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The Convergence of Self-service Technology

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March 12, 2008
Software | Compliance
Michael L. Kasavana, Ph.D., NCE, CHTP - kasavana@msu.edu

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© 2008 Hospitality Upgrade. No reproduction without written permission.

Consumers have grown tired of incompetent and inexperienced staff, long waiting lines and closure of outlets at times they prefer to do business. To overcome such frustrations, an increasing number of industries are choosing to provide self-service technology options for their patrons. Self-checkout at retail stores and supermarkets, pay-at-the-pump gas stations, self-checkin at airports, online banking and stock trading, and a variety of other applications (e.g., photo kiosks and DVD rental units) have become commonplace.

The hospitality industry has also adopted the transition from customer service to self service. As touchscreen terminals become more user-friendly they become capable of handling more complicated tasks. Lodging providers, fast-food operators, private clubs, fine dining restaurants, casino operations and others are trading face-to-face encounters for face-to-monitor interactivity at a variety of unattended points of sale. Will this trend continue? Which forms of self-service technology will endure? Will current technologies converge to form a new self-service platform?

Self service as a model and a market trend has gained momentum as consumers increasingly accept and often prefer self service to assisted service. Most businesses report self-service applications lead to a reduction in operating expenses while markedly improving customer satisfaction. For example, in banking the phrase full service used to refer to a bank teller being capable of handling transactions affecting checking accounts, saving accounts, safety deposit boxes, as well as processing mortgage and loan account payments. Today, full service banking means that the bank provides a wide range of technological alternatives designed to discourage customers from interacting with the bank’s tellers. Applications like Internet banking, ATMs and interactive voice response (IVR) systems have become popular self-service alternatives. While it appears bank customers clearly value the convenience, consistency and self-control of automated transactions, the future for hospitality industry applications is not as clear. Similar to other retailers, hoteliers and restaurateurs appreciate the extended coverage, lower operating costs and reliability of automated transactions. As a result, opportunities to conduct online and on-premises self-service applications are welcomed alternatives even for an industry that prides itself on personal hospitality.

Consumers aged 18 to 24 are often referred to as Generation Plastic or Gen P. This is the group that exercises a strong preference for cashless transaction settlement (cash is out, plastic is in). A significant percentage of Gen P transactions are cashless; in fact, some studies suggest nearly 100 percent do not involve cash. This group of young adults grew up with advanced technology unlike any previous generation. As a result, Gen P has a greater desire to exercise control over its purchase decisions – control that helps explain the escalating presence of self-service applications. The number of Gen P consumers is projected to exceed 91 million by 2017. Application developers must recognize the future isn’t what it used to be as self-service applications are projected to impact the business world for years to come. Now is the right time to consider changes in the way commerce is planned, managed, coordinated and controlled. 

The three most popular self-service technology platforms are: vending, kiosk and Web applications. While vending focuses on product presentation and delivery, kiosks typically are limited to dispensing information and deferred services, while the Web provides unparalleled search and e-procurement capabilities. The fact that more kiosk applications are being built with product distribution in mind, and Web connectivity overlaps every aspect of transaction management, will likely transpose vending into a more expansive and comprehensive unattended point-of-sale application.

While most vending machines handle only cash transactions, the opposite ratio applies to kiosks which predominantly favor electronic payments; Web-based transactions are naturally cashless. While the percent of vending machines accepting cashless payments is projected to approximately 40 percent to 50 percent by 2010, kiosks likely will continue to process a significant proportion of transactions as cashless. In the North American Self-Service Kiosk Survey, a kiosk is defined simply as a self-standing technology-based unmanned device. Such a definition may not clearly distinguish a kiosk from a vending machine or a terminal connected to an e-business Web site.

Many industry observers have sought to differentiate a vending machine from a kiosk or terminal-based enterprise based on the nature of transactions being handled. Some industry experts postulate that a vending machine becomes a kiosk when it begins accepting electronic payments (regardless if it continues to accept cash). This does not seem to be a reasonable or sufficient criteria since a payment device is merely a peripheral component added to the base of a more complex system, not the system itself. Others have proclaimed that a vending machine becomes a kiosk when it has an extended range of functionality. But specific functionality is hard to define and also can fail to differentiate one device from the other. For example, when a manufacturer of a large capacity glassfront vending machine adds a touchscreen interface panel and chooses to classify the machine as a retail kiosk, the vending industry has difficulty understanding this transition. 

