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Old Concerns New Convergence

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June 12, 2015
Converged Networks
Max Rayner

VoIP alone is an old topic. The present focus is on the convergence of Internet protocol-based telephony (IPT), high-speed Internet access (HSIA) and the related services such as TV, HVAC and energy management in the hospitality context.

The voice, data, and more broadly, the general communications convergence trend is bringing forward new opportunities for vendors to serve hoteliers in ways that add far more value than previously available.

For a full-service hotel with significant phone bills, introducing Internet protocol telephony (IPT) as a replacement for traditional voice can lead to savings as high as 77 percent on local and long distance calls alone, which could amount to more than $50,000 per year. More typically, savings will likely be lower but still significant.
Adding a cloud-hosted PBX to the mix brings additional savings vs. installing an on-premise PBX. These can range from about 30 percent for a limited-service property to greater than 120 percent for a large hotel with support contract costs.

While there are cases where an on-premise PBX could break even after five years, that only happens if hoteliers take the risk of not having service contracts and opt for time-and-materials support from their traditional PBX provider, which can bring a nasty surprise as soon as any major service is needed.

But we’re jumping to a conclusion without sufficient foundational work, so let’s start with context. In order to substantiate the relatively bold claim that the time has come for convergence in hospitality networks, it may be helpful to understand the background for each previously unrelated individual service, the reasons why they now present both threats and synergies when considered together, the market forces opening the door to convergence, and the evidence within hospitality and related progressive fields that might serve as canaries in the coal mine.

Outside of hospitality there is plenty of precedent and evidence for network convergence. The parallels to voice, data and HSIA convergence are worth noting: in legacy cases, voice is carried over a Primary Rate Interface circuit (PRI) into the Public Switched Telephone Network (PSTN). In the United States this generally means either a bunch of Plain Old Telephone Service (POTS) analog lines or a T1 circuit comprising 23 voice channels and one management channel. The upside is that 23 concurrent calls can be placed with guaranteed quality. The downside is that a number of PRIs are needed in a large hotel property to handle peak loads, and those channels can’t be used for anything else but voice despite being both costly and mostly idle.
Convergence comes into play because voice, data, guest and meeting HSIA can share common data circuits. Just like the fiber channel protocol can be carried over Ethernet with significant cabling and other savings in a data center, voice can be carried over IP with significant savings and added flexibility. Additionally, convergence simplifies a cabling and management rat’s nest of coaxial cable for TV, a different coax for security video, CAT 5 for data, CAT 3 for phones, and 19th Century vintage American wire gauge for thermostats and other things.

By now you may already be feeling like Pete Seeger and humming to yourself, “Where have all the acronyms gone, long time passing?” Sadly, there are even more to cover including the subtle distinction between VoIP and Session Initiation Protocol (SIP).

While VoIP is a general term for voice carried over IP, SIP has a more precise meaning. VoIP can encompass proprietary protocols such the Skype protocol. SIP is an Internet Engineering Task Force (IETF) public standard. It is one of the main enablers of voice and data convergence and has given rise to SIP trunking, which is the ability to pipe multiple voice channels over a common data line. To make things simple, you can think of SIP as an open, standard mechanism to deliver VoIP.

In the infancy of the Internet, when peering (the connection between distinct Internet autonomous system networks) was often sketchy even within the United States, SIP implementations carried a real risk of degraded quality of service. However the corner has been turned. Even legacy carriers that had been squeezing the last drop out of their POTS lines are now pushing customers to IP. In Silicon Valley, when consumers complain to AT&T of high bills, AT&T agents are now actively pushing AT&T’s VoIP solution as a replacement with a bonus: Internet access that can power a wireless router as backup for cable Internet.

Furthermore, holistic management of connectivity solutions that take into account how people live today are taking hold and even very large enterprises are realizing they’re better off letting specialists outside their companies handle HSIA. Starbucks turned HSIA management at its stores over to Dimension Data, who is tasked with ensuring that carrier services at each store are both cost effective and high quality.

