Executive Vendor Summit - Las Colinas, Texas April 11-13, 2007

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June 01, 2007
Executive Vendor Summit Review
Kris Burnett - kris@hospitalityupgrade.com

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© 2008 Hospitality Upgrade. No reproduction without written permission.

They say everything is bigger in Texas, and the same was true for Hospitality Upgrade’s third Executive Vendor Summit held April 11-13 at the Omni Mandalay in Las Colinas, Texas. In attendance at the event were 56 presidents and C-level executives from some of the top hospitality technology companies in the world.

Attendees came for the informative sessions and more importantly, the networking.

Tom Giannopoulos, chairman, president and CEO of MICROS Systems, Inc. found benefit in both. “I found all of the sessions to be well planned and informative. The Executive Vendor Summit provided me the opportunity to meet interesting entrepreneurs and to learn about emerging technologies and businesses in our industry,” he said.

Tim Whelehan, director, strategic markets for PAETEC, agreed. It was his first time to attend and he is glad he came. “You’ve got all the right people here from the vendor perspective. Everybody knows each other and they are coming from all corners of the globe,” he said. “Some of these people (attendees) have been driving technology in the industry for years and the knowledge base here, well, what you get from a conversation here, you can’t get from getting to know each other at a tradeshow. For me, I am doing a lot of listening and asking a lot of questions.”

The summit spanned two and a half days, with the first day highlighted by the annual golf scramble and barbecue. Before dinner in a beautiful outside setting overlooking the water, attendees were divided into four groups and then, in speed-dating fashion, spent a few minutes introducing themselves to as many of the others as time allowed. The evening culminated with an amazing dinner showcasing some of the best in beef, Southwestern food and desserts from the area, and then the golf tournament awards.

Thursday contained the first full day of sessions beginning with “Street Talk.” In this session, by far one of the most popular and interactive of the summit, the panelists examined mergers and acquisitions, and, using their own experiences, stressed being proactive more than anything else. Attendees had the opportunity to hear from the buyer’s side with Tom Giannopoulos, chairman, president and CEO of MICROS Systems, Inc.; the venture capital side with Russ Planitzer, managing principal of Lazard Technology Partners; and both the buyer’s and seller’s sides with John Rovani, managing director, travel and hospitality investment banking, The McLean Group, which advises clients in mergers and acquisitions (M&A) and capital formation transactions worldwide.

Giannopoulos opened the session with his version of “the shocking truths about M&As.” He highlighted eight main types of M&As including: roll-up acquisitions, where they consolidate companies within a specific industry using rising stock prices; merger of equals, where two companies in the same industry merge to create investor value through synergistic initiatives; private equity/LBOs, where underappreciated companies are targeted, fixed, resold and then taken public again; “ego” acquisitions, where there is no strategy according to Giannopoulos, but where “two highly egotistical CEOs overpay as they out-ego each other;” “needed to make the quarter,” which is self explanatory and works most times according to Giannopoulos; “what were we thinking,” where much more is paid for the company than they can sell it for in the end; entrepreneurial divestitures, a win-win where an entrepreneur started a company which then became a good target for acquisition by another company; and finally, strategic acquisitions, where the company expands into related markets by acquiring well-run, profitable companies (a majority of these work because they are well thought out).

Giannopoulos said, “None of these are bad or good, each depends on how they are managed or handled.” He stressed that a majority of mergers and acquisitions fail, but those that are successful are the result of a long-term business strategy, paying the right price, preserving critical talent and staying the course.

Planitzer described what a venture capitalist focuses on when looking for new business. First, “we invest by ZIP code,” he said. Resources are available to them when they stay close to home. He also said that it is important to stay in an industry in which the venture capitalist has expertise. Companies that are in stage one (trying to build a product) or stage two are very attractive to these individuals as well, as the companies are in the early stages and ripe for investment.

Planitzer said, “Hospitality is one of the hardest places to do market segmentation because there are so many segments. The fragmentation makes the selling in that space very, very hard.” One goal for venture capitalists is capital preservation, having the least amount of capital necessary for the next stage. “If you use capital wisely, it could mean the difference between getting six times your money or four,” Planitzer said.

