Interview with Scott Gibson, CIO and Senior Vice President, Kerzner International Resorts, Inc.

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March 01, 2005
Face to Face
Richard Siegel - Rich@hospitalityupgrade.com

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© 2004 Hospitality Upgrade. No reproduction without written permission.

Note from Rich:
One of the benefits of creating The CIO Summit is the ability to get to know the CIOs on a more personal level. I remember Scott Heintzeman, the CIO at Carlson Hospitality, telling me his first job was at the front desk of one of Carlson’s hotels. When Scott Gibson mentioned his first job it made me laugh. From his beginning in the franchise world of hotels to his current role as CIO and senior vice president at Kerzner International his has been an interesting journey. His views on technology generate fuel for thought. I am sure you will find this interview extremely enlightening.

Rich: Let’s start with your background.

Scott: My background is by and large hotel technology. The franchise and brand side of the business is where I started and worked for many years. More recently I’ve been focused on hotel owners and operators. My first job was with Ramada. I was also with Anasazi for about six years during their central reservation system development days.


What did you do with Anasazi?

I joined Anasazi as an applications developer and for the last four years there managed reservation system implementations for companies like Euro Disney, Promus and Forte Hotels—both TravelLodge, based in San Diego, and then the Forte Hotels portfolio of brands in the United Kingdom.


Managing implementations can be tough. There is often that issue of meeting expectations, especially with custom software.

I had what I thought was the toughest job at Anasazi. I was the guy who had to take the initial proposal and resulting contract and try to make some good come out of the implementation. With custom software development there is always going to be this gap between what people expect and what they get. My job was to make you happy with the gap. I did that for about four years and then decided to spend some time at the other side of the table. I joined Red Lion in the Pacific Northwest for three years, largely implementing a reservation system for them.


When was this? What reservation system?

It was the mid-1990s. Red Lion had actually bought an Anasazi reservation system and had been struggling for maybe as long as two years to start the implementation. They bought the system, had it in their data center and just didn’t know how to get it done.


So you came to the rescue?

I thought it would be a great opportunity to take something that I knew and bring value to a business model that I hadn’t been heavily involved in before.


I guess you liked the hotel side.

Yes. After Red Lion I went back to Phoenix to work for Mike Kistner at HFS, which or course evolved into Cendant. I came in as the director of development for their IT organization and spent five years with Cendant. When I left I was the CIO for Cendant’s hotel division.


And then Kerzner?

I made the decision to come to Kerzner because, after a great deal of time around the franchise and chain organizations, I wanted to work for a company that had the quality of products that Kerzner does and the pride of ownership in the products that they have.


That’s interesting. It sounds like today you can maintain a great deal more control over your environment and technology decisions. In our last issue we did a Point/Counterpoint in which Carlson Hospitality, which operates chains and franchise brands like Radisson, made the case for trying to implement uniform technology across the brand and Interstate Hotels, a large management company, explained how the franchisee can often have very different goals.

When I was with organizations like Cendant and Ramada, there were a great number of things we would have liked to do, but they were incredibly difficult to do because of the economics involved. Also as a brand and a franchisor your ability to move the properties in the direction you want them to move is fairly constrained.


It seems that way.

Unless you are willing, as Cendant was at one point and as Ramada did at one point, to pick up the cost of a full blown property implementation. Actually, it’s incredibly difficult to do even when you are willing to pick up the tab.


So you were there during Cendant’s Project Power Up?

Yes, I was there during Project Power Up. I was also at Ramada during the migration from Room Finder to Room Finder 3, which was their property terminal implementation for their reservation systems. And I was at Anasazi while the original central reservations development project was going on with Choice Hotels. When I went to Red Lion they were implementing a reservation system and a two-way integration with their property management system.


So you’ve lived through some phenomenally ambitious and difficult IT projects. What’s going on here at Kerzner?

We are not only doing a great many things technically, but from a business standpoint we are in the middle of some tremendous change for the organization. It’s pretty fascinating.


Let’s familiarize everyone with Kerzner. Wasn’t it once Sun International?

Actually, when I came here it was Sun International.


How long ago did you join Sun International?

