?  Perhaps, but doesn’t this defeat the purpose of having a single, integrated platform?

Best of Breed vs. Integrated Suite
If you insist on having the best PMS, best central reservation system, best sales and catering system, etc., you will probably not get that with an ERP-based integrated solution. What you lose in “best of” functionality you will gain in efficiency and integration. However, this is sometimes difficult for your most demanding users (think sales department) to accept and understand. Be prepared for push-back, and sell your team on the greater good before the implementation begins.

Serving the Guest vs. Serving the System
Since the system is very holistic and driven by downstream financial processes, there is the risk of putting more work on the end user. If guest-facing users are spending more time entering data, they are spending less time interacting with guests.  Make sure the ERP application you select gives employees better information without making them slaves to the system.

Many industry leaders and technology decision makers are frustrated with the current state of hotel technology. Much of this frustration results from the need to install disparate systems from multiple vendors. Interoperability is limited, costly and fraught with problems. There is a hunger for a new approach, and the ERP story is appealing. With at least two vendors offering hospitality applications built on ERP backbones and undoubtedly more coming,  ERP-based solutions are worth considering.

David Sjolander can be reached at dsjolander@gmail.com.

©2013 Hospitality Upgrade
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