Connie Rheams, vice president of business development for AltiusPAR, explained how the parent company of AltiusPAR had built some products on its own. Her company is now taking these products to market. The company didn’t need the $8 million or 18 months for development like many companies do. Because of this, AltiusPAR was able to take $8 million off of the capital development, a situation which would be very attractive to an investor, according to Planitzer.

Rovani covered not only what buyer companies are looking for but also what seller companies should do to prepare for a possible exit and tidal wave of acquisitions for their small- to mid-sized company. He explained that using the right approaches correctly, looking at the earnings, growth rates, buyer requirements and dynamic marketplace, looking at the balance sheet, buyer type, consideration mix as well as matching the unique values of the acquired company with those of the prospective buyers, are some of the most important keys to M&A value.

Rovani said the hospitality IT capital markets and retail IT markets have performed well against the Nasdaq composite (April 2006-April 2007). “There is a lot of activity in the travel IT M&A markets, but the big, big change is those going private (like Amadeus and Sabre),” Rovani said.
 
He described the active hospitality IT M&A markets as online B2C, B2B back office and PMS and POS. According to Rovani, travel IT valuations may decline, while retail IT will remain active and hospitality IT M&A will increase. He also inferred that there is a great deal of money being thrown at companies in India.

Rovani then covered several recommendations to a seller for preparing for an exit. “Exit planning is not an event; it is a process that continues throughout the life of your business,” he advised. “Carefully select and train your successors because your financial success depends on their success.” Another critical factor he covered was knowing how to motivate and retain key employees in order to create and sustain business value.

Rovani summarized some of the value drivers an individual can utilize when preparing for an exit; revenues, profits, growth prospects, product quality, human resources, housekeeping, risk management and an advisory team. After covering the steps in the M&A process, from initiating the engagement to closing the deal, he examined common seller pitfalls.

When it was time the floor was opened for questions. John Burns asked Giannopoulos what is next for MICROS. Reinforcing his recommendation of long-term business strategy, Giannopoulos said, “The overall strategy at MICROS is to expand into related markets. We have fulfilled that strategy without any missteps. I have documents from the 1993/94 timeframe that show where we wanted to be.”

Responding to a question from Ted Horner, owner, E Horner & Associates, about an individual’s value, Rovani said, “It is what you bring to the table. If you are part of an operation and you are valuable, they will want to include you for a period of time.” His recommendation is to hire additional people, train them or transfer your knowledge to them, and then sell them off with the company, bringing further valuation to the company.

Giannopoulos was asked about the importance of a strategy. He said, “The strategy you establish is paramount. You can’t establish by fads. Establish a strategy, begin to execute that strategy and stay after it as long as it takes… I have bought products and made acquisitions to fulfill (our) strategy.”

Giannopoulos also recommended that companies who acquire other companies in many cases should leave those companies alone to a certain extent. “I don’t believe in synergies because a lot of times (it) creates substantial cultural issues… If they are doing well when you acquire them, let them run their business."

Luis Segredo, president and CEO of MTech, asked, “What about if they are competition?” To which Giannopoulos replied, “Then let them compete.” Giannopoulos then ended the session after several more questions by summing up his theory on M&As: “Success is not the result of luck. Success is the result of strategy well executed.”

Greg J. Pesik, president and CEO, Passkey International, Inc. agreed. “This year the M&A discussion provided some of the best take-aways and actions steps for our company.  Even without a specific M&A activity underway, the session gave good insight into what we should be doing in the normal course of business,” he said.

The next session, “Trends to Watch,” included John Bray, president of John Bray Consulting; Paul Serff, Discover America Partnership/president and CEO Texas Travel Industry Association; and Sandra Andrews, industry solutions director retail and hospitality, Microsoft.

Andrews began the session by covering some of Microsoft’s key initiatives today: integration, business intelligence and guest experience. Some of the emerging technology trends she foresees include; the Web revolutionizing television; mobile device proliferation; server-based gaming; the mobile wallet (shop and pay via mobile phone); technology/services for the millennium generation (like the blog that Bill Marriott has started); and a digital life-work style convergence.

