At this time of year many organizations are still fully engaged in the annual budgeting process. For some information technology (IT) departments this represents an opportunity to plead their case for much needed funding for various initiatives and programs. For others this represents an effort to justify their expenditures against cost-cutting measures and demands. In either scenario, IT leadership and their companies are left with the challenge of where to focus their time and efforts and which areas of the business and which initiatives they should fund.
As we found out during Hospitality Upgrade’s recent CIO Summit, there are often instances where the various business units of an enterprise focus their efforts on initiatives that they believe are important based on current trends and information, only to find these programs do not produce the anticipated results for a variety of reasons. As such, many of the hospitality industry’s IT leadership were interested in sharing information on which initiatives in general appear to be worth pursuing and identifying those which may need to be put on the back burner.
Based on the premise that most IT leadership (and other industry executives) are looking for a baseline or reference point from where they can validate the areas they are targeting for their IT spend, Hospitality Upgrade initiated a survey of industry technology leads to see where they were planning to allocate their investments for 2017. We received responses from a good cross segment, with most coming from the hotel/lodging division. While the majority of the responses came from companies located within the United States, there was representation from the international community as well. The survey responses included most of the major brands and as well as some key asset management companies, hospitality management companies and individual ownerships. Hospitality Upgrade created a similar survey in late 2014, and in some cases, we were able to analyze the variances and targeted changes between the two different years, which yielded interesting results.
The following represents some highlights from the survey including the targeted areas where many companies are focusing their 2017 IT budget spend.
For the second time, more than 70 percent of the respondents indicated that they would be increasing their IT investment in the coming year. This is more than likely tied to the financial performance of their respective companies and the overall state of the industry in general. Most organizations realize that in order to grow their companies and revenues they need to invest in technology and systems that will create operational efficiencies, improve the customer’s experience, and help generate sales. During times of prosperity it’s important that the investment in IT match the growth of the company.
Fewer than 10 percent of the companies surveyed reported that that they would be reducing their IT spend.
While the top three areas of focus were almost identical to that of the previous survey in 2014, there were changes in the bottom two areas. EMV surpassed that of service performance, and employee engagement replaced mobility, which surprised the team reviewing the data.
71% of those hospitality CIOs surveyed said their company will be increasing IT investment in 2017
It should be noted that a number of the expenditures slated for 2017 are actually multiple-year project investment carryovers from 2016 which either require continued enhancements or have lengthy implementation requirements due to the size and scale of the companies and projects.
Survey note: It’s important to mention that while these represent the overall top five areas of focus, they may not necessarily represent the overall top five initiatives from a dollar-spent point of view. This is because some of the larger brand entities had a different focus than that of the overall group that was surveyed, and because the dollar value of each segment is unknown. As such, the results of the survey would be skewed toward the large brands if this were factored into the equation.
In analyzing the 2016 CIO survey, the following was noted:
TOP 5 AREAS OF FOCUS FOR 2017
1 IMPROVED FINANCIAL PERFORMANCE
While this was listed as the No. 1 area of investment in 2016, the continued focus on this area came as no surprise, as revenue generation is still the key driver among most hotel companies. With the market continuing to be extremely competitive, revenue management and channel optimization remain key focal areas of investment for publicly traded companies as well as independently owned organizations alike. Enhancements to CRM and loyalty programs are also on the list of investment directives. A number of responses (almost 70 percent) indicated that they were targeting business intelligence (BI) initiatives for the coming year as part of their technical focus and in an effort to become more strategic in managing the business and targeted revenue focus. The improved financial performance initiatives would more than likely also be linked to the guest experience directives that were slated for implementation.
2 GUEST EXPERIENCE
The investment in guest experience technology continues to be strong as hotels attract guests to hotels. There continues to be increased expenditures on key drivers such as improved Wi-Fi service, self-service mobility applications and expanding the in-room offerings. An example of this is the interest in casting to allow guests to connect their mobile devices to the in-room TV. Many of these areas of focus go hand-in-hand with an improved wireless network being required to access content from Netflix and other online sources, as well as to use casting options.
A number of the respondents indicated that they would be implementing keyless entry solutions following the program initiatives being rolled out by some of the brands. Implementing these initiatives should result in an improved guest experience and help to increase incremental revenues and operational efficiencies.
While a number of trade articles have pointed to the Internet of Things (IoT) beginning to infiltrate its way into the room and property with sensors, beacons and other types of tracking technology, for the most part, this is still being tested and is not widely deployed.
