Face to Face with Tom O'Toole, SVP, Marketing and IT, Hyatt Hotels Corp.

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October 01, 2001
Face to Face
Richard Siegel - Rich@hospitalityupgrade.com

© 2001 Hospitality Upgrade. No reproduction or transmission without written permission.

Over the last month or so we have consistently heard people say that we must move forward after the events of Sept. 11. I believe that and thankfully so did Tom O’Toole of Hyatt Hotels Corporation. We were scheduled to meet in Chicago on September 13th, which obviously didn’t happen. Tom agreed to reschedule quickly and we did meet the week after. Even with all that was going on in the hotel industry at the time, Tom’s willingness to meet with me was something I will always be thankful for. After reading through this interview, I believe you will also. It is a great interview that I am sure you will enjoy. We did agree to stay focused on the technology issues that Hyatt Hotels are facing, not current events. I am glad that we did, we all needed a bit of normalcy at the time.

Rich: How long have you been here at Hyatt?
Tom: Six and a half years.

Tell us about yourself.
My background is in communication research methodology. I began my career at an advertising agency in Cleveland, Ohio.

Any interesting accounts?
My first assignment was for the American Express account. Other accounts that I worked on over the years included glue, peanut butter, health insurance, beer, publishing, restaurants and hotels.

What did you do from there?
I moved up in marketing research and then account management; in 1987, I became vice president and account group supervisor.

Tell me about your transition into the travel and tourism industry.
The biggest account in my group was Stouffer Hotels, based in Cleveland. After a close working relationship with them, they offered me a position as director of marketing programs.

How long were you at Stouffer?
From 1989-1993. Then I was with Renaissance Hotels until 1995 after they acquired Stouffer Hotels. I joined Hyatt as vice president of marketing in 1995.

When did you begin to gain more technology responsibilities?
It was a gradual transition, beginning in early 1999 when I became responsible for central reservations and electronic distribution, in addition to marketing.

Where did you go from there?
In October 2000, information technology formally became my responsibility. I think it’s interesting to note that Hyatt is one of the first companies to successfully combine the marketing and technology roles into one position. My current title is senior vice president of marketing and information technology.

How many hotels does Hyatt have today?
In North America there are 124.

How about Hyatt International?
Outside North America there are 81.

What is the relationship of these two companies?
Our working relationships, programs and information systems are seamlessly integrated.

But, they are truly different companies, aren’t they?
Yes, but let me provide you with an example. The people who are sitting outside my door to the right are working on our frequent guest program, Gold Passport. They work on Gold Passport marketing efforts for Tokyo as well as Chicago properties. It’s one Gold Passport database, information system, customer service system and marketing plan globally. Same for airline programs. This is only one example of how HHC and HIC operate quite seamlessly. We are all in constant contact with our HIC counterparts, and vice-versa.

You also manage most all of your properties, correct?
Yes, Hyatt is a management company, and as such we have just four franchised properties in North America. This allows us to implement systems and related initiatives well.

But, like other hotel companies, you must still sell to the individual owners what you are doing with technology and its benefits.
That is true, particularly whenever there is any capital investment required. Our owners are quite sophisticated; increasingly they recognize the business potential of technology applications.

But still, I imagine you need to cost justify these investments.
True. But, owners today understand the issues facing our industry.

Any long-term technology issues going on at Hyatt right now?
A long-term initiative I am working on right now with the set of people involved here is developing a three-to-five-year schedule for planning replacement of our existing major systems, including POS, PMS and CRS.

Hyatt is unique in our industry because it basically outsourced its technology. When did you do this?
It was 1996.

Has this been successful?
We recently did a benchmarking study to evaluate our outsourcing relationship. It showed that Hyatt’s relationship with our outsourced technology firm (CSC) is serving its intended purpose. We have seen no downside to outsourcing our technology. CSC has provided Hyatt with cost-saving benefits.

Which were?
The relationship has exhibited excellent cost control without in any way inhibiting development of systems enhancements and new technology initiatives.