Paul Serff revealed another trend–a startling decline in overseas travel to the United States in the last five to six years. Between 2001 and 2006, overseas travel to the United States was down 17 percent, and between 2004 and 2005, overseas business travel to the United States was down 10 percent. Serff pointed out that customs and integration seem to be two ongoing deterrents and potential causes of the decline. “The world is getting the value of travel and tourism,” he said. “(The mission of) TIA is to promote and facilitate increased travel into and within the United States.”

Promoting travel further, John Bray shed light on many of the new vertical Web sites consumers can use to map out their own trips and customize searches using the reviews and recommendations of others. Attendees were rapidly writing down every one that he mentioned in an attempt to visit the sites themselves.

What you will find, according to Bray, is that in the past, consumers used the Web to find the best price. That was Travel 1.0. Bray said, “It used to be about checkout, buy, payment, click… Now there are online travel bazaars for shopping, planning… and they are using them to plan travel experiences (Travel 2.0)... It is changing from searching for the best rate to finding the best trip.”

One trend Bray pointed out was that due to this increased interest in vertical travel Web sites, traffic on TripAdvisor™ (where travelers can post hotel reviews and rankings) is on the increase and will eventually overtake the value of Expedia. He explained why travel on the Web is changing. “The users are taking charge. Digital music encourages electronic snacking, satellite imagery brings maps to life, and digital photo sharing has soared,” Bray said. “Instead of being marketed to, consumers are saying, let me see what I am buying, what I want.” Bray stressed this is not a fad, but is here to stay.

He pointed out that regular search engines like Google or Yahoo are not travel-specific. “If you enter ‘hotels, Paris,’ you get all kinds of listings,” he said. But other sites such as kayak.com or kosmix are travel-specific. When you enter ‘hotels, Paris,’ that’s what you get, hotels in Paris. “Travel-specific search engines have emerged… that organize search results by category and provide personal results,” said Bray.

Bray describes these Web sites as smarter Googles, or smarter search engines, because the searches can truly be customized. Another example of a smarter Web site is Farecast.com which uses tools a revenue manager would normally use. It predicts fares by looking at seats and then forecasts when the fares will go up.

Flyspy.com is an example that gives airfares for a one-day, 10-day, 30-day, etc. window, and then gives a curve based on that window. It allows you to adjust the length of your stay and sort the flights listed by column. Wegolo.com is a meta search engine that allows you to enter a temperature, distance from the beach or snowfall amount and ask where you can go to find these aspects. It does this by mashing up different categories and presents its findings.

Bray explained why the Web sites with reviews are so popular. “Shared experiences inspire travel (buying),” Bray said. “User content stimulates the content of search advertising.” (He continued that Trip Planner on Yahoo has a half million trip plans loaded on it right now.) Aside from customer reviews (typewritten with photos, and in some cases, in video) on Web sites like those mentioned and that of Sheraton, there are numerous travel blogs and other meta search tools to customize searches and illuminate Web sites that other people with similar interests have visited. It allows consumers to share travel information and its creates social networking.

Wikia, or World Wikia, an encyclopedia for travel, is updated around the world and contains user-generated content and very user-friendly directions for updating content. It is known as, “World Wikia, a free travel directory that you can edit.”

In the last 10 years (1996-2006), consumers have moved from Web 1.0 (250,000 sites and 45 million global users) to Web 2.0 (80 million sites and over 1 billion global users).

Consumers are even using YouTube for travel purposes. “(People) used to use YouTube as an entertainment source; now they use it as a source,” Bray said.

Consumers can get dinged for deals, they can buy travel from their calendars, cars or search via instant message. Kayak.com is another example of a meta search engine which enables users to enter search criteria once and gain access to several search engines simultaneously.

As Bray pointed out, trends like meta search engines have taken a quantum leap. “(They) are designed around historial data trends and predictive analyses. These tools provide analytical capabilities that a person simply could not replicate.”

The last session of the day focused on some of the domestic and international trends. Panelists included Douglas Clark, principal, The TyleRyan Group; Ted Horner, owner, E Horner & Associates; Kevin Short, vice president, EDS; and Connie Young, industry partner manager, Microsoft.