Deciding whether a device is a vending machine or kiosk is not simple. When the vending industry categorizes a device as a vending machine, it is possible the kiosk industry classifies that same device as a kiosk. For example, consider a DVD rental machine. Although always considered a vending application, this device recently received an outstanding design award from the kiosk industry. Are there distinctions that delineate a vending machine from a kiosk? Is this an important distinction? Or is it just a matter of subjective division with meaningless distinction? Here are a few characteristics for consideration (with references to Web-based retailing included):

  • User interface – a vending machine incorporates push-buttons for product selection; kiosks rely on touch-screen monitors for selection; the Web relies on clicks and hypertext linkages.
  • Information – vending machine information is limited to product pricing; kiosks and Web applications are best known for their information search and retrieval techniques that can provide detailed data about a multitude of factors.
  • Product display – vending machines traditionally place products behind a glass front; unless a kiosk supports a product delivery mechanism there is no product delivery, only information referencing; similarly, Web sites feature a variety of products presented in digital format, with delayed shipping requirements.
  • Architecture – vending machines are governed by a vending machine controller (VMC) that monitors inputs, processes and outputs; kiosks are PC-based devices normally running a Windows or Linux operating system; the Web is a network of networks amenable to a variety of computing platforms.
  • Payment processing – vending machines are equipped to primarily handle coins and currency payments and occasionally open (credit and debit card) or closed (paykey, RFID, payroll direct) payments; kiosks are built with a high expectation of electronic payment transactions but may be equipped to handle cash payments; the Web is strictly a non-cash payment business.
  • Marketing – a vending machine features product packaging, displayed behind a glassfront, that conforms to mechanical (spiral and coil) restrictions; kiosks and Web marketing usually involves dynamic digital displays with multiple product views as well as extensive product information. Many applications also provide a mechanism for package customization or personalized purchasing.
  • Products – vending machines are limited in product offerings based on the number of columns or selection options on the machine; kiosk screens can feature a large number of products and product sizes, and unless connected to a delivery mechanism, are flexible in product mix; Web sites can feature almost an infinite array of products through hyperlinks and search engine capabilities.
  • Services – vending machines are incapable of offering concierge services and are limited to the product inventory of the machine; kiosks and Web sites can link to the power of the Internet and numerous remote sites for access to a wide variety of concierge services.

The fact that vending is the original form of unassisted retailing is often forgotten as a result of the extensive development and implementation of newer platforms for self-service transactions. Simply stated, the world’s largest vending machine is the Internet. It is primarily responsible for laying the groundwork leading to the economic movement toward self service. The fact that the Internet has become a universally accepted platform for product search, product information and product procurement is having a profound impact on the way business is redefining the customer interface, customer service and customer relationship management (CRM). The business aspects of vending are embedded in the concept of v-commerce.

While it can be argued that the vending industry has been comparatively slow in adoption of innovative hardware, robust software, wireless networking and enhancements to its customer experience, an opportunity for the industry to reinvent itself looms on the horizon. As self-service technologies continue to evolve and converge, the vending industry needs to be sharply focused on playing a role in the immediate delivery of products as well as enabling connectivity to remote resources.

Self service has evolved into an industry that no longer is simply a channel for selling or delivering goods and services, as it now allows consumers a wide variety of choice in product shopping and method of settlement. The features that are becoming so popular in Web-based and kiosk operations are strong candidates for upgrading v-commerce functionality, management and customer interface. As surveys continue to reveal, consumers are seeking more self-service deployment and the vending industry appears ready to reignite the innovative spirit that originated unassisted retailing more than a century ago.

The ability to differentiate between a vending machine and a kiosk has been blurred as placements and applications seemingly overlap. Despite the fact the vending industry has existed for more than a century and the kiosk industry just passed its tenth anniversary has not simplified the process. According to a recent article that appeared at ePay.com, there are approximately 8 million vending machines in the U.S. compared to 800,000 kiosks. Domestic vending revenues have been estimated at $30 billion annually (source:vendingtimes.com).

While the vending industry has yet to parallel online capabilities, such as Web-based customer interfacing or digital signage, to any great extent some considerations may be appropriate. Since online purchasing tends to be more convenient, accurate and timely, it can provide a better purchase experience than conventional shopping. One company that has made strides in this direction is Zoom Systems. Its Web site (zoomsystems.com) describes how its robotic stores work that it is like shopping online, but with instant gratification.

The kiosk has become an effective point-of-sale option that is rapidly being adopted – sometimes in place of a standard vending machine. In North America, the number of installed kiosks has quadrupled in the past four years. In a recent industry report, Summit Research Associates estimated 800,000 customer kiosks (not including ATMs) are installed. This number of kiosks is expected to exceed 1.2 million by 2009. In 2007, consumers were projected to have spent more than $525 billion at self-checkout lanes, ticketing kiosks and other unattended retail outlets according to the IHL Consulting Group; this is a tremendous increase over the $438 billion collected in 2006 revenues. This figure is forecasted to exceed $1.3 trillion by 2011.

