10 Trends Affecting Hospitality IT in 2005

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March 01, 2005
Technology | Trends
Bradford S. Iverson - brad.iverson@us.ibm.com

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© 2005 Hospitality Upgrade. No reproduction without written permission.

The hospitality industry has gone through tremendous change over the last decade. Some changes have been dictated by technological advances, such as the shift from mainframe access via dumb terminals and green screens, to the current emphasis on above-property applications leveraging data from a single source. Other changes, such as the increased use of the Internet spawned a plethora of new opportunities along with new intermediaries. And, of course, the economy and geopolitical events have impacted our industry.

Through it all technology and improved business processes have had an enormous impact in transforming this industry--real-time access to inventory, transparency across multiple channels, campaigns targeted with laser precision at niche segments, seamless exchange of operational information and key performance data -- all have had a profound impact on the industry.

Indeed, change has been the one constant, as it will be in the future. With this frame of reference, this article examines the 10 trends expected to impact the hospitality industry in 2005 and the coming years.

1 Saying ‘No’ to Commoditization: Watching their neighbors in the airline space, hoteliers will do everything in their power to avoid commoditization. Embracing and expanding upon the natural variances between hotel properties and services will be critical. Seeking to emulate such successes as the Westin Heavenly Bed® there will be increased focus on new product/service development and differentiation. While such activities will go beyond IT, technology holds the ability to both drive and enable substantial product differentiation.

2 Increasing Spending: With RevPAR up hoteliers are once again able to make investments in their future. According to IBM’s 2004 Global CEO Study, 83 percent of CEO’s surveyed will be focusing on revenue growth over the next three years.1 increased appreciation for the ability new technology and business processes can drive business value will lead to meaningful increases in IT spending. The focus on investments will enable revenue growth, including new products, new services and customer intimacy enhancements.

3 Understanding the Customer: Traditionally, CRM in the hospitality industry was largely the loyalty program, with value based on room nights and customers grouped into loyalty program tiers. Today there are opportunities to do much more with CRM eventually perhaps "marketing to one" and the industry will soon be embracing such capabilities. Indeed CRM can enhance revenue and differentiate service. As such we see the full scope of CRM capabilities being applied, leveraging these tools at a more micro level of detail, where campaigns, package creation, and service, are delivered on a one-to-one level, where customer value goes beyond room nights to focus on lifetime value.

4 Delivering Personalized Experiences: While the notion of personalized service has been discussed for some time, and successfully implemented in limited cases (e.g., Wyndham ByRequest®), today the capability to expand and deliver personalized service at a reasonable cost is reality. Armed with the next generation of CRM information and handheld devices, today it is possible to arm restaurant servers with the name of the guest’s favorite wine and fondness for chocolate desserts. Such capabilities can dramatically drive revenue, enhance guest value and contribute to brand affinity.

5 Going Direct: While online intermediaries have in the past outmanoeuvred online direct sales, this trend continues to reverse itself. Indeed, with a well designed site, robust functionality and appropriate marketing, those hospitality companies with a large portfolio and strong brand equity should aspire to reach online direct adoption rates that exceed online leaders such as Southwest Airlines (for first nine months of 2004, passenger revenue generated by Southwest.com equalled 59 percent2). JD Power supports such a notion, reporting that "guests who book directly on a hotel chain’s Web site report significantly higher satisfaction with their stay than those who make their reservations through an independent travel site."3

6 Expanding Online Distribution: Online direct distribution has traditionally focused on the transient and unmanaged business segments. Attention is moving to other forms of online distribution. In addition, more large corporations are interested in online direct bookings, when appropriate reporting and support of negotiated rates is supported, as well as an increased focus on providing online group capabilities. There is merit in using the online channel to secure advance bookings for ancillary hotel services including restaurant reservations, spa treatments and the like.

7 Strengthening Brand Value: Rising occupancy and ADR traditionally encouraged hoteliers to go independent. However, in 2005 and beyond strong branding will be more important than ever. Not only are brands increasingly blanketing the globe (both within and outside of the hospitality industry), but a strong brand is necessary to drive online direct bookings, to differentiate and avoid commoditization, and to provide leverage against online intermediaries. To further enhance the bond and brand value significant investments will be made in brand/franchisee portals, portals that will enhance and streamline both processes and information delivery.

8 Building Self-Service: Self-service is now an accepted way-of-life in the airline industry, and travellers will increasingly embrace this form of interaction if not prefer it for their hotel stays. Indeed, while we have seen self-service infiltrate the large, full-service hotels this trend will expand into mid-scale properties. In addition, there will be a need for a consistent, multi-channel approach to self-service that includes Web, kiosks and wireless devices.

Moving beyond such we believe that that CUSS (Common Use Self-Service) will revolutionize the entire travel experience. Already players like Hilton Hotels are pursuing strategies. Northwest Airlines' passengers will soon be able to print their boarding passes when they check out of a Hilton as they head to the airport.4 Clearly, those who implement CUSS will provide a great customer convenience that will contribute to their service differentiation.

9 Growing the Revenue Picture: Hoteliers will increasingly demand access to the full revenue picture that is required to manage their business. As previously mentioned we see a future in which customer information is leveraged to deliver personalized campaigns and packages. A future in which online direct sales go beyond room nights to include restaurant reservations and spa reservations -- in short a future in which the brand delivers value through more than room nights alone. Accordingly, we see a need for both the brand and property to have access to better real-time revenue and profitability information -- dashboard information that goes well beyond room nights and ADR.

10 Planning for the Future: Hotel revenue is up which enables these organizations to finally look to deferred investments in their infrastructure and plan ahead. Such investments must be made carefully, ensuring appropriateness and providing the flexibility, scalability and adaptability necessary to meet future needs and innovations.

Focus will be key as investments in non-core, non-differentiating functions are not generally the best use of limited capital. As such, hospitality companies will increasingly focus their capital investments in truly differentiating functions, while turning to outsourcing and its many benefits for that which is non-core. This will not only improve the organization’s focus, but will deliver world-class capabilities, capital outlay reductions, flexibility, scalability and more.

Bradford S. Iverson is responsible for IBM’s strategy and offerings across the hospitality and travel related services industries. In this role he keeps abreast of industry trends, identifying customer pain points and needs. He is always interested in hearing from those in the industry and may be reached at brad.iverson@us.ibm.com.

1 Global CEO Study 2004. IBM Business Consulting Services. Somers, NY.
4 NWA Fliers Cann Soon Check-in at Hiltons - Hotel Kiosks Latest Idea in Self-Service Travel,
Martin J. Moylan, St. Paul Pioneer Press, p. C1, December 14 2004


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