About three years ago. When I joined the company, it was known as Sun International, Limited. We changed our name to Kerzner International, Limited, about 18 months ago. Sun International was founded by Sol Kerzner, who had previously founded and operated Sun International in South Africa, which was most famous for the Sun City resort.


Back in the 1980s when I worked with the PMS company CLS, one of their big accounts was Sun International in South Africa. I have never been there, but I heard the place is absolutely gorgeous with beautiful high-end resorts.

Yes, they have some great products. And we have some great products as well. So it was good for both of us, I think, to go our separate ways and to market our own identities.


Thank you for shedding some light on this. But what is Kerzner today? Everybody knows Atlantis, but what else is there?

Kerzner is really a combination of two brands in the marketplace. The first and obvious one is Atlantis. Atlantis is a brand in the mega-resort space and at the moment is our one product in that space. But that’s going to change. You may have seen the press releases that we are finalizing development plans to build a second Atlantis on Palm Island in Dubai.


It seems like everybody is building something in Dubai.

It’s a tremendous marketplace. Economically it is growing by leaps and bounds. There is tremendous airlift into Dubai, and it is a great tourism destination. You will also find a significant number of global companies are choosing Dubai as the location for their regional headquarters. It is becoming something of a technology center.


What about from a tourism perspective?

It is huge. What the Dubai government is undertaking with the Palm Island development really staggers the imagination.


What is Palm Island?

Palm Island is an artificial island that is being developed. If you look at it from an aerial view, it’s an island in the shape of a palm tree, with the trunk coming out from the mainland, and with a crown of 17 palm fronds. The shape maximizes the ocean frontage of the real estate; the island is about 7 miles long, but increases the beachfront at Jumeirah Beach by 35 miles. It’s going to be an area of vacation homes, hotels, resorts and restaurants. It will be an upscale vacation paradise and is very well suited for what we do. We have a presence in Dubai with our One&Only Royal Mirage resort, so it was natural for us to work with the Dubai government and further develop the Atlantis brand.


Tell us about your One&Only brand.

Kerzner operates a portfolio of small, super upscale luxurious properties in exotic places that are our One&Only resorts. I would guess that many of your readers will be familiar with our One&Only Ocean Club on Paradise Island in the Bahamas, which is a product we have owned and managed for some time.


Where else?

We have Le Saint Geran and Le Touessrok in Mauritius. We have Kanahura in the Maldives, and we also have the Royal Mirage in Dubai. In addition, we just completed the re-development of the One&Only Palmilla in Los Cabos, Mexico. It is our second property in the North American marketplace along with the One&Only Ocean Club. We expect to tremendously raise the level of awareness of the One&Only brand in the North American market.


What are your technology responsibilities here at Kerzner?

My primarily responsibility is for the Paradise Island operations, and then I have part-time responsibility for the rest of Kerzner’s global and the One&Only presence overseas. It’s particularly difficult for me to have the day-to-day direct responsibility for what’s happening in places like Mauritius and the Maldives, so we tend to have localized control and I set strategic direction on particular technology initiatives and products and advise these operations. Ninety percent of my time is spent on items directly related to Atlantis and the Ocean Club on Paradise Island, or on our corporate office. That makes sense, since the Paradise Island operation at the moment is the 800-pound gorilla. It drives the company and that’s where the vast majority of the revenue and earnings come from.


How do you address the technology needs at two uniquely different products on Paradise Island?

Obviously we have property management systems for the Atlantis operation, casino player management systems, financial systems, telecom systems and so on. One of the things we do with the One&Only Ocean Club Paradise Island is we tend to leverage the IT strength we need to have in place for an operation like Atlantis. Atlantis is a 2,317-room hotel with dozens of restaurants and bars; it’s a huge operation. One of the benefits is that the Ocean Club enjoys a higher level of IT presence, support and capability than your typical 105-room standalone property would otherwise enjoy.


How long will Atlantis be 2,317 rooms?

We are in the final planning stages of developing another 1,200 rooms in a fourth tower, which will bring us close to 3,600 rooms. We will also be adding an extensive group meeting/convention space well beyond what we currently offer.


Are you trying to be the ultimate mega-resort?