Didn’t you recently announce high-speed Internet access for the guestrooms in your hotels?
Our biggest high-speed Internet access advantage, which we adopted early, is in our hotels’ meeting rooms. In fact, by the end of this year we will have every Hyatt hotel wired for high-speed Internet access in meeting rooms.

But, let’s get back to the guestrooms. Why did you wait so long?
There really was not significant demand. We tested it in about 12 hotels and even when we provided free access with a good user interface, our guests’ usage percentage was in the teens. Norm Canfield, Hyatt’s vice president of rooms, said that waiting to do the guestrooms was the best decision we never made.

You might get arguments as to why the usage was so low from those that provide this service.
And possibly some of their arguments could be valid, but a year and a half ago we made a decision to focus on the meeting rooms, where we knew there was a growing need and customer demand. We chose Core Communications as our meeting room access provider.

Is Core exclusive?
No, but we recommend them. Each hotel has a choice who to use based on the hotel’s business situation.

Why do you think the guestroom access has been such a problem?
I believe that it has not been, and is still not, as user-friendly as a typical user requires. Additionally, many of the companies offering in-room Internet access had a disconcerting tendency not to be around long.

Why was that?
The business models were not sustainable and the demand wasn’t there.

And this is why you didn’t rush into it.
Correct.

But you recently announced you had chosen Guest-Tek for high-speed in-room access?
We chose Guest-Tek because they have a solid offering and credible stability.

You have told me about choosing Core for your meeting rooms and Guest-Tek for your guestrooms. What does this mean when you “choose?” How did you define choosing?
What we do is choose the preferred company-wide provider and do a master Hyatt deal with them. The specific local installations are at the discretion of the individual hotels.

But, these are not exclusive vendors for Hyatt, correct?
Correct. They are our preferred vendors. If there are business circumstances at a particular hotel, they may choose a different arrangement.

But most do follow your lead?
Very many do.

Do you plan on putting Guest-Tek in all of your rooms or just certain rooms at your hotels?
It will depend on the property. If the hotel is our Hyatt Regency Bellevue property outside Seattle, which is down the road from Microsoft, their needs, and ultimately their guests’ usage, are likely to differ significantly from Hyatt Whitney in Minneapolis. We are providing guidelines for the hotels. At the outset it will not be every room, but often categories of rooms. It could be Regency Club rooms or the business plan rooms. It will be a realistic number based on the location.

You brought up wireless before. Where do you think we are going with this technology?
The potential applications of wireless are of great interest and potential value to both Hyatt and our customers. Ideally a guest who is working on a document in his/her room could take his/her laptop to the lobby to have a cup of coffee and keep working on the project. Then go to dinner and continue working on it. This would be great for business travelers.

Is the technology there for this?
It is developing. Infrastructure, security and other issues remain. I think we are getting there.

What is holding us back?
People, understandably, don’t want to jump on the next Bluetooth before it’s prudent. Remember all the hyperbole about Bluetooth a couple years ago?

Rolling the dice on technology is part of the game though, right?
Scott Miller, president of Hyatt Hotels, and I visited the R&D facility at Sprint not too long ago. We were impressed with many of the technology applications in development there for travelers. But, it can be a while before what works in the test lab works reliably for properties from St. Lucia to Hawaii.

You had talked to me earlier about your interest in looking at what companies like Sprint, AT&T, IBM and other large companies are doing. I still believe the heart and soul of technology for our industry is being developed by the smaller companies.
You might be right, but I am increasingly wary of small providers. Even some who look very solid today might not be around in two years.

At HITEC 2000 we distributed an RFP for high-speed Internet access for our guestrooms — it was standing room only. I remember there being a line out the door to get a copy of the RFP. I believe we eventually received 72 completed proposals. Of those 72 proposals, only a handful of the original vendors are still around.

I know what you mean. I publish a magazine and I have been burned by some of them.
You know who I think made the most from many of the dot-coms?

Who?
The companies that made the polo shirts that they all bought with their logos on them.

(laughing) Good point.
Seriously, you can see why we look closely at companies’ sustainability.

