Looking Forward in 2012, Ramblings from the Industry

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March 01, 2012
Feature
Trevor Warner - trevorwarner@warnerconsultinggroup.com

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Technology has arrived as a top driver to get people into rooms, create a positive experience to keep them in the rooms, and make sure guests return after they check out.  While we shouldn't discount location, location, location, rate or clean rooms, which are all major factors in the buying decision, technology is now playing a primary role. 

What are the crucial changes in 2012? What impact can we expect? What products will finally live up to their promise? 

We reached out to several industry experts to find out what is on the hotlist for 2012.  All of our participants come from different backgrounds and have vastly different hotel portfolios giving us a good summary of the industry as a whole.  We asked each six questions to guide the conversation and then let them ramble.  If you’ve ever spent time with someone in IT you’ll know it’s either a one word answer or something just short of a novel.   

Q1: What do you expect from guest Internet this year?

We started with an easy question.  The hotel industry has taken on the role of connecting guests to the world.  The impact has become increasingly expensive and difficult to manage.  What do you expect from guest Internet this year and what are you doing to adapt? 
 
Al J Schneider Co. CFO Ron Strecker said, “[Our top priority in 2012 is] a major overhaul of our wired and wireless network to meet today’s demand from travelers and prepare for the jump to VoIP, a unified communications platform, and allow new technologies requiring a robust Wi-Fi environment.”

VP of Technology for Noble Investment Nelson Garrido said, “Bandwidth requirements will increase anywhere from 20 percent to 100 percent depending on location.”  Destination Hotels and Resorts CIO Marty Stanton agreed with this increase in bandwidth usage and said, “Volume, volume and more volume. Increase, increase, increase.” 

We once coined the phrase how much bandwidth do you need?  Answer:  How much can you afford? Does that still hold true?  Stout Street Hospitality Vice President of Technology Jeffrey Stephen Parker said, “More, more and more in both bandwidth needs and number of devices. With the major players in mobile data (for example, AT&T and Verizon) capping and throttling data, most heavy data users are moving their mobile devices to use data on hotel networks to manage costs and caps.”

It’s clear. 2012 is the breakthrough year for hotels.  You must have a solid network and the bandwidth to ensure guest satisfaction and stay in the good graces with the reviewers on TripAdvisor®, the new baseline for perceived performance. 
 
Q2: What is your technology initiative this year?

Outside of pleasing the guest with an insatiable amount of bandwidth, what technology initiative are you focused on this year?

Davidson Hotels and Resorts VP of Technology Ron Hardin said he is looking at management tools, specifically systems management, network management, security management and compliance management. Hardin said he has too much to manage manually.

Stout Street Hospitality’s Parker took this a step further and said, “We are working on technologies that are device and platform agnostic. The goal to seamlessly allow users to use Linux, Mac®, PC, Android™, Chrome™, BlackBerry®, iOS, Windows® etc. to securely access sensitive data.”  Stout Street Hospitality is also looking at networked alarm clocks, high-definition platforms and ways to reduce printing.

Is it fair to say this is the year of centralization?  The cost can be high for the tools to accomplish this and there are still issues with so many integrations, but as Strecker pointed out earlier there is not enough time in the day to manage manually.  Hotel ownership and management must move to centralized data in order for the data to be useful. 

Getting back to initiatives for 2012, Noble Hospitality believes apps inside the hotel are important. That brings us to another question; will hotel apps make an impact in 2012?  CTF Development, Inc., VP of Information Technology Simon Eng said, “It depends on how much functionality is baked into the app and how loyal the guest is to that particular brand.”  This brings up a great marketing point.  What is the app developed for and who is it developed for?  Brands are clearly distributing apps that generically cover the portfolio that will appeal to the high frequency traveler but not to the vast majority. 

Luxury properties have a suite of services that will allow the app to give a guest specific information that they can drill down to allow for better information in the palm of their hands. Parker agreed, sort of.  He said, “Unless there are tangible benefits to a guest, I do not see a traveler loading his phone with an app for every hotel chain he is going to stay at. The super loyal guest (or a points-hound) might be persuaded to load an app, as he is going to stay with a chain that will let the application benefit him.”

Parker also said he sees a lot of what he calls drive-by apps, or apps designed for a specific promotion (download an app and get a free martini), but these apps are soon ignored or uninstalled.

Parker’s point is valid, but haven’t all apps become dispensable?  Use the app for the moment and then uninstall and move to the next.  It’s so easy to add them and even easier to upgrade or remove them.  Perhaps 2012 is the testing ground for the validity of apps.  In the hands of a good marketing hotel, apps are a gold mine with low cost and significant direct contact.  With the brands beginning to roll out more improved apps, 2012 may turn out to be the rough draft which will be rewritten in 2013. 

Let’s move along from apps to tablets.  Apple’s CEO made the statement that we’ve entered “the post-PC world.”  Corning released a statement that over 180 million tablets will be in the hands of consumers by 2014. Recently published forecasts by eMarketer predict 81.3 million tablets will be sold in 2012.  From a hotel perspective, the tablet impacts the hotel industry since tablets are ideal for streaming and easily transportable. Whether guests are streaming Netflix, TV on demand, highlights, sporting events or other online content, tablets are easy to use and built for media. Tablets are making an impact, but will they make an impact in the hotels in 2012? 