3 INFORMATION SECURITY/ CYBERSECURITY
With a number of breaches within the hospitality industry this past year, and other large corporate breaches such as Yahoo headlining the news, this continues to be an area of concern. Also ransomware and other new threats are targeting the industry, and with potential impact on operations and revenue, companies are focused on limiting exposure. With the sophistication of the threats and the possibility of breaches increasing, companies are looking to outsource their information security/cybersecurity requirements to third-party service partners that specialize in countering these risks. Not only are many of these security services better equipped with the tools and resources to counter cybersecurity threats, but they have become extremely familiar with the requirements for the industry and can provide cost-effective options for those companies who can't afford in-house security resources.
Traditionally, the responsibility of data security has resided with the CIO or IT leadership, and while this still continues to be the case, we have seen a shift of this responsibility to a dedicated chief information security officer (CISO). In response to this question, almost 30 percent indicated that they had a dedicated CISO, CSO or other officer responsible for the company’s data security initiatives.
4 EMV
When the EMV deadline of Oct. 1, 2015, came into effect, it was anticipated that most companies would have this expenditure targeted for immediate implementation. However, once the risk exposure was analyzed and coupled with the lack of viable solutions, many elected to hold off on implementations this past year until these concerns were resolved. Now that there are viable working solutions available, many companies are targeting funds to outfit their properties in the coming year. When polled, more than 52 percent indicated they would have all of their properties installed by Jan. 1, 2017. Interestingly enough, some of the respondents indicated they would be focused on tokenization projects in the coming year rather than the deployment of EMV. (Additional information on the EMV focus can be found in the side bar on page 22.)
5 EMPLOYEE ENGAGEMENT
At first it seemed a little surprising to see that the investment in employee engagement systems was rounding out the top five spot on IT investment. However, in recent years corporations are beginning to understand that investment in human resources is one of the most important assets they have. A recent Forbes article referenced the Deloitte Global Human Capital Trends Research analysis, which said, 78 percent of business leaders rate retention and engagement as being urgent or important. It also said, “Engaging people well is becoming one of the biggest competitive differentiators in business.”
From a hospitality perspective, if a hotel’s staff is loyal and happy, its guests are more apt to have a pleasant stay and are more likely to return in the future. Based on this premise, many companies are investing in their staff and implementing programs and technology to assist in their interaction with both guests and other staff members.
Looking at the remaining top areas of investment, the final focus areas are ranked as follows:
Mobility
Alignment with Internal Business
Big Data
CapEx vs. OpEx Expense Management
Mobility
While the focus on mobility initiatives appears to have declined slightly, the majority of the respondents’ investments in mobility initiatives were still targeted toward improving the customer’s experience. Approximately 75 percent of respondents indicated that this was where they were targeting their mobility initiatives. The areas of focus were primarily reservations and bookings, guest-facing applications and direct communications (SMS, marketing and location-based). Additionally there was traction with keyless entry applications and loyalty programs.
The slight decline appears to be related to companies not achieving the results and usage with some of the hotel-related applications. The specific issues appear to be related to the number of apps that guests have to download and challenges with regard to the back-end integration with other hotel-related systems. Additionally there were concerns related to support. These concerns may change once a more uniform platform emerges that can be easily supported and seamlessly integrated to most systems. That said, there are still a number of mobility-related initiatives that are garnering traction on both the guest and operational fronts, and many companies are still moving forward with deployments.
While some of the chains are still targeting mobile keyless access for guestrooms, the trend toward offering it as an option also appears to be gaining traction with a number of respondents. Additionally a number of CIOs referenced rollouts of operationally related projects from rapid response/workflow scheduling to mobile sales tools. On the innovative front, there was almost no interest in any virtual reality investment, with most indicating that the cost to deploy the technology was prohibitive at this time.
Alignment with Internal Business
Many of those who responded to the survey highlighted the requirement for IT to align themselves with other business requirements. In many cases specific marketing and sales initiatives need to be aligned with IT in order to be successful. Operational programs may require a large commitment of IT resources to be implemented. A number of individual responses targeted specific areas of focus for 2017. These included the selection and implementation of new ERP solutions, an increase in the investment of redundant systems to reduce the potential for system outages and improve uptime performance, technology refreshes (something that many organizations have neglected over time), and upgrades to internal applications and infrastructure, among other areas.