We are the ultimate mega-resort and it’s going to be more so. In addition to the resort product, we also have a timeshare product at Atlantis, called Harborside, which is operated in a joint venture with Starwood. The timeshare resort is located on our marina, and guests at Harborside or members of Harborside have access to all the Atlantis facilities. We have a marina operation which is the largest and best appointed marina operation in the Caribbean. Our expansion plans include developing additional luxury retail and restaurants around part of the marina, which we are calling the Marina Village.


That sounds like a massive undertaking. OK, turning back to technology…how important is the electronic distribution issue to you?

It’s tremendously important for us. You know, you hear quite a bit about the transition of the travel mindset in the industry today.


Meaning?

You are not selling rooms anymore, you’re selling experiences. With a product like Atlantis we’ve always been in the business of selling experiences. The challenge is that the quality of the experience is directly related to our knowledge of our customers. Like many people in the industry, we have a fairly broad range of distribution channels to bring in our customers. If you look first at our casino business we do a pretty good job of understanding who our customer base is. That is mandatory in the casino business. For the leisure travel business, we run our own tour operation (Paradise Island Vacations), which is located in Ft. Lauderdale, so we really have direct contact with our customers. But a substantial amount of our product is still marketed through travel agencies, third-party tour operators and allotment systems to those kinds of providers. In those cases it can be particularly hard to understand anything about our customers. Equally challenging would be to engage in any kind of dialog with the customer in advance of their stay.


So what you are really saying is…?

Our challenge is how do we establish more one-to-one contact and a better understanding of our customers in an environment like that? I don’t think that our belief is unique.


The hotel industry, especially the resort segment, is looking very closely at dynamic packaging. Are your prospective guests able to research and package when booking?

Absolutely. Our tour operation, Paradise Island Vacations, sells standalone products and package products and can do a great number of things in the area of booking individual experiences as part of your stay. But to a great extent we are limited by the technology that is available in the travel industry.


For example?

On our Web site today, for the most part you can only book rooms, and you’re booking through a third-party provider. What we’ve been working on for the last couple of years is putting technology in place that extends the range of products that are available on the Web.


Such as?

Full packages and even dynamic packages on the fly. We want you to be able to book your dinner reservations, spa treatments, golf and any other activities available. We want you to be able to book them whether you come through the call center, the Web site or call the property directly. People expect managed itinerary capability through a Web site today. We want to use the technology to facilitate an ongoing dialog with our customers prior to their stay to maximize the experience they will have when they are here.


You are trying to address a need that is a very hot topic in the technology arena today.

We are in the middle of two major technological initiatives at the moment trying to reach this objective.

One of the initiatives involves the development of a new tour operation/reservation booking system that is not only functional for the call center but also directly Web enabled so we will be able to service customers via either channel.


How long has this been going on?

It has been about two years. Like all such initiatives it has its ups and downs, but we are fairly confident now that we will see the launch of the capability this year.


What is the second initiative?

For most of the last year we have been engaged in an initiative to consolidate our customers and activity information into a single database. Most hotels live in a world where they have widely disparate systems with widely disparate technology bases, and they have information about their customers essentially locked up in many different places. Often the information is in conflict. They have no way to bring it all together, so they can’t turn information into knowledge. It’s probably more so for companies like ours and the other resort casino operations. With the casino there is another element of knowledge and awareness of the customer that isn’t in the mix in the hotel business. So we’re working with several providers, primarily NCR, on an initiative using their Teradata product to bring all of that information together.


How are you doing this?

We are going about it in a phased approach because the risks inherent in trying to do everything we want to do at once are simply tremendous and many more people have failed than have been successful. We are pretty confident that this year we will see the ability to have all the information about our customers available to our sales and marketing organization.


And then?

Down the road with the reservation system and customer database infrastructure in place, we will take the next step and bring the reservation system and customer information technology together so we can make valuable use of customer information in the sales process, the initial contact process and the pre-arrival process. All of this is terrific, but if what you are trying to sell is personalized experiences ultimately that information has to find its way into the hands of the customer-facing staff at the property. That will clearly be the hardest part of all of this because you are talking about a level of integration with products that are not well suited for that kind of integration.


Who do you use for your reservations?

We are using Tech 7 now, which I think some people out there are still using. It’s been a good product for us since it handles tour operations and wholesalers well. But it’s really old and it’s tremendously hard to integrate.


