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Technology, Information and ROI

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June 01, 2005
Technology | ROI
Dan Phillips - dphillips@its-services.com

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© 2004 Hospitality Upgrade. No reproduction without written permission.

President Bush gave a speech last month, forcing “American Idol” to be pushed back a day which really upset my wife. He was speaking about the current state of affairs in Iraq and the war on terrorism. At the end a reporter asked one of those predictable questions, something like, “Mr. President, with all of the information you had about al Qaida before Sept. 11, rate your performance on what measures you had in place to protect our country from such attacks.”

President Bush gave the expected response about how easy it is to be a Monday morning quarterback and he wished an institution like Homeland Security was in place before.

When it comes time to predict which applications of technology will yield the best ROI (return on investment), in many regards hoteliers do a worse job, with more information at hand, than the government had with regards to predicting terrorist attacks. Both hotels and the government seem to waste a great deal of unused information. In this case ROI can be measured in hard dollars, soft dollars, guest satisfaction, operational efficiencies or whatever benchmark makes the most sense to you for that specific decision.

To start, I’m going to pick on call accounting systems, call price structures employed by hotels and the call accounting vendors. The early 1990s was the heyday of telephone department revenue for hotels. Phone calls that cost pennies a minute were sold for dollars a minute typically experiencing a 90 percent or more profit margin. The traveling public reacted and began using calling cards and then cell phones. Now a hotel is lucky if the telephone department breaks even.

How many hotel general managers have sat in their executive meetings and looked that front office manager or operations manager straight in the eye and demanded an explanation as to where all the money is going? Hotels had the information right at their fingertips indicating the decline in calling volumes.

After speaking with pretty much every call accounting vendor out there, I have found that they do not spend any time or resources reviewing the plethora of information that spits out of the systems they sell and support. I find it shocking that no call accounting vendor ever examined the call detail records on behalf of their customers and gave them a heads-up as to what was coming down the pike.

This Monday morning quarterback will tell you that hotels had the information at hand in plenty of time to recognize that telephone department revenues were evaporating. Most did nothing in response. Some actually raised their rates to make up for the lost revenue, probably sending their guests elsewhere in the meantime.

This is an example when the information was dictating that we should change our use of the existing technology, or deploy new technology, to be applied to meet the current circumstances. Threshold billing, bubble pricing and bundled packages have finally made it to the current stream, unfortunately almost 10 years too late. In this case applying new call accounting features combined with marketing and an education effort toward the guests would have had a large ROI.

One of the current trends is the installation of wired or wireless high-speed Internet access (HSIA). Most every hotel chain in the country has mandated that all hotels will have HSIA by the end of 2004, or at the latest by 2005. It’s interesting that anywhere from 2 percent to 8 percent of the traveling public demands HSIA have put the hotel industry in such a tizzy.

Installing HSIA may not be cheap. On average, the installation may be from $150 up to $500 per room, plus monthly recurring fees of about $1,000. Up until 2004, most hotels charged about $10 per day, but now the trend is to give it away as a room amenity. So, where is the ROI? What information are we to use to predict trends that will prevent or enhance revenue opportunities? Will occupancy and ADR go up once HSIA is installed? Will meeting room sales of HSIA pay for it all? Will providing a hotspot and getting commissions from Boingo and T-Mobile be the sole source of revenue?

In-room movies or video on demand (VOD) systems are another guestroom technology that have ROI factors. In many cases these systems are installed at no cost on a 5 or 7-year revenue-share contract. If you were told that an overwhelming majority of the movies ordered are adult content and that the average duration these movies are viewed may be less than 20 minutes, would that be important to you? Could you deploy an inexpensive solution to meet the needs of your guests that would allow you to keep all of the revenue? Would this increase guest satisfaction?

Information gathered from technology applications can be a powerful tool. Could you predict the outcome of the Super Bowl by comparing the VOD usage by each team the night before the big game?

Applications in hotel technology are proliferating. It is critical that you spend time analyzing the information that your systems provide. When deciding what product to buy and what vendor to purchase from, you may want your criteria to include report packages and the analytical skills provided. HITEC is a great forum to shop the latest gizmos. Take the time to discuss the information you will need to maintain ROI for today and over the years you will use your purchase.

Dan Phillips is COO of ITS, a consulting firm located outside of Atlanta, Ga., specializing in technology in the hospitality industry. For comment or question, he can be reached at dphillips@its-services.com.

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