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Online Central Reservation Systems: What the Industry Is Saying

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

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

In the last issue we reviewed the idea of online central reservation systems. Now, after interviewing some of the vendors who sell these applications and the lodging companies who have bought these applications we can see what the industry is saying about online CRS. Vendors interviewed were SynXis, Pegasus Solutions, Radiant Systems, Micros Systems and Trust International. Clients interviewed were MGM Mirage, Wyndham Hotels & Resorts, Meristar Hotels & Resorts and Suburban Lodges of America.

Some Background
Last time we defined online as any application that is Internet-enabled or Internet-native so our only test for an online application is that it runs in a browser window. While that definition might be considered simplistic, in the following interviews it was the only common characteristic shared by vendors and clients. We did not address location of databases or communication methods. We chose to focus more on the business side of why vendors believe online applications are valuable, how lodging companies perceive these applications, and how they are being used or what is being planned.

What’s So Great about an Online Application?
Chris Heinz, senior vice president of distribution and revenue management at Wyndham, said, “It’s never made much sense to me to have distributed technology in an industry that isn’t technology driven. We believe that thin-client technology will allow our users to run their business, and let the technology people manage the technology.” Wyndham uses many of Micros-Fidelio’s applications, including its CRS, PMS, CIS and revenue management applications, and is planning a thin-client beta installation of Opera, Micros-Fidelio’s enterprise system.

Radiant Systems’ Vice President of Hospitality and Travel Services Mark Haidet said, “An online application, using Internet-native software, takes advantage of all Internet technologies, lowering the costs of technology.” Radiant Systems offers an Internet-native suite of applications including a PMS and distribution management, POS, workforce management and enterprise-wide consolidated reporting.

Understandably, all the vendors interviewed agree that using the Internet is a good thing, leading to lower costs, easier system use and maintenance, higher functionality and security. In general, clients agree.

Pam Streeter, VP of electronic distribution for Meristar, said “We were looking for four things. Low cost, technological sophistication, ease of use and something that could grow with us.” Meristar signed with SynXis to provide GDS connectivity and a Web site booking engine for all of Meristar’s non-branded properties. By the end of September, Meristar had 17 properties live on SynXis. Meristar’s plans also include using SynXis’ applications to help Meristar manage its corporate housing units in 23 different cities. In its call center, Meristar is using a multi-property PMS for most of its properties. “We are in the process of implementing SynXis Agent [SynXis’ call center application] for those properties which are not on this particular PMS, and our plan is to migrate those properties using the multi-property PMS from that application to SynXis Agent.”

MGM Mirage began considering an online application when their GDS volume got to be too much for their GDS vendor. “We were driving more volume than our vendor would allow,” said Glenn Bonner, CIO of MGM Mirage. “We were also looking for direct interfaces into our PMS and we wanted to reduce costs by aggregating GDS access from each hotel into one channel that would serve all properties.” MGM Mirage also uses SynXis for GDS connectivity and its Web site booking engine.

Other hotel companies were looking for more complete solutions. David Krischer, chairman and CEO of Suburban Lodges of America, said, “We had been using online products for three years, but we had never been able to put it together on an enterprise level.” Suburban Lodges chose Radiant Systems’ online solution for distribution management and property management for its company-owned hotels. Once the system is installed in these 66 properties, Suburban will begin a rollout to its franchised properties.

Some Specifics: GDS and ADS Channel Management
A common requirement among all the clients was the ability to better manage GDS and ADS (alternative distribution system) channels. ADS channels include the public sites like HRN and WorldRes, as well as private Intranet or extranet sites for preferred operators. All the lodging companies interviewed believe that an online provider is better situated to provide that connectivity, and to provide the functionality needed to manage that connectivity.
“Until 18 months ago, there were no external systems touching our internal hotel’s systems,” said Bonner. “We’ve always been more secure and private because of the customer spending information stored in our casino systems. I won’t want to build interfaces to Expedia, Travelscape or Travelocity; I want to have that relationship through a single point of contact, even with wholesalers.” MGM Mirage has no central reservation system; each property has its own reservations department, so each property manages its allotments for the GDS and ADS channels via a property-specific logon into SynXis.