How long have you been using it?

I believe we have been using Tech 7 for 12 years. It definitely predates me.


Are you able to make changes to it when necessary?

We don’t make many changes to it. We’ve had it for a long time and it has to be said that this is not our first attempt to build an alternative to Tech 7. We went through an unsuccessful replacement search about four or five years ago. From a standpoint of being able to do the kinds of things we want to do with our sales system we are certainly behind where we’d like to be.


Why wasn’t replacing it successful?

Ultimately it wasn’t successful because there is no product out there that you can buy that does the things we want to do. If you are operating an upper mid-scale business travel hotel or chain there are alternatives out there. You can go out and buy products that are well suited to meet your business needs. If you are operating a unique product like we are operating, you are not going to find a system that does what you want. Inevitably you end up looking at products that are more or less close to what you want and then go down the path of trying to build the product you want from that. These are initiatives that don’t have great success rates in the industry.


You’re in a unique market and suppliers traditionally create something that is going to have the widest market appeal. That’s the dilemma that you are in.

If you look at the rest of our technology base, we use Inter-American Data’s LMS product for our property management system at Paradise Island. We use Bally’s ACSC casino management system and there is a tremendous amount of existing integration between those two products.


Did you meet Dan Garrow from Mohegan Sun casino at The CIO Summit this past September?

Yes, I did. We talk fairly frequently. Kerzner was a consultant to the Mohegan Tribe for the development of the Mohegan Sun casino. We provided construction and operational consulting and helped them build that product. We have remained close. We talk to them about what they are doing and they talk to us about what we are doing. I don’t think we generally see each other as competing in the same space.


So you use LMS and ACSC. Who do you use for your point of sale?

We use MICROS for point of sale in our food and beverage and retail.


Do you own all the retail outlets?

We operate our own retail stores and we also have lease agreements with brand names for the upscale retail operations throughout the property.


Are any of the restaurants leased?

No, they are all ours. And it’s one of the areas that receives a great deal of attention. With a 2,317-room property and what amounts to a fairly small island, we try to provide a tremendous variety with food and beverage opportunities for the people that we have at our resort, which can change dramatically.


How so?

The dynamics can be interesting because we have seasonal occupancy, but very high generally across the board. The thing that I had to learn coming in as a technology guy and not a resort business guy is the difference between completely full in February on Paradise Island and being completely full in July. When you are completely full in February, you are generally getting travelers without kids who are trying to get away from the cold weather and go someplace nice. So 2,317 rooms probably equates to 5,000 people in February. In July, 2,317 rooms often equates to 10,000 people.


You are a great candidate for a revenue management study. Do you use revenue management?

We have not done much with revenue management, mainly because of the technology fragmentation of our distribution. A significant amount of our distribution goes to third-party tour operators and packagers in the form of allotments. Like most people we have very little insight into how those allotments get used until very close to the arrival. Another significant percentage of our rooms go through our own tour operation and that’s great but that’s just a piece of the whole picture. Then we have a casino distribution model where a significant percentage of our room nights actually are being directly marketed by the casino operation into their player base. So it’s incredibly difficult for us, given this disparity, to take a look and say here’s all of our inventory and pricing information in one place and all of our utilization information about our inventory and our pricing in one place—now let’s make some intelligent decisions about it.

One of the objectives is to have a clearer understanding of how our inventory is being sold, how it’s being used and how utilization and pick up is happening. And part of that is trying to get into relationships with our third-party tour operator partners and our travel agents to give us insight into how they are marketing us, what customers they sold to and what those customers like and want. We want to directly communicate with these customers because that’s the best way to give them a great experience.


Very large resort hotels like yours often have massive turnover where the check in and check out experiences can result in serious delays. What about Atlantis?

It’s an area where we have challenges, especially when we have full turnover in the strong part of our season. It’s aggravated by the fact that a significant amount of the airlift into Nassau from the Northeast and south Florida happens early in the morning. We will have days when there are thousands of people who want hotel rooms at 11 o’clock in the morning and thousands of guests who have not yet left. It’s an interesting challenge. We have talked about ways to improve the check-in experience and we constantly do things to improve it. But the kinds of things that you would like to do to speed it up are based on the assumption that there is actually a room ready for the guest. If there is not a room ready, it’s pretty hard to fix that problem with technology.