Big Data
While managing Big Data has long been an Achilles heel for most companies, most would agree that there are significant competitive advantages that can be gained from being able to effectively manage the information. With a number of respondents targeting CRM projects for the coming year, the promise of being able to effectively target individual guest preferences becomes more obtainable. As in the past, most survey responses indicated that companies would be using the information from Big Data to create predictive models for financial strategies. Additionally, the data would be used to create product and market segmentation strategies and increase customer visibility.
A number of the responses also indicated that they were looking to implement business intelligence (BI) solutions in 2017, to better understand the information they were collecting and use it to make informed management decisions and directives.
Capex vs. Opex
A significant number of companies are continuing to look at transitioning to cloud-based applications for some of their applications. However, more than 80 percent indicated that they are not ready to transition all of their applications to the cloud. Looking at the applications, the largest adoption of cloud-based solutions was associated with revenue management, CRM and sales and catering systems. This was due in large part to many of the leading application providers consciously transitioning their systems to the cloud. While there are still companies concerned with the transition from a capital expenditure model to an operating expenditure model, the hospitality industry appears to be adapting. Other systems gaining traction include many of the primary applications such as PMS, POS and spa. However, a number of respondents indicated they were reluctant to place their primary systems into the cloud, based on performance or redundancy concerns. These included concerns over obtaining effective data circuits at some of the properties, latency apprehensions, as well as specific concerns over the architecture of the applications themselves. There were additional concerns associated with third-party contracts, security risks and lack of control, especially as they relate to updates. With many of the application providers looking to transition their systems to the cloud, this trend can be expected to continue. That said, more than 30 percent of those polled indicated that they had no plans to transition their primary systems to the cloud either now or in the future.
Aside from cloud-based applications, many organizations are looking at outsourcing as a way of providing improved service levels and controlling expenditures. Other areas of focus from the survey included social media, mobility and ERP.
GPON
With the upswing in the industry’s performance still very much on the rise, many companies are investing heavily in new hotel builds and renovations. Additionally a number of corporations are in the process of upgrading low-voltage infrastructures as part of new wireless system deployments. The question that many have been asking is whether it’s worth investing in GPON deployments rather than the more traditional copper/fiber infrastructures. When the question was posed to the CIOs the results were quite interesting. Nearly 30 percent of the respondents indicated that they had deployed GPON at one or more properties. A further 38 percent indicated that they were either considering deployments or would in the future. Just under 32 percent of the respondents indicated that they would not be considering GPON in their infrastructure deployments.
Of those respondents that indicated that they had deployed GPON, the majority cited future-proofing as the primary reason for the deployment. Others indicated that they deployed it as a cost-saving measure, however, there are conflicting opinions as to the true cost of deployment and whether this factored in all of the construction-related costs associated with the deployments.
>>>With more than 70 percent of respondents reporting that they expect an increase in their IT spend this coming year and only 10 percent expecting a decrease, 2017 promises to be a good year for the hospitality technology industry. Most respondents indicated that their primary reason for investing in new technology was to improve their customer engagement and experience. This was closely followed by their directive to make operations more streamlined and efficient. Other reasons included a focus on innovation and moving systems to the cloud. From a technical perspective, the biggest area of focus appears to be cybersecurity. With the number of breaches increasing, it’s not surprising that this is still one of the biggest areas of concern. This was closely followed by the challenge of maintaining legacy systems, and then finally, mobility.
Looking at the survey results, one of the biggest surprises was the focus on employee engagement. Companies are realizing the need to focus on human resources. Also, surprising was the investment in mobility had slipped on the survey rankings. While mobile investment will almost certainly continue to grow, it may be time to strategically focus these efforts going forward.
Special thanks to Blueprint RF for its sponsorship of this project.
Jeremy Rock is the president of RockIT Group, a consulting firm specializing in new development and refurbishment projects. He can be reached at JRock@RockITgroup.com.
©2016 Hospitality Upgrade
This work may not be reprinted, redistributed or repurposed without written consent.
For permission requests, call 678.802.5302 or email info@hospitalityupgrade.com.
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Sidebar
Ransomware
According to FBI reports, ransomware incidents increased dramatically the first part of this year, and in recent months, the proliferation of attacks has affected everyone from individual users to hospitals and even police departments. While most of the news coverage centered on hospitals and other large institutions, very little has been published regarding incidents affecting the hospitality industry.