Other companies are looking for the enterprise-wide distribution solutions. “We are very active over the Internet,” said Suburban Lodges’ Krischer. Suburban can now manage all its allocations centrally, since the booking engine on the Suburban Lodges’ Web site will now connect directly to the enterprise system provided by Radiant Systems.

Meristar’s Streeter said, “Channel management is one example of better functionality. We can control availability and rate offerings from the call center to the GDS to the Internet from one application.”

Inventory Management – Who Owns the Inventory?
You thought online applications would answer this question or even do away with it, didn’t you? Think again.

Bernard Ellis of SynXis said, “Inventory should reside in the CRS so that channel management can be more tightly monitored, especially as more and more reservations come in electronically.”

Properties control the inventory at MGM Mirage hotels, but Bonner is planning for more automation. “MGM Mirage is preparing our inventory managers for the day when a much larger segment of our inventory is given over to the Internet,” he said. “They may not be able to keep up with potential demand, say when Elvis comes back to life and announces that he’s performing at the MGM Grand, and everyone tries to book over the Web.”

At Meristar, Streeter believes its PMS will become a client of the CRS. “We want the CRS to control the inventory of the PMS,” she said.

Heinz said, “Wyndham intends to have our properties discontinue booking into the PMS when our interfaces are completed. All bookings should come through the CRS because it will allow us to cross-sell all properties.”

Most vendors try to stay out of this argument, lest their position hurt their sales. Pegasus Central, an online enterprise system, will sell its PMS and CRS components separately, as will Micros-Fidelio. Ultimately, of course, this argument will go away when an organization establishes true, single-image inventory used by reservations agents and front desk staff.

A common argument against browser-based applications continues to be connectivity and speed, but those interviewed didn’t seem to be too worried.

Heinz said, “(Wyndham’s) biggest concern is bandwidth and getting data from point A to point B quickly without bogging systems down and affecting GDS connectivity. We are in the process of heavy load testing to ensure that thin-client won’t negatively affect us. So far, we haven’t seen anything that leads us to believe that there will be performance issues for the user.”

Haidet of Radiant Systems said, “Private networks have an advantage in that there aren’t as many bandwidth issues. Most private networks ride on public infrastructure; either way, there’s not too much difference. Our customers use either a high-speed DSL or a fractional T-1 line.”

Telecommunications wasn’t much of an issue for Meristar. “No upgrade was needed when we installed,” said Streeter. “Most of our properties were already on a WAN over a T-1 line, and all of them had some sort of high-speed connection.”

Interfaces don’t seem to be much of a problem so far, at least not for the vendors.

Krischer of Suburban Lodges said, “Radiant Systems created a box that serves as an interface with all other third-party activities at the hotel – PBX, door locks, PPV, voicemail, and more. The box resides at the property, aggregates the property-level information, secures, encrypts and buffers it to send it up the wire to the central database.”

Jos Schapp, director of central systems for Micros-Fidelio, said the openness of XML allows new development. “An XML API allows easy access from external systems into the Micros-Fidelio CRS, and allows customers to book through any device they want, including wireless phones and handhelds.”

Even the traditional reservation services providers find XML to be helpful. Connie Rheams, president of Trust International USA, said, “We think that Internet technology will help us more than our clients because of ease of writing XML interfaces. We are quite pleased that the HITIS and OTA XML standards exist, but we’re finding that some PMS companies aren’t quite ready for them.”

According to Bernard Ellis, “XML takes care of our interface issues. We hand providers XML standards, but mostly we use a flat file import.” Ellis notes that XML interfaces have handed the industry a paradox, “Now we have a way to write cheap and fast two-way interfaces, so who needs single-image inventory?”

Meristar, MGM Grand and Wyndham are all in the process of writing one-way or two-way interfaces between their central reservation systems and their property management systems. “The process is less cumbersome on the SynXis side,” said Streeter, “but we still have to deal with the traditional PMSs.”

Proponents of the online model maintain that costs will decrease using a browser-based application, saving FTEs, hardware costs and increasing operational efficiencies (lowering operational costs).

