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Online CRS: The New Phenomenon

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June 01, 2001
Valyn Erickson - valyn.erickson@us.pwcglobal.com

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

Coming up behind traditional central reservation system (CRS) vendors are vendors selling online reservation systems. There are more of them and their market share is growing, but what exactly defines an online reservation system? What exactly are these vendors offering and why are their applications worth considering?

There are several definitions of online when it comes to any type of system, not just CRSs. Online hasn’t always meant ‘via the Internet.’ Hotels and reservations providers have communicated remotely for years using programs like PCAnywhere or Citrix WinFrame. Today, applications call themselves Web-enabled or Internet-enabled, meaning the application has the programming necessary to actually run on a Web site, but may use a programming language that enables the application to also run in more traditional environments (client/server, for example). The newest programming and marketing term used by online vendors is Internet-native, meaning the application was programmed in an Internet language (Java, for example) and built specifically to run on the Internet, and may or may not be able to exist in a client/server environment. When it comes to CRS, there are those who make the argument that CRS has been online for years, using interfaces (one-way or two-way, real time or batch) to send reservations from the CRS down to the property management system (PMS). But let’s not muddy the waters any more than they already are. For the purposes of this article and in the interest of space, we’ll define online CRS as any CRS application that is Internet-enabled or Internet-native. As Internet-native is a fairly unknown term, here are some characteristics, for clarity’s sake:

  • More security and encryption devices than in non-Internet languages to ensure data security as it passes over communication lines
  • Ability to take advantage of other Internet technologies at a lower cost
  • Easier interfacing, with the ability to take advantage of XML messaging (preferably using OTA and HITIS)
  • Reduction of technology costs
  • Reduction of Costs
Like CRSs of old, an online CRS would reside in a single place, either at the corporate or regional office, or at a third-party site using the application service provider (ASP) model. Defined as the remote hosting of both application and data, usually using a transaction-based fee model and requiring properties to have only PCs that have Web browsers, printers and network connections, the ASP model has been discussed and debated in the hospitality technology arena for the last few years. This article won’t add to that discussion or join that debate, but will use some of the ASP economic arguments for an online CRS, including:
  • Reduces or eliminates capital expenditures for technology
  • Much lower up-front costs
  • Ties technology expenses to occupancy using the transaction-based fee model
  • Costs of technology are spread over time
  • Reduces total cost of ownership
  • Less need for expensive, fat hardware
  • Reduces technology head count
  • Upgrades and fixes are applied once by the provider for all locations and users
  • Needs less training time for employees
  • More familiarity with GUI and Internet applications
  • Provides better yield through more efficient channel management
  • Ability to more closely manage dispersed inventory and pricing across all GDS and ADS channels

Basic functionality in an online CRS is not very different from a traditional CRS. It takes reservations and stores guest information, and can pass on that information to the PMS. Several of the online CRS vendors offer enterprise packages, incorporating not only CRS but also PMS functionality, representing their product as providing true single-image inventory. The single-image inventory has been a happy but elusive dream of hoteliers for years. Single-image inventory would eliminate the headache of multiple instances of (usually mis-matched) guest data and provide a true, incorporated data warehouse, making customer relationship management (CRM) easier and less expensive; would eliminate the need for interfaces or integration between the CRS, PMS and the data warehouse; and would finally put to rest, once and for all, the age-old hotelier argument of where guest data should ultimately reside. However, most of the vendors that offer an enterprise solution also say they can sell their solution by component. The big difference is in channel management functionality, and as more hotel reservations come in over more Internet channels, this functionality absolutely cannot be overlooked. Because these applications are Internet-enabled, or even better, Internet-native, their ability to easily talk to online channels of distribution is much more sophisticated than the legacy CRSs out there. Those CRS applications that were built to be Internet-enabled or Internet-native have much more functionality when it comes to allocation, pricing and tracking of rooms by channel, generally in real time.

Communication issues have become less important in the ASP debate as communication security has become more sophisticated and high-speed communication has become more affordable. The debate over public lines vs. private lines has also subsided with the advent and widespread use of virtual private networks (VPNs) and the encryption technology offered with Internet-native applications. Certainly a private network has its advantages in guaranteed (mostly) security and bandwidth space, but the gap between public and private communication networks is closing. From the perspective of a CRS, the amount of actual information that passes to a PMS is fairly limited and passes down only once (modifications and cancellations contain such a small amount of information that they hardly make a dent), supporting the argument that public lines, especially using an Internet-native application, are a viable option. The more compelling communication argument surrounds the enterprise solution over public communication lines, but we’ll leave that for another article (and a braver author).

Once decried as the Achilles’ heel of ASP-based applications, interfaces to both internal (inside the hotel) and external (outside the hotel) applications have become much easier to write and install, thanks to the work of OTA and HITIS for their XML-messaging standards, to the open databases in use by the newer applications, and to improved communications technology. This is good news for hoteliers, as now most vendors are (more) willing to pick up the tab for writing interfaces, as it’s no longer the time-consuming, banging-head-against-wall exercise it was in the past. Most vendors also recognize that most hotel companies will not take no for an answer when it comes to interfaces, so sales come easier with interfaces already written and available, and are moving to create alliances with other vendors to make themselves more attractive. The newer vendor entrants to the online CRS world seem to understand that the willingness to write interfaces and the availability of existing interfaces will give them an advantage in this tight marketplace.

What’s not to like?
You may have noticed that there are more online CRS vendors than online PMS vendors in the marketplace, and for good reason. Generally, a CRS for a hotel company exists in only one place, while a PMS obviously exists at every property, and there’s much less heartache replacing one application than replacing many. However, CRSs tend to be complicated beasts with many users and depending on their age, lots of complex programming affecting lots of other systems. Replacing a CRS is no easy decision, and the bigger the company, the harder the decision. Right now for mid-sized and small companies as well as independents, an online CRS is a viable and attractive option. There is the concern that given the rate of technological change the purchase of a package today may be rendered worthless by the new technology of tomorrow. Plus the idea of having client/server components and online components in the same network makes some technology professionals nervous. On the other hand, there are companies out there that have put out RFPs for online providers only. Those organizations seem to realize that this is no time, given rising guest service demands and a tightening economy, to hide from the coming technology.

Valyn Erickson is a principal consultant in the Hospitality & Leisure Practice at PricewaterhouseCoopers. She can be reached by e-mail at valyn.erickson@us.pwcglobal.com.

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