Payment-accepting kiosks are usually divided into three broad categories: self-check kiosks, ticketing kiosks and self-ordering kiosks. Self-check kiosks are dedicated to linking both checkin (registration) and checkout (settlement) activities associated with airline travel, hotel accommodations, events and meetings. Ticketing kiosks primarily print or transmit information authorizing entry to an event or transportation venue. Self-ordering kiosks primarily focus on goods (and services) at a quick service or family style restaurant or access to a takeout location or delivery center.

McDonald’s, Burger King, Subway and other eateries are testing self-service kiosks in preparation for widespread utilization by 2010. These quick service restaurants (QSRs) implement kiosk solutions using standard PC hardware running Windows or Linux operating systems. Basic QSR kiosks allow customers to self order and pay with credit, debit and gift cards, while full-service models are capable of Internet connectivity, coupon processing and coin and currency acceptance. In addition, kiosks are also being tested outside the restaurant for drive-through and drive-up self-service applications.

Most kiosks can serve multiple purposes, for example, a product catalog and gift registry for customers and a job application center for prospective employees. Kiosks typically include industrial-strength hardware, secure application software and highly efficient netware along with tools necessary for centralized remote monitoring and management of the kiosk network.

Simply stated, the world’s largest vending machine is the Internet. It is primarily responsible for laying the groundwork leading to the economic movement toward self service. The fact that the Internet has become a universally accepted platform for product search, product information and product procurement is having profound impact on the way business is redefining the customer interface, customer service and customer relationship management (CRM). 

The Internet represents the ultimate form of self service. A majority of U.S. consumers use the Internet as part of a shopping process, even if they eventually go to a store to purchase or pick up an ordered item. Researching product features and conducting price comparisons online before actually shopping appears to empower customers while creating a more informed buying experience. As a result, domestic online sales grew from $47.8 billion in 2002 to more than $130.3 billion in 2006 with 71 percent of Americans engaged in shopping online. Annual spending per purchaser increased from $457 to $784 during this same time period. Many industry observers have commented that any company that does not take advantage of Internet-like capabilities will fall behind its online competitors.

Efficient e-commerce companies provide a platform that allows customers to research products, order products, process payments and access customer support online. The success of Web-based self service depends upon the quality and quantity of information available and the ease with which it can be located. Online self service has been shown to have a more positive return on investment (ROI) than other customer-facing technologies. Known for cost savings, Web-based self service also fosters customer relationship management since customers are routinely required to create an account to initiate a transaction. In addition, incremental revenue can be gained through up selling or cross-selling related products.

Unlike static vending machine operations, Web and kiosk applications typically include tools for centralized remote monitoring and network management. Most applications serve multiple purposes, for example, a Web site or kiosk can present a detailed product catalog and gift registry for customers and a job or loan application center for prospective employees. For most Web-based and kiosk applications there are several appealing features embedded in the self-service programming that may not be obvious.
As experts proclaim, self-service technology has to either make a process faster, cheaper or better for customers or it is not worth the effort. Given the capabilities of self-service platforms it appears a convergence of technologies may be on the horizon. While vending focuses on product presentation and immediate product delivery, kiosks typically are dedicated to information services with limited product delivery, and the Web provides unparalleled search engine and e-procurement capabilities. The trend for vending machines is to market an array of non-traditional and higher value items (e.g., electronic gadgetry, clothing and restaurant quality meals). For kiosks, designs are re-engineered to facilitate more product distribution, while online connectivity overlaps every aspect of transaction management. A convergence of these formats will create a more expansive and comprehensive family of unattended point-of-sale applications. By combining the best technical aspects of these applications, the hospitality industry may well be capable of implementing more self-service applications at a lower operating cost (less labor intensive) and therefore more profitable. 

While face-to-face transactions have traditionally been handled on a cash basis, settlement has significantly changed over the years. According to the Federal Reserve Bank, in 2003 the number of non-cash transactions surpassed the number of cash transactions for the first time, and in 2005 the number of debit card transactions outpaced the number of credit card transactions. As a matter of fact, self-service operations today are predominantly electronic payment-based.

The competitive advantage possibilities derived from self-service applications are simply too significant to ignore. Technology is dramatically and profoundly changing the nature of business by providing the potential for new services, radically revamping service delivery, and expanding customer service reach. As the hospitality industry continues to implement self-service devices, it must be mindful of three keys for success: clarity – will customers know what to do; ability – will customers have the ability to use the technology; and motivation – will customers appreciate the benefits derived from the technology.