Would you consider kiosks to help with the massive turnover days?

It’s certainly on our horizon and something that we talked about as an alternative. Truthfully, there are other things that we have focused on. We have talked about putting kiosks around the property that will give guests room keys. Or there would be a kiosk where you come up and put your room key in and the kiosk will tell you if your room is ready, activate your room key and provide a graphic map of where to go. A solution like this strikes me as more manageable for the customer and a much better experience than issuing pagers at the front desk and paging guests when their room is ready. From a management standpoint it’s a big enough challenge for me to keep track of all the employees’ pagers; I don’t know how I am going to keep track of all the pagers I handout to 2,400 customers.


On those big turnover days, do you have any special communications for housekeeping to let the front desk know as soon as possible a room is ready?

We still use the telephone for that and it continues to be something of a challenge for us.


Are you currently involved in any wireless initiatives?

In a number of our food and beverage outlets and our pool decks we have piloted handheld order-taking devices. These handheld devices are connected to the MICROS POS system. When someone takes an order it speeds up how quickly the order gets to the kitchen and, in turn, how quickly we can get the order out. We have also rolled out wireless Internet access.


Where?

We started in our marina at Atlantis, but we are in the process of including the pool decks, lounge and library areas of Atlantis. We are also rolling it out as a standard for our One&Only resorts across the board in outdoor common areas such as pool decks, libraries and lounges.


Is wireless a big part of your future?

We will be offering wireless Internet access to our guests in all the places it makes sense. The main lobby of the Royal Towers in Atlantis doesn’t have any seating areas. It’s a show piece, but you don’t sit there so we are not going to spend a great deal of effort putting wireless Internet connectivity into the lobby of the Royal Towers. Conversely the lobby area of the Coral Towers is in fact a significant seating and lounge area so we have put it in there. Simply, we are looking at the common areas across the resort where it makes sense to offer this service. This all started with the marina, primarily as a service to the yacht owners and guests.


Who are you using for wireless?

It is our own solution. Generally it is based around Cisco’s BBSM product and associated network devices. We have put in the transmitters and wiring ourselves, and we operate it ourselves.


Tell me about the casino.

As a general rule I try to stay out of the casino since I don’t gamble, but we support many technology initiatives. In the last few months we have actually done quite a bit there. We opened the Pegasus Race and Sports Book in September.


Is this a new venture for the Bahamas?

Yes, we opened the sports book in September to coincide with the start of the football season.


What else are you doing in the casino?

We just piloted the cashless slot machine which uses ticket technology. You can now get a voucher instead of waiting for the money to drop.


I know from a gaming standpoint the industry wasn’t embracing this technology right away. It made it too easy to stop when you were ahead right?

Yes.


But, like all new technology, once a few places started using it…

It’s a terrific service for the customer. Historically, one of the challenges for the decent sized casino was the core guest experience when the hopper needs to be filled, the jackpot can’t be paid out because there are not enough coins in the machine. This is such a better experience for our guests.


If I win a jackpot, I want the sirens to go off and the coin dropping to happen.

It’s interesting you say that. You will actually see that at many casinos that have implemented the ticket-in/ticket-out methodology that still drops coin on jackpots. The jackpot will get paid out maybe 15 percent in coin and the other 85 percent on your ticket. The idea is you want to hear the coins falling. That’s what people like about the experience of winning a jackpot is the noise and the lights and the coins.


Where are you with this technology?

We have rolled this out to a fairly small part of the casino floor, but we will be rolling it out to the whole casino floor this year.


How many slot machines do you have?

We have about 1,000 slot machines on the casino floor. We also have a full range of table games that you will see in any casino in Las Vegas.

Last year we started single deck blackjack, which is something that seems to be really big in gaming right now. This is where the dealer actually shuffles and deals a single deck of cards, which has a tremendous amount of appeal. Not being a gambler I’m not sure of the appeal, though I’m told people like it because they get to handle the cards.


I think it makes card counting easier (smile). Is it a pretty large casino?

It’s a very large casino for the Caribbean, but not as large a casino as you might see in the Las Vegas market because there isn’t the traffic.