Closer to hospitality, we see a great deal of market variability and it’s often the case that hoteliers will do better with specialist help in securing the right pricing and mix of services. Ranging from telecommunications consulting to billing and service provider coordination, consultants boast an average savings rate for hotels of 10 percent to 15 percent in telecom costs and often partner with companies in securing the most cost-effective mix of additional services for their clients, frequently providing significant additional leveraged savings.

Comcast Business has begun offering SIP trunking in California, New Jersey and selected cities. The service is not widely available enough, and although it is marketed as business-class, the underlying networks appear to operate regionally. On the other hand, Windstream is more flexible than large carriers and continues to offer carrier Ethernet and transport services for enterprise data, voice, network and cloud hosting solutions, often in partnership with hospitality specialists. 

More targeted on the hospitality industry, we have been encouraged to see the emergence of providers aiming at convergence, with Thing5 and Guest-tek being the most notable. Thing5  offers converged communications offerings including HSIA (Innflux), SIP trunking, a cloud PBX solution, and contact center capabilities that include social engagement services, while Guest-tek offers media, HSIA (iBAHN) and PBX (Telnet) services. Voice Carrier, a relative newcomer to the hospitality market, has recently introduced an offer to replace legacy hotel voice lines and old PBXs with capital costs shifted to the monthly service fees. Any new equipment is bundled with its hosted service on a 60-month rental contract that can be canceled by returning all the equipment in good working order.

Why Now and Why Converged? 
Part of the points of leverage that make a converged service offering significantly more valuable have to do with the evolution of guest behavior, and therefore of hotelier’s needs. Until now, with relatively balkanized service providers, vendors have been able to point fingers at each other when issues arise. But as guests put intense pressure on HSIA with all the video streaming, file moving and interactive gaming prevalent today, this could easily imperil the quality of SIP trunking voice provisioned over a shared, limited pipe.

In a scenario like this, a single vendor managing the network for SIP trunking, hosted PBX, HSIA and even contact center services can deliver far more value. Moreover, such a vendor can enforce quality of service rules that both assure a good experience on all channels and offer additional revenue opportunities for guests and meeting organizers. This is especially true as guests increasingly expect a connected omnichannel experience.

In this context, we’re often asked if industry specialization matters, that is, why shouldn’t hoteliers go with major brands instead of providers focused on their vertical? There are many reasons including the weight of history and many battle scars from trying to shove square pegs into round holes, but here are a few examples:

  • Vendors focused on global enterprise unified communications have biases around assuring global cross-data data center communications, interoffice calling and other things that are largely beside the point for a hotel property. What they do well (such as connecting thousands of workers across hundreds of offices for a single company), most hoteliers usually don’t need.
  • On the other hand, what hoteliers need (such as tight PMS integrations and specific hospitality requirements) global carriers don’t do particularly well. For instance, the needs posed by group meetings HSIA (including the need to extend and secure multiple meeting organizer networks concurrently) tend to confuse generic vendors.
  • A good understanding of the various types of connections in legacy hotel systems is also a prerequisite for success in the installation of converged networks.  In legacy models, older interfaces abound including PBX, keyless entry, in-room movie rental, minibar sales, Internet access, point of sale and energy management. Any vendors that need to be taught about these old-school “quaint” interfaces are a danger to your property and your blood pressure.
  • Integrations with PMSs are critical, and only hospitality-focused saints have the patience to handle the slings and arrows around certifying PMS connections.
  • Bottom line, while general purpose vendors can be quite good at documenting rule of thumb savings from convergence, it’s the hospitality-focused ones that can deliver those savings fully and reliably and contribute to the delight of your guests.

If your focus is primarily on voice, you can realize significant initial savings from SIP trunking alone, either concurrently with a cloud PBX deployment or followed by it once your old telephony assets have been fully amortized. But you also need to watch for two dangerous ends of the spectrum:  large companies with plenty of VoIP experience but zero understanding of hospitality, and small amateur-hour regional hospitality vultures with lots of hotel lingo but limited network, carrier and industry throw-weight.