For the convergence of self-service technologies to be effective, the hospitality industry must be willing to change the guest’s experience. Shifts in customer-driven applications will move interactions from face-to-face to face-to-monitor. The question is, will this benefit the industry in the long run.

Michael Kasavana, Ph.D., NCE, CHTP, is a NAMA Professor in Hospitality Business for the School of Hospitality Business at Michigan State University. He can be reached at kasavana@msu.edu.

Self Service in Hotels

A new guest amenity is working its way into local hotel lobbies to alleviate long lines at check in. Self-service kiosks have already proven their worth at airports and in retail establishments and now are showing up in hotels. They look like ATMs and can check a guest in, take credit card information and dispense the room key in a fraction of the time that a live person can perform the same tasks. These kiosks, developed by IBM, first appeared in hotels around 2004 with the Hilton and Hyatt chains leading the way. IBM has more than 3,000 units installed at more than 200 locations, including airports. Besides local Hyatt and Hilton hotels, the Embassy Suites Downtown Tampa has had the machines since it opened in 2006. Now Marriott is joining the party by installing kiosks in its major hotels.

“The goal of the machines is not to eliminate front desk staff. Instead it is to add service for the guests,” said Cheri Rutledge, GM of the Tampa Airport Marriott. If the guest can trade standing in line for 20 minutes to check in for a few seconds in front of the kiosk, he walks away much happier to begin his stay, Rutledge said. It also frees up front desk personnel to handle questions or problems that might arise for other guests. Web-based, the kiosks can interface with the hotel’s current management software and can manage a guest’s bill in real time. It also allows for upselling of hotel amenities like a spa or dining choices.

At departure, everything works in reverse, printing out final bills and completing payment options. Guests can receive departure folios even after checking out of the room to cover last minute charges such as breakfast.

Other capabilities include tracking loyalty points, upgrading room assignments, printing out food and beverage coupons and even e-mailing a final bill. It also allows hotel guests to make airline seat selections and print boarding passes.

Considering that figures from the American Hotel & Lodging Association show there were 47,135 hotels and motels in the United States at the end of 2006, the number of hotels with lobby kiosks is just a small fraction of the total. Early models had trouble interfacing with hotel management technology. IBM helped alleviate incompatibility problems when it developed the Common Use Self Service implementation standard, which helps software from different manufacturers work together seamlessly.

The Tampa Airport Marriott, chosen as a test market for Marriott, has had the kiosks for three months. Recently the Renaissance Tampa International Plaza, which is a Marriott hotel, will be installing one kiosk. Later in the year the Marriott Waterside in downtown Tampa will add them to its lobby.

Although IBM touts potential labor cost savings in its sales literature, Jim Bartholomay, GM at the Renaissance also said the real benefit for the hotel is a happier guest. “It will allow us to redeploy some of our staff to interact with more guests and to provide more revenue opportunities in the lobby,” he said.

“Lobbies are being reconfigured to be more than just a pass through,” Bartholomay said. He is trying to build traffic in the lobby as a destination, where guests can sit and visit with friends and colleagues, relax with a drink, work on the Internet and have a small meeting. Freeing up staff to leave the confines of the front desk makes that task easier.

“What makes a property full service instead of limited service is this kind of amenity,” said Bob Morrison, executive director of the Hillsborough County Hotel & Motel Association. Airports and stores have had the self-service kiosks for about 13 years with increasing success. Even rental car companies have their own version of self-service check-in for frequent travelers.
Self Service in Restaurants

The recent NextChoice survey of 100 North American restaurants revealed the use of self service in the restaurant industry is rapidly increasing. The study claimed 61 percent of restaurants have considered self-service options, which will result in a significant increase in deployments. Quick-service outlets (69 percent) are most interested in self service, followed by casual dining (57 percent) and fast casual (50 percent). Restaurants in the South led the self-service deployment momentum. Nine in 10 restaurateurs in the South have or were considering self-service, while the East and Northeast are somewhat behind. Just 13 percent of restaurants in these areas offer self service, versus 48 percent in the South.

The main obstacle to self service remains cost, though operators have cited that capturing customer data and marketing gift cards are important considerations. Restaurateurs reported that the accuracy and speed of the machines are also important criteria with the key to return on investment (ROI) being increased revenue, improved productivity and competitive advantage. NCR, MICROS Systems and Radiant Systems were the three most prominent providers of self-service technology, although NextChoice was gaining awareness. It appears the industry has reached a tipping point rendering 2008 as the year that self service significantly impacts the foodservice industry.


For comparison charts and success factors go to www.hospitalityupgrade.com/spr08SelfService.

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