What do you mean by traffic?

In addition to the fact that we are an exclusive resort product, there is very little local traffic in the casino because gambling is illegal for Bahamian citizens. We have a very different model as a casino operation than casino operations in other locales. The players in our casinos are going to be the people we bring in, our customer base that is there for the resort experience or the people from the cruise ships.


So, what’s on the Kerzner plate today?

Over the next two to three years we will be investing about $650 million in expanding the hotel operation at Atlantis Paradise Island. My team has a big role to play in that. Also, as I mentioned earlier, the development in Dubai will be in the neighborhood of $600 to $700 million to develop the resort casino operation there. The technical resources to launch the One&Only Palmilla development came from my Ft. Lauderdale team; so I have a significant number of people who have been absent from the operation here because they have been in Mexico. Also regarding the One&Only operation, we have plans for an expansion of somewhere between two and four properties a year over the next five years.


When do you see the Dubai property opening?

It will probably open in three years. But just because it is three years away from opening, that doesn’t mean we aren’t running around like crazy building proformas, budgets and plans for technical infrastructure. We are asking ourselves the question: How will we provide technology support in an environment like this? Are we going to create a technology support group better located to service a place like Dubai other than Ft. Lauderdale? We need to have answers to those questions.


How do you plan your technology purchases for a project three years out?

For Dubai, we need to decide if we will buy the solutions we use today for Atlantis, and therefore we have a certain amount of trust and confidence in the technology; or if we take a serious look at what’s coming available in the marketplace. I don’t think we know all the answers to questions about what kind of technical infrastructure to roll out. I must remind you that you have written in your magazine how people use systems longer than they need to.


Yes, we have.

One of things that I discovered over the years in travel, and particularly the hospitality technology marketplaces, is the real reason people use systems longer than they ought to.


I am listening. Why?

It is because the systems that are very functionally rich are the systems based on old technology. The systems that are based on new technology are not as functionally rich. So you really have a challenge.


You will likely get an argument on this.

I’m sure I will. People use technology longer than it technically should be used, but it is because they have difficulty finding solutions based on new technical architecture that have the range of capabilities, interfaces and integration points with the rest of their business that they have become used to from their current product.


Trying to integrate new technology with the existing legacy systems often hurts technical advancements for the industry.

This certainly is a challenge. If you continue to use the legacy systems with the functionality, integrating new stuff with them is difficult because of the age of the technology. From a purely technical standpoint I would like to have systems that are all based on new technology, but selling the functionality of those products to my operating partners can be a difficult thing to do.


The hotel industry, at least in the past, has been notorious for using technology until it often dies. There is something very wrong with this mindset.

I agree. Plus, this manifests itself in much simpler areas. An exercise of interest would be to go around to all the hotels in the world and assess the average age of the personal computers that we are using. Forget the complicated technology. How much value are you getting out of a five or six-year-old personal computer that can’t do any of the things that a new PC can do? Often I think operators don’t know what it is that they aren’t capable of doing with that piece of equipment. If you’re not trying to roll out the capabilities and the latest versions of Microsoft Exchange, for example, you don’t know how limited your underlying exchange server and PC infrastructure are. People tend to discover the problem with the age of their PCs right when they are in the middle of implementing something new.


(Laughing) That’s so true. What do you see as the next wave of technology that might hit the industry?

At The CIO Summit last September we discussed that there has been a tremendous effort over the past few years to define standards for the integration of these widely disparate systems. I said then that I think this is missing the problem.


What do you mean?

The problem is that we have systems that were built to solve problems we no longer have and we need systems that are built for the problems we have now. If you look at any hotel operation today you will find that they have a property management system that manages their inventory, rates and rooms and has the ability to take reservations. It even has an accounts receivable module or function, so it’s an accounting system on top of being a property management system. It does all this stuff because it’s a product that grew up in an environment where it was in isolation. It had to be able to do all of those things, because it didn’t have the ability to leverage those functions in other systems or applications.