Short sees a continuing trend in the movement from custom applications to off-the-shelf  software and ASP models. He sees a slower trend toward managed infrastructure–at least slower in hospitality than other industries. By moving to off-the-shelf software or ASP models, you don’t need developers as much, but he does see them moving toward an integration role.

Young focused on the main resource that Microsoft uses; its customers. “We rely on customers to give feedback,” she said. Microsoft’s other goals are to work on ensuring their solutions are scalable and enterprise-ready.

Horner started right off the bat with a question for the audience. When he asked, “How many vendors here intend to set up operations in Dubai?”, 75 percent of the audience raised their hands. Horner explained that the fastest growing airline is Emirates due in part to the 6 million travelers who went to Dubai last year. “By 2010, Dubai will have 15 million tourists,” Horner said.

He then posed a challenge to the audience, “What are we trying to achieve in our guestrooms? I encourage every one of you in the next 12 months to visit the highest/fastest-growing markets–India, China and the Gulf.”

Horner reminded the audience, “The sales cycle in this business is long… We get called daily, weekly, show me the money; where is the ROI for the new technology? The constant challenge for us is how do we continue to drive ROI… I personally think HD will become a multimedia device.” He also predicted that energy management will be a major issue including the integration with PMSs.

Douglas Clark said that rate fraud (airlines, car rentals, etc.) is a big problem. As he pointed out though, some companies don’t care. “They would rather have that lower rate when they are empty than no guests at all,” he said. “The focus of revenue management was how to get the right guest. Now the focus is how to get the right channel.”

Earlier, Sally Kelly pointed out that we are still trying to understand a global market that is expanding. “There are more than 1 billion people in India who have never stayed in a hotel. What are you all doing (globally)?” she asked the panel.

Short said that EDS is focused on partnering and is not going to become a point-of-service provider. Young agreed, confirming that Microsoft would rely on partners to help.

According to Horner the door is open. “I am starting to see opportunities after five years (since 2002) with HTNG,” he said. “If you don’t comply to HTNG standards, do not bother to apply. From the owners’ perspective, we should provide a choice. There is a tremendous gap for new players to come to the table especially in new hotels.”

David Chestler, SVP corporate business development, Pegasus Solutions, Inc., asked about localization. Kelly responded, “Localization can be understanding the market. We have a difficulty understanding that we aren’t in Kansas anymore. Buyers are different than we were. You have to understand the culture.”

Clark said, “American chains are moving into China and India. If you take one of the limited-service brands to India, perception there is that it will be the best product (property) in the area.”

“How do you manage?” Clark asked. He said we must know the market and cannot standardize for this and other reasons. As he explained, in Saudi Arabia they read right to left, so a before-and-after advertisement doesn’t work in this market.

After a full day of sessions and a short break, attendees were not disappointed with the evening’s events. Next up: Tom Peck, SVP and CIO of MGM MIRAGE spoke at the gala dinner.

As a Six Sigma Master Black Belt with extensive experience in the standardization of business practices into a centralized service model, Peck kept the audience engaged the entire evening regarding the evolving role of the CIO. 

The highlight of his presentation was a toss-up between the cartoon about Richard Siegel and the “You might be a CIO if…” list that had everyone roaring with laughter.

Some of the roles of the CIO that he covered were: having a firm handle on resources; understanding compliance; ability to assess risk; governance; ability to improve time-to-market; understanding the ramifications of globalization; understanding customer expectations; understanding/practicing good business and good ethics; focusing on service; integration and support; and the movement to technology firms. From strong beliefs in Six Sigma principles to belief in partnerships and people, the vision/mission at MGM MIRAGE and its new CityCenter is clear; it’s all about the guests.

His discussion of “How to stop the Dilbertization of IT” gave a humorous glimpse at some really good recommendations for empowering people; in this case, his IT force. “Let IT be more than firefighters,” he said. “Allow them to toss ideas back and forth to make for better technology solutions instead of jumping from one calamity to another.” He also encouraged building well-rounded people. “It starts with people–engage them,” Peck said.

Both customer experience and brand are very important at MGM MIRAGE. “Brand is more powerful than location for hotel choice,” Peck said. “Brand is driven by experience; technology helps drive experiences. Guests want consistency,” he said. “We have to sell experiences, not products.”