Bonner said, “By aggregating our GDS access from multiple hotels to one outlet, we figured we could negotiate a lower cost, and we did. Plus we wanted to reduce FTEs at the properties by getting rid of clerks re-keying reservations. And we did.” Bonner continued, “We looked at the more traditional providers and stalled at the initial, upfront costs. It made no sense to us to do a custom GDS interface through one of the switches so we thought a third-party solution was the best option. The downside is that we had to give up our own chain code, but the upside is that we didn’t have to spend money to get set up – no hardware, hosting or software costs, just that per transaction fee.”

Meristar feels it has definitely saved on training costs. Streeter said, “It’s all done over the Internet. We have not had to upgrade any hardware in the hotels, provided they had Internet access and a decent 486. From the call center perspective, it will be a definite savings. We won’t have to buy or even upgrade our computers, and we won’t have to buy servers or hubs. We just need our PCs and a T-1 line.”

There seems to be little resistance to the transaction-based or subscription-based pricing models.

“Suburban Lodges’ franchisees are used to the transactional-fee model for reservations,” said Krischer. “They aren’t so used to software costs on a transactional basis, but they like the idea of no high upfront costs. Paying on an ongoing basis turns out to be less expensive and they don’t feel like they’re using yesterday’s technology.”

Some vendors are willing to sell their product on a subscription basis. “We can base our pricing on occupied room nights from the property management side, placing occupancy and ADR against some numerical factor,” said Radiant’s Haidet. “Subscription-based pricing allows for less initial capital outlay than a license and fee, and subscription-based pricing is more consistent with the operations and forecasting of the hotel than transaction-based pricing.”

Ease of Use
According to Streeter, implementation in the past has always been a nightmare, but implementing SynXis was a breeze. “The system is so flexible and free-form, each hotel can easily tailor the information and screens presented to best represent itself,” she said. But she said the learning rate and availability maintenance was daunting at first. “Our reservations and revenue managers adapted quickly, and now they can do it from wherever (they are) because it’s Web-based, which makes the process easier.”

MGM Mirage had no complaints about cutting over from its previous provider. “Our people were used to a fat client through a dial-up,” said Bonner, “so there was no real change.” He also liked the quick time-to-market. “We signed the contract on March 15 and had everyone up and running by June,” he said, “and none of it was really dependent on SynXis. We had to work with the PMS vendors to write the interfaces.”

Guest Service
We are, after all, in the service business, welcoming guests into our hotels and providing for their needs while they stay with us. Do these applications have an impact on guest service?

Heinz said, “We can facilitate guest service by allowing our staff to take care of customers and management channels and not have to worry about keeping the system running. People work here because they like to provide service, not because they are technologically oriented.”
Streeter agrees, “From the Web side, SynXis has made guest service easier. Confirmation letters, inquiry responses and modifications and cancellation acknowledgments are personalized and go out fast. On the GDS side, it’s transparent to the travel agent.”

Single-Image Inventory, Myth or Reality?
It is entirely possible to have a true, single-image inventory today. The definition here is the classic one – one database used by reservations (internal and external), front desk and the back office with no interfaces; only the views would be different, based on what data each user needed to see and use. It would mean that lodging companies would have to be willing to throw out both their CRS and their PMS at the same time, and most companies aren’t willing, or financially able, to abandon a system they may still be paying for. Laura O’Connor Barclay of Micros-Fidelio said, “Investment in existing systems is the biggest obstacle we see.”

“Radiant is aware that companies want to protect their investments or perhaps defer expenses,” said Haidet. “We know that capital expenditures are an issue and we are willing to work around that.”
Of the vendors interviewed for this article, only Pegasus said they offer single-image inventory products. Micros-Fidelio said that Opera version three, scheduled for release sometime next year, will be a complete, single-image inventory product. All the vendors interviewed are willing to sell their products by component – CRS or PMS – so it’s possible to purchase a component and wait for any legacy systems to be paid for and purchase the remaining components. However, most of the hoteliers interviewed aren’t looking for true, single-image inventory; most would be happy with solid, stable two-way interfaces between the CRS and PMS. And I thought this was the 21st century.

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

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