The same property will also have a reservation system that does many of those exact same things because their reservation system was a product that was created when it was isolated from the property management system. What we really need in the technology industry is a whole new array of systems that take advantage of the communications and integration capabilities that exist today but focus the pieces of the product around the functionality that is actually required for that part of the business. You don’t need to manage inventory in seven places, you need to manage inventory in one place and then you need to have a range of applications that can all go back to that inventory. You don’t need both an accounting system and an accounts receivable module in your property management system to generate folios. There should be a services module of accounting functionality that your property management system draws on in order to generate a folio or a bill for a guest.

We are spending a tremendous amount of energy figuring out how to integrate and manage these two systems, which have significant areas of overlapping functionality and therefore significant areas of overlapping data elements. How do we ensure that they both have the right view of those data elements and they are both kept up to date, when ideally that wouldn’t be your problem?


Scott, you seem to have pretty strong feelings on using new technology. Why didn’t the ASP model take off in the hotel industry to the level everyone expected?

It’s an interesting question because at least for technology, forgetting the business model, an application services model is what is needed. Like I mentioned before, I need to have a product that provides accounting management capabilities and other applications can use its services. Most hotels today use different vendors for their accounting, purchasing, accounts receivable and their property management system. Why? Because that’s where the products are today. But I would say with respect to ASP that one of the challenges with it is that some of the available services were targeted to hotels from a cost savings standpoint, but they are inherently dependent to a certain extent on a high cost communications infrastructure. So I think a great deal of the message was lost. If you want to save money by not having to host your own property management system and using a hosted property management system solution, part of that solution means an expensive connectivity to that service, and an accompanying risk in the loss of that connectivity. A technologically unsophisticated hotel operator finds that the rising communication costs are offsetting the savings they gain by not having their own property management system.


I am not sure that the only issue is cost.

That is a fair statement. There are models where it works. I have to say I would have more confidence in relying on communications infrastructure inherent in the metropolitan area of Los Angeles or New York, but after recent events, I have tremendously diminished confidence in relying on such a model between Ft. Lauderdale and the Bahamas.


Why is that?

We have redundant connectivity out of the Bahamas through several carriers and several undersea cables. But we recently had an undersea cable cut, so for a week we were operating on about 50 percent of the bandwidth between the two locations. We said in the past that maybe we should locate more infrastructure in Ft. Lauderdale and serve it up to the Bahamas, but after this experience we are scratching our heads and wondering how we feel about that now.


Even with your recent experience I am not sure the industry should give up on the ASP model yet.

I think it is something that will definitely happen because it is tremendously difficult for the hotel industry to continue to support the P&L cost impact of staying abreast of technology on an individual property basis. It’s a challenge. Profitability is a challenge for a hotel that is trying to do all of the things that they ought to be doing technologically. I can easily see that there will be many environments where the ASP model makes sense. We are probably just early in the process. It’s similar to high-speed Internet access for the hotel room. HSIA has taken many more years than expected to take off as part of the competitive portfolio that you have to offer.


If the ASP solution follows the lead of HSIA…

The ASP model will happen. In the technology world we think that things are going to be adopted faster than they actually are. It has to do not just with the rate of adoption on the part of our customers but also as you stated earlier, it is always hard to get people to buy into change. We tend to see something like in-room Internet access as something that’s going to generate a huge amount of revenue and be a great technology for the guest, but it takes a while to get there.


As we look back at HSIA in hotels, it is intriguing. Should we charge or not charge?

Isn’t it interesting that the customer base has matured to the point where there are enough people traveling with their laptops to create demand for the service, we have also arrived at the point when they think it should be free? Early on they were willing to pay for it, but only a few were running around with laptops taking advantage of it.


What about entertainment in the guestroom? Do you have plasma televisions in your rooms?

In some of our One&Only properties, it’s becoming a standard. The subject of plasma televisions also came up at The CIO Summit. Particularly in the high-end hotel business, very often you go into a hotel room with a $20,000 armoire that has a $200 television. What does that say about the experience? So in the high-end hotels you will see demand for better in-room entertainment capabilities and a product convergence as well. To play in that space you are going to have to be able to offer something beyond the traditional movies, a few games or Internet access. Guests who are after a high-level experience will want in-room entertainment options as good as those they have at home or better. I think the next great technology product for hotel rooms will emerge from the convergence of home entertainment and information systems.


What else do you see happening in the room?