In the IPT/VoIP area we like to put prospective vendors through a checklist to separate the wheat from the chaff. A few sample items will give enough of an idea.  Can the proposed cloud VoIP PBX system (in conjunction with your PMS):

  • Upon check-in automatically enable room voicemail, deliver a greeting message, and enable long distance if incidentals have been guaranteed?
  • If a guest is moved can their messages and wake-up call requests be moved?
  • Set wake-up calls with or without repeats and report on un-answered wake-ups in case you have a knock-on-door policy at the “Nth” fail?
  • Allow the traveling band coach set a group wake-up for all 50 band members?
  • Ensure message lights (including “call front desk” cases) work as expected or are there constraints driven by IAD appliances?
  • Provide alerts to property personnel or security when a 911 call is taking place and keep the message/alert posted until acknowledged?
  • Have the flexibility to deliver the auto-attendant features and busy-don’t answer routing rules you want, ideally including a 24/7 contact center backup, and provide you with useful call data – leveraging 100 percent of your call data for your BI needs?
  • Upon check out delete any personal data, reset any status lights, passwords if any, and turn off long-distance calling?
  • Help automated status code setting such as clean/dirty/engineering ticket, etc.?
  • Overall, align total cost of ownership, short and long-term, with your hotel’s needs and usage?

IPT/VoIP is not like baseball, where the occasional miss is forgivable and (given legacy PMS quirks) sadly expected, but if a provider is only batting in the 300s against a basic list like this, you may instead want to adopt alternative services that give you an edge over the competition across the street.

Of course, a hotel could choose to buy a local PBX appliance, but that choice brings two issues with it:  it can only break even after a long period (typically five years) if the hotel foregoes service contracts and gambles on having no issues during that time which may require time and materials payments. The capital outlay/on-premise choice also carries financial predictability risk. If there is an issue within five years of purchase, the T&M costs bring an unwelcome surprise that management has to deal with as opposed to the SaaS subscription model.

Taking it one level higher, the Internet of Things (IoT) is upon us. Hotel guests experience its benefits at home and increasingly expect to enjoy the same benefits in their hotel stays. Especially the much fought over newer generations arrive with at-home experiences such as control access to their homes with an August Smart Lock, monitoring children’s safety at home from their smartphone, setting temperature remotely or having their cars talk to their home controls.

Customers expect as much, and indeed more, when they’re paying for a hotel experience. And increasingly, delivering such high quality integrated experiences requires a converged network that enables delivering high quality integrated experiences at relatively low cost. 

What a holistic converged network with HSIA, IPT, and proactive LAN management does is enable hoteliers to provide a Mercedes experience for the price of a Ford.

Max Rayner is a partner at Hudson Crossing LLC, a leading consultancy in travel and hospitality. He can be reached at max.rayner@hudsoncrossing.com.  

©2015 Hospitality Upgrade
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Benefits to owners, management companies and brands from convergence alone are significant and ongoing.

One-time new build benefits: Benefits come from a mix of savings on the number of individual cabling pathways that have to be laid out, translating to material and labor savings on the cabling and the construction itself. Studies expect cabling savings of 30 percent. For an 80-100 room limited-service hotel this could mean $80-$100K in cabling savings. For a 400-room full-service hotel with meeting space this could exceed $250K. 

Operating cost savings: Service contracts for maintaining disparate cable types from multiple vendors are simplified to one single standard, saving on the order of 15 percent versus typical cable maintenance contracts. 

Energy, HVAC and other savings: Formerly analog hyper-local systems like HVAC and power can now be managed intelligently, reducing wasted energy use by 50 percent to 70 percent.

Brand standards compliance: Compliance with brand standards and audits may seem like it should be a given, but as brands have gotten tighter on their standards to assure guest satisfaction, owners and managers need high quality vendors focused on hospitality who arrive already knowing what GPNS is. Marriott has done the entire industry a huge favor with its Global Property Network Standards and other brands have followed suit.

SIP trunking is especially attractive when it can leverage the Internet connectivity a hotel must have for other purposes as well as guest HSIA.  In these cases, market specialists like Eric Ryan Corp. typically see the same average savings as Hudson Crossing does of about 30 percent on local and long distance costs.

Guest mobile experience: A proper HSIA network opens the door to enabling guest mobile phones to interact with (and buy more) hotel services. True mobile integration should give guests the option of leveraging their own smartphone during a hotel stay. Thing5’s TravelButton smart phone API, with its ability to “pair” room phones with guest smartphones, is at the leading edge of this trend.

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