Before ending his presentation Peck briefly described MGM MIRAGE’s new CityCenter complex on the Las Vegas Strip between the Bellagio and the Monte Carlo. It spans 76 acres, boasts six high rise buildings, a 500,00 sq. ft. retail experience and a 150,000 sq. ft. casino; a project totaling $7 billion.

The following morning during the last session, Scot Campbell, VP MIS business solutions MGM MIRAGE, Project CityCenter, walked the group through the finer details of the complex slated for completion in Q4 2009. According to Campbell, “It’s going to be big. It’s going to change the way you look at Las Vegas.”

He said, “My job is about innovation and what the customer is going to experience in 2009.”

At CityCenter/MGM MIRAGE, they are focused on diversity of people at every conception of design. Campbell explained, “The underlying factor is that diversity is key.” Many involved in different stages of the project including the construction companies are required to take diversity classes.

The statistics show that CityCenter is the largest private building project ever in the United States, covering over 76 acres and including six high rise buildings housing luxury condominiums, a luxury hotel and casino, two boutique hotels and a 500,000-square-foot retail and entertainment district. The project will eventually employ an estimated 12,000 people and will offer 6, 000 rentable rooms, 1,350 residential properties, nightclubs, showrooms, convention space and restaurants.

Campbell explained his job description as, “Do whatever you need to do to make IT successful on this job.” The ultimate goal at CityCenter is to create a type of lifestyle for the people who live in these homes.

According to Campbell, what’s new is IP everything. But there are ramifications to putting everything on an IP network. He said, “We’ve got to go forward. We have to change technology, but technology is changing all around us.”

Looking ahead Campbell said, “When Project CityCenter opens, guests will be carrying high-speed mobile communication devices integrating their telephony, messaging, video, photos, music, TV, personal information management and payment technology. The mobile phone will be the technology of choice when CityCenter opens.”

“The consumer is moving from PC-centric to mobile phone-centric,” he said. “To appeal to these mobile people, CityCenter must meet their needs and support their habits.” Some of the mobile technology he predicts includes: mobile TV growing   rapidly; mobile payment trends/contactless credit cards becoming commonplace; and mobile phones serving as digital wallets.

At CityCenter/MGM MIRAGE, their goal is to work closely with their vendors. “Understand our Six Sigma approach, be open to best of breed and data bus architecture." Campbell advised the group of vendors seated before him, “We want to see profile data at every customer touchpoint. It’s about the experience and the technology.”

And that about sums up the event. With all of the networking, shared information and relationships made, it was about the experience and the technology.

Thank you to the sponsors of the 2007 Executive Vendor Summit: Microsoft, TechTeam Global and HFTP.

 
-Submitted by Kris Burnett, Hospitality Upgrade

2007 ATTENDEES
Dan Ives, SmartConnect, Inc.; Larry Dustin, iBAHN; Greg Pesik, Passkey International, Inc.; Tom Giannopoulos, MICROS Systems; Tracy Flynn, NCR Corp; Per-Anders Wendin, InnLink, LLC; Jay Troutman, APTECH Computer Systems, Inc.; Gregg Hopkins, Karyon; Tim Whelehan, PAETEC Communications; John Springer-Miller, PAR Springer-Miller Systems; Steven J. VanTassel, SoftBrands; Scott Alvis, SynXis Corporation; Patrick van der Wardt, Brilliant Hotel Software; John Burns, Hospitality Technology Consulting; Ed Booth, IDeaS; Mark Pinsley, ADACO Services, LLC; Mark Francischetti, TechTeam Global; Mark Tapling, InfoGenesis; Ted Horner, E Horner & Associates; Antonio DiMilia, LodgeNet StayOnline, Inc.; Robert Magliozzi, CENDYN; Douglas Clark, The TyleRyan Group LLC; Victor Alikin, GBCblue; Frank Pitsikalis, ResortSuite; Rick Munson, Multi-Systems, Inc.; Glenn Convey, Metamend; Jeremy Rock, RockIT Group; Luis Segredo, MTech; Tom Littleton, LMG Data Mining; Ron Dressin, RedRock Software; Mark Holzberg, Lorica Solutions; Clive Taylor, EasyRMS Ltd.; Sudharshan Chary, Datavision Technologies; Luis DeSouza, NFS Hospitality; Kevin Short, EDS; Jon Inge, Jon Inge & Associates; Murat Ozsu, innRoad; Stu Levin, Tangerine Global; David Chestler, Pegasus Solutions, Inc.; Ron Tarro, SDD/Systems Design & Development, Inc; Annette Hogan, Amadeus; Connie Rheams, AltiusPAR; Sandra Andrews, Microsoft; Tina Stehle, Agilysys, Inc.; Jacob Dehan, Northwind-MaestroPMS; Bruce Bensetler, Data Plus; Steve Gelb, Maxim Revenue Management Solutions; Sean O’Neill, Newmarket International, Inc.; Don Hay, Digital Alchemy; Eric Conrad, IBM; John F. Davis III, Pegasus Solutions, Inc.; and Frank Wolfe, HFTP.