Yes. But, I started with Hotel Information Systems in 1981 when there were only 18 employees and a handful of installations. The faith that the large chains had in this little company allowed them to grow. You need to sometimes have faith in the smaller companies.
We look at our technology needs on a case by case basis.

Could you give me an example?
The company that developed and still maintains our current www.Hyatt.com Web site for us was located in Bath, England in the basement of an old brewery.

What was the name of the company?
Open World. Everyone who worked there, when we started working with them, could fit around a kitchen table. They still operate Hyatt.com and have probably developed over 100 Web sites for us.

Let’s switch gears again. You have some pretty fancy developments going on for meeting planners, don’t you?
We just announced and are ready to beta test Hyatt’s Internet meetings engine. This will allow our customers to book meetings in real time into our reservation system. To our knowledge we are the only one in the industry who will enable meeting planners to do this. I am sure you are aware that most major hotel companies, us included, have developed their own booking engines to book rooms. But, a booking engine is a simpler function than a meetings booking engine. We believe we are ahead of the curve regarding this technology.

Why do you think you were able to accomplish this?
We have a CRM system for meeting planners, single-image inventory, one CRS system and one PMS. Our uniform systems, and CRM systems, are very advantageous for implementing technology developments.

You say this is undergoing beta testing. What does that mean?
We have been testing it internally and will soon make it available for a selected set of customers to try it. If that goes well, then it will be introduced for broader customer use, which we plan on doing by the end of this year.

In a previous issue of Hospitality Upgrade, we did a Point/CounterPoint on the need to do site visits when booking meetings. Some will think with the advances being made with Internet technology and applications you are developing that maybe the need to visit a hotel will go away.
Our approach is more realistic. We don’t expect a very large company holding their annual sales meeting on Kauai, Hawaii will book it through the Internet. However, if you need 20 guestrooms, one meeting room, a coffee break and lunch at the Hyatt Regency O’Hare, this can easily be done via the Web.

I agree. This is a great example of tasks that not only can be done via the Web, but in my opinion, should be. Let’s switch gears again and talk about CRM, a very hot topic in the industry today. First of all, how do you define CRM?
If you line up six people and ask each to define CRM, you will probably get six different answers. Hyatt has three systems that currently meet the definition and functionality of so-called CRM systems. The ROI of some of the CRM systems being sold today is apparently proving questionable at best.

Truthfully, this is such a hot topic, I can’t say that I thought about it from this angle. But systems aside, how do you define CRM?
An ad hoc definition would be that it is a database system to track and proactively respond to the transaction history, preferences and profile of a specific customer, through targeted marketing activities, customer service, customized business product offerings and other means.

That was very well said, and one of the better definitions that I have heard.
CRM and knowledge networks apparently are the buzz words du jour. The real value of much of it remains to be seen.

True. But, that is the nature of technology and business. Which is why it is important for any business to not get left too far behind. So you’re saying that you are actively doing CRM today with your existing systems, correct?
For example, we converted our Hyatt Gold Passport system from a main frame-based system to a client-server system a few years ago. Much of the rationale was to enable CRM applications. We looked at our three systems, Gold Passport, guest history and Envision.

What is Envision?
Envision is our database information system and for meeting planners. We evaluated Hyatt’s system against the features and functionality of what are being sold as CRM. In all three cases the realization is that these are CRM systems. We just haven’t called them that.

Even if that is true, where did you go from here?
We currently have multiple databases. Our next-generation CRM initiative is to incorporate our multiple CRM systems and other Hyatt customers databases into a universal database, for all contact points, targeted marketing and distribution channels. This what I’d like to do next.

It might be easier, but with the technology available today, others can also do this. Technological advances now allow different systems to easily talk to each other. Plus, it is relatively inexpensive to do this. That was not always the case in the past.
I totally agree.

Another big issue facing the hotel industry is distribution. What do you feel is happening here?
I believe we will see further consolidation of the distribution structure in our industry. I also think we will see new distribution intermediaries created that don’t exist today. There are also related technical questions concerning connectivity standards and direct connectivity.

So what you are saying is that the distribution channels that we know today will change dramatically, correct?
Yes. Some will go away, some will change, and there also will be new intermediaries created.