Based on this information, we asked a number of industry IT leaders whether they had been exposed to any ransomware incidents within their organizations. Surprisingly a number of them indicated that they had been exposed to ransomware. However, most of them were not that concerned with the threat and reportedly dealt with the breaches by treating them as typical system or application outages. This meant they did a restore from their back-up systems and were essentially up and running within a reasonable timeframe. While there are obviously key technical issues that are implemented as part of this procedure, the important takeaway from these responses was that the hotels and companies did not negotiate with the entity/person trying to hold their data for ransom.
This appears to counter what most online reports reference. In most cases the reports indicated that both the law enforcement community and the victims recommend the effected parties pay the ransom should they find themselves in a situation where their systems and data are being held for ransom. The primary reason that they recommended that the victim pay the ransom was the typical time involved with getting the information back. Additionally, even if you are able to restore the data, you may not have eliminated the malware and you could be exposed to it again.
The following were the recommendations and feedback from the industry team:
1: Do not pay the ransom.
Most hotel company IT leadership believe that you should not pay the ransom as you are rewarding the guilty party for malicious activity.
2: Treat the attack as a typical system outage.
Treat ransomware breaches as you would any other system outage.
3: Ensure that your disaster recovery program is intact.
Confirm that you have back-up processes in place.
4: Antivirus and intrusion detection.
Ensure that your antivirus and other malware detection and prevention systems are up to date and in place.
Very often it could take days to get the ransom paid and the data restored. This is because ransoms are to be paid in bitcoin, and buying bitcoin in any one of the U.S. exchanges can involve a three to five-day wait time. As such, you may be forced to deal with a lengthy delay in restoring your data. The industry recommendation is not to reward the criminals for their crimes, but to take a stand and fight back.
References:http://www.forbes.com/sites/joshbersin/2014/04/10/its-time-to-rethink-the-employee-engagement-issue/#1c79bae91827
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Sidebar
EMV
It’s hard to believe but it’s been a year since EMV was mandated to be installed on point-of-sale (POS) terminals in the United States. In most instances, the liability shift went into effect on Oct. 1, 2015. However, as we have seen, the industry was simply not ready for a full-scale implementation of this requirement, and in fact, a large number of companies have yet to implement solutions.
In a recent survey, only 2.5 percent of respondents indicated that all of their properties were fully deployed with EMV solutions. Seventy-five percent of the respondents had less than 50 percent of their properties fully deployed. Breaking the numbers down further highlighted that 55 percent had less than 10 percent of their properties deployed, and almost 25 percent of all respondents had no installations. The primary reasons that most cited for the lack of deployment was the fact that viable proven solutions were still not available for many of their applications as well as problematic installations and support. Additionally, the cost of deployment was referenced, which in many cases was cost prohibitive given the number of terminals that were required.
On a positive note, it appears that many companies/ organizations are working to get their properties deployed and compliant. When asked whether they plan to deploy EMV on a propertywide basis before Jan. 1, 2017, more than 52 percent indicated they would.
CURRENT CHALLENGES WITH EMV DEPLOYMENTS
1 The role of the gateway provider
The credit card gateway provider has been assigned the responsibility of creating the interface between the application provider and the EMV equipment provider – a role that they are not typically used to facilitating.
2 The use of third-party equipment suppliers
The EMV terminals from providers such as Ingenico and Verifone are being distributed to the end users via third-party equipment distributors. These third-party distributors are also required to “inject” the specific gateway provider system configuration for each property into the devices prior to shipment. There have been a number of instances where this has been facilitated incorrectly, which has resulted in deployment delays and other operational challenges.
3 The lack of knowledgeable installation and support resources
EMV is still fairly new to most deployment personnel. As such, many are learning on the job, so to speak. This has resulted in challenges with application menus and configuration to each of the solution options that are currently available with their systems. Additionally, in a number of instances there have reportedly been shortages of knowledgeable support staff to assist with the deployments and support of the applications.
4 Impact on operations
One of the unanticipated challenges with EMV has been the impact on certain types of operations and revenue generation. This is especially evident in food and beverage operations such as bars and lounges, where servers are used to processing payments quickly and efficiently. The challenges with the length of time that it takes for an authorization, coupled with the lack of effective pay-at-the-table solutions, have had impacts on service levels and the ability for servers to process payments in an effective manner. The issues have resulted in lost revenues, and in many cases, lost earnings for the staff.
5 Pay-at-the-table solutions
We still do not have effective pay-at-the-table solutions. With one of the requirements for EMV being that the cardholder should always be in possession of his or her card, this requirement cannot effectively be met until viable pay-at-the-table solutions become available.