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Sessions you may have missed:
  • Street Talk: Current M&A activity and recommended steps for buyers and sellers
  • Trends to Watch–2007 and Beyond: Equipment, the spread of customer-content Web sites and TIA (Travel Industry Association) update
  • No Names Please…: Domestic and global activity
  • Gala Dinner Speaker: Tom Peck, CIO of MGM MIRAGE, and the vision that drives the company
  • Pay No Attention to the Man Behind the Curtain: An update on Project CityCenter in Las Vegas, Nev., from VP of MIS Business Solutions Scot Campbell.
For more information covered in these sessions, please see www.vendorsummit.com.
 
 
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“I found all of the sessions to be well planned and informative. The Executive Vendor Summit provided me the opportunity to meet interesting entrepreneurs and to learn about emerging technologies and businesses in our industry.”  Tom Giannopoulos, chairman, president and CEO of MICROS Systems, Inc.


"The vendor summit allows me to advance relationships with our key industry partners fueled by topics discussed in the sessions.  There is no other forum that permits the type of interactions with other executives.  I look at the summit as the annual kick-off for industry partnering.
Where else can you spend 48 hours with your colleagues, competitors and partners without being pulled into client-related activities or sales?”  Greg J. Pesik, president and CEO, Passkey International, Inc.


“I really enjoyed hearing some of the outside perspective on the venture capital, the frank talk from the CEO of MICROS on the whole acquisition/M&A picture and some of the outside perspective. I normally have to go to (several) conferences to pick up and glean that information.”  Jay Troutman, president of Aptech Computer Systems, Inc.


"The Executive Vendor Summit provides an opportunity for vendors to get to know each other, in an informal setting, and discuss their strategic direction and possible strategic initiatives where those directions coincide.”  Ron Dressin, president, RedRock Software

 
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Seven foursomes participated in Hospitality Upgrade’s annual Executive Vendor Summit golf tournament held this year at Bridlewood Golf Club in Flower Mound, Texas. Fees donated for mulligans benefitted the HFTP Scholarship Fund.
 
 
Winning Foursome:
  • Ron Dressin, president of RedRock Software
  • Mark Tapling, president, CEO of InfoGenesis
  • Dan Ives, president, CEO of SmartConnect, Inc.
  • Rich Siegel, publisher of Hospitality Upgrade
 
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Vendor Checklist
  • Reserve my spot for next year’s summit.
  • Make more time for networking with other attendees.
  • Take more notes in the sessions.
  • Volunteer for the Executive Vendor Summit steering committee.
  • Follow up with a couple of the attendees about a few ideas I have for our companies to work together.
  • Work on my golf game before the summit next year.
 
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Thank you to the 2006-2007 Executive Vendor Summit Steering Committee for their contributions and input into the programming portion of the summit:
  • Ed Booth, CEO and chairman, IDeaS
  • Don Hay, CEO, Digital Alchemy
  • Sherry Marek, senior vice president, Datavision Technologies
  • Rick Munson, CEO, MSI
  • Luis Segredo, president, MTech
  • John Springer-Miller, president, PAR Springer-Miller
  • Greg Pesik, president, Passkey International
  • Ron Tarro, president and CEO, SDD

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