Interesting. I guess we shall see. The Internet most definitely has created many new channels and also a new way of thinking. This is very different than the old days of booking direct or through a travel agent.
True.

Plus, there are auction sites and different travel-related sites. There is Priceline. Hasn’t this created havoc among the hotel marketing professionals?
It has created the growth of net rate-based distribution models. The issue for the hotel companies is dealing with revenue management across distribution channels in a dynamic and restructuring distribution environment.

Which means it all really comes down to controlling rates, correct?
Hotel companies need to be able to control what rates and inventory are made available through which distribution channels to whom at what times. This includes both conventional and unconventional channels. This gets more complicated as we deal with new distribution intermediaries. This is the reality of what is going on today in the industry. This has created at least three strategic issues for Hyatt that we are addressing today.

What are they?
What is Hyatt’s distribution strategy going forward? What are the associated business policies, procedures and processes? What should be the technology infrastructure to enable this distribution strategy in the future?

Tom, that was very well put.
Again, that is the reality of what is going on today.

You have mentioned net rates and distribution. What about revenue management practices as it affects these net rates available through the different distribution channels?
This is an issue. As the number of net rates-based applications has proliferated, we are working to rationalize and simplify rate management for our general managers and create more coherent and strategic management of our rates.

The net rate Internet distribution model is fundamentally contrary to some of our most important basic business principles as a hotel company.

Such as?
Single-image inventory. Rate integrity. Yet, this type of Internet distribution intermediary is a growing reality in today’s market. We need to figure out how to manage it relative to other distribution channels.

So, this is the question for the industry today, how to manage this, right?
Yes. It involves a variety of issues including the three levels I previously mentioned.

Very well said. Let’s switch gears again. Hyatt has always been a company that is known to internalize technology development. Hyatt is known to create different systems in house for corporate use as well as for the properties.
Yes.

Are there both upsides and downsides to this approach?
We are evaluating today what we do now and how we use other companies. We will do what best serves the company and our hotels.

Could it be a different approach than you have done in the past?
It might be.

Some of the systems you use today, like your PMS, could be considered old.
We are planning a multi-year timeline for changing our major systems, such as our PMS and CRS. I believe that the differentiation of the PMS and CRS will prove to be largely an increasingly arbitrary distinction in practice. You can start with either one and you are making decisions about doing both simultaneously just because of the way technology is developing.

And vice versa.
Yes.

How do you keep abreast of what is going on?
We, like most, attend HITEC and look at what is out there. We talk to a wide range of system providers, technology companies and others. I read constantly, try to talk with smart people in the industry, and want to be as knowledgeable as possible about what’s developing and potential consequences and opportunities.

This of course also allows you to understand what is out there and also what your system is doing.
True. But, I am also glad that we don’t have to make a major system decision today. Our PMS and CRS are somewhat older, but both still continue to serve us quite well and remain very competitive and functional, relative to what is out there currently.

When do you think you might change your systems?
We’ll decide our direction and timeline during the next two to three years.

What do you feel is the toughest thing someone in your position must deal with?
I don’t know if this is the toughest thing, but one of the responsibilities of this position is being willing to resist the commentary, typically driven by hyperbole, press coverage and zealousness, about deciding to wait regarding new technology developments that are really not quite ready for prime time or for which there would not be sufficient business value or which involve issues beyond oversimplified descriptions.

This happened with smartcards. It happened with high-speed Internet access for the guestroom. When asked why I am not endorsing some new technology application right away, my answer often is, “We’ll see.”

But, waiting and often being left at the gate is not always the right thing either.
True. Hyatt has been, historically and recently, a leader in the hotel industry. Our Internet meeting engine, e-folio, group billing and other recent developments demonstrate that we remain so and will continue to be in the future.

If you were going to describe your approach to technology overall, what would it be?
We make decisions very carefully, but when we decide to do something, we do it.

Great attitude…good for you. Tom, thank you so much for agreeing to do this on such short notice in light of all of the recent events that have happened.
Rich, thank you for asking me.

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