I would like to deploy an itinerary management solution into the guestroom. A guest has invested the last three months planning this vacation, why does he want to experience it by carrying around a piece of paper? He ought to be able to pull up a schedule that tells him he has a massage at 9 a.m. and the kids are going to the Discovery Channel Camp at 10 a.m.—is this what you want to do or do you want to change it?

The challenge today is the TV set and the remote control are not particularly effective ways of managing an itinerary. We have talked about wanting to deliver room service through some automated product in the room. Again, it’s easy to order a movie with the TV remote control, but how do you order a cheeseburger with no onions and a variety of other alternatives that are not on the menu using the manufacturer’s remote control? It’s just not a great solution.


I remember when in-room movie vendors tried to offer room service via the television. Even if it didn’t take off it was still a great idea.

It’s a good idea and has to be tried, but the TV remote control is probably not the right device. That’s why I think you will ultimately be able to deliver in-room services via some mechanism other than the traditional television and remote control. Something else has to be there. If you want to do a managed itinerary, room service or direct marketing in the room, it’s going to have to be something other than the conventional television set up.


Do you know what it will be?

I don’t know what it is, but I think it will emerge from what people do in their homes now.


That is interesting. OK, one last question. You have a great background with limited-service, mid-market and luxury properties. Are there mistakes that have been made along the way?

I sometimes think I don’t have a great appreciation for the business side as much as I have for the technology. Another thing that we discussed at The CIO Summit is that we as an industry are often slow to recognize which segments of the hotel marketplace are becoming commoditized. Things like loyalty programs, for example, tend to hide that from us because loyalty programs generate reasons for people to use one product over another. But I also see in my own personal experiences the point at which loyalty programs are becoming less and less drivers of utilization.

How so?

Everybody belongs to them and everybody reaches the thresholds that you need to reach to get treatment, but not everybody can get good treatment.


Can you give me an example?

I recently flew through Las Vegas, Phoenix and back here to Ft. Lauderdale. I’ve always been an America West Frequent Flyer member. A year ago, every time I purchased a coach ticket as a Platinum member I got upgraded. Now I get an upgrade about 40 percent of the time because everyone else is a Platinum member too and there are a limited number of seats they can upgrade.


I guess that might be considered progress or the fact that airlines are offering less flights today. What about the other side of the equation?

Not to single anybody out, but I have flown for many years on America West. One of the things I’ve liked with America West is that it was clear their philosophy was they wouldn’t take off with an empty seat in first class. If there was an empty seat in first class they were going to find somebody else on that plane who deserved a seat in first class. Fly other airlines and you will see that there is often an empty seat. There should never be an empty seat in first class. The same can be applied in hotels. I think it does not happen as often in the hotel business because you just don’t know enough about your customers. There is always somebody in your hotel today who deserves a better room.


That’s a great point. Many hotels have beautiful suites that aren’t booked. They should put someone in that room so they can have a great experience and tell everyone about it.

The trick is to know the “someone.” If you have a great unoccupied suite, who is the one guest in your hotel right now that is going to have a circle of friends and associates that he or she is going to convey his or her experience to and that can influence a buying decision? That’s how you start to generate brand loyalty—unexpected good treatment as opposed to the expected good treatment.


Talk about the convergence of marketing and technology, you could be the poster boy. (smile)

It’s interesting for me to end up in the hotel technology business. I was a history major in college and then spent five years in the U.S. Army infantry of all places and then somehow stumbled into this business. I often think that the only reason I ended up in this business has to do with the first job I had at Ramada. I was junior computer operator in their data center and I got the job because the primary function was that I would be the person who would pull off the big green bar reports that ran overnight. I would de-collate them, burst them, trim the edges, bind them up and distribute them to all the necessary offices before 8 o’clock in the morning. So the number one characteristic to get this job was the ability to be at work well before 8 a.m. And I think they figured coming out of the Army I was familiar with being somewhere at 5 a.m. with the right clothes on and knowing the right stuff to do.


(Laughing) We are never sure why we end up where we do. I am sure fate comes into play. Scott, thank you very much for sitting down with me. This has been great.

Rich, thank you. By the way, everyone I have talked to is looking forward to this year’s CIO Summit. You have set the bar pretty high. Good luck.


Thanks. I am sure we will need it.

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