As an alternative to interactive television, Royal Caribbean Cruises VP and CIO Bill Martin said, “[Royal Caribbean is] deploying iPads® on older ships in the fleet.”  This is an interesting use of staying current while replacing a fading technology.  We’ve seen something similar happening in major markets such as New York, where hotels have deployed tablets to impress guests, but also as a media alternative. Rosen Hotels and Resorts Director of Information Technology Jim Bina said, “For our hotels [tablets] are being reviewed for fine dining wine list, ordering, guest settlement and electronic surveys.” CTF Development is also looking for platforms to deploy in both operations (F&B) as well as proactive sales.

So one group is talking about tablets for guest consumption and then the next group is talking about tablets for administrative interfacing with guests.  In 2012, tablets are making an impact on both guests and admin.  Parker said, “Tablets are a terrific media consumption device. We see (both internal and external) use for email, media and even some productivity applications on tablets. We have even pushed the point-of-sale argument allowing tablets to be mobile revenue centers for things like cash bars.” 

Q3: Will we see an impact of a non-traditional POS in 2012?

Our next question, will we see an impact of a non-traditional point of sale in 2012? As an example, Square has a tremendous amount of momentum processing over $2 million in transactions per day.  Is this our future? 

Xanterra Parks & Resorts CIO John Wimmer had some concerns. He said, “PCI is a concern. Once we overcome that hurdle, it will impact POS.” 

Oh yes, there is PCI.  We can’t go a day without discussions about our best friend, PCI.  Is this the answer? 

Eng said, “I hope so. We, as an industry, have to start minimizing our PCI scope and exposure.”
Along these same lines, Stanton said, “Chip and pin will come into play well before this.”

This leads us to the question of why Europe embraced this technology and yet it is very slow to adopt in the United States.  Garrido believes he has the answer to both and stated we have to wait until the retail side is mainstream.  Retail is the major driver in creating consumer demand which includes payments.  Hotels drive a significantly lower volume in retail, yet a higher per-charge average.  So while we see a foundation laid for non-traditional point of sale, maybe 2012 is not the year for a major push in the hospitality industry.  Non-traditional point of sale has begun its penetration.  The golf courses on the PGA tour use non-traditional point of sale to run both food and beverage as well as merchandise all over the golf course during tournaments.  In addition, if you’ve flown lately you’ve noticed that airlines no longer accept cash on a long flight.  Flight attendants use handheld devices to take credit card payments at your seat.  These are more convenient, have better accountability and decrease loss.  

Eng said that one of his top priority projects in 2012 includes lighting and A/V controls for more sophisticated guests in its higher-end properties who are used to their home AMX and Crestron-type environments. 

Q4: Are environmental controls financially feasible in 2012?

And this leads to our next question: Have environmental controls finally arrived as a financially feasible product in 2012?

Parker said, “I believe that hotels need to put better environmental controls into their buildings, and that good energy management is not only feasible, but will become a necessity, as it has in Europe, to control costs as energy prices rise. However, we need to deploy solutions that interact with the property management systems to make sure we know when someone is in a room.” Stout Street Hospitality is looking into deploying this, hopefully with one or two hotels online by the end of the year. 

Wimmer said, “As a green company, this has been an initiative for years (for Xanterra) and is being installed as a part of a multiple year rollout.” A majority of the respondents agree that energy is expensive and with new government incentives in place, energy management is a product for 2012.  But it was not unanimous.  There is still concern over the cost and the ROI.  The more hotels that get installed, the more real data will become available.  2012 is the year that data should become more reliable and available.  With the new incentives in place, environmental companies get more aggressive in both selling and financing the implementation, creating a lower barrier to entry.  The opportunity may open the door for hotels to take the green initiative.  

Q5: What big technology opportunity do you feel the industry is missing?

With 2012 shaping up as a big technology year in the hospitality industry, are there any big technology opportunities with which you feel the industry is just missing the boat?

Strecker brings up a hot technology topic that he’d like to see. He said, “More industry-based ideas like RoomKey.com that start to bring the cost of distribution channels back to a more manageable level.”  Strecker also said he want to see talented programmers who are encouraged to develop more B2B and B2C sites that are funded by and operated by the industry for the industry and its guests.  This is a topic that deserves its own article. 

Eng pointed to the guestroom and said, “An easy, manageable delivery of streaming content to the guestroom, whether it is through Netflix or the guest’s own Slingbox®, and a method to charge a reasonable fee to provide the bandwidth (is something I'd like to see).”  The Consumer Electronics Show 2012 was stock full of TVs that are Internet capable.  In addition, tiered bandwidth is gaining momentum and seems to be a short-term answer for delivering high usage expectations at a reasonable price (but it’s not free).  If we agree that guests bring in their own media content (both actually and virtually) then some sort of fee-based delivery makes sense.
 
The biggest shake-up may take place this fall with the implementation of Apple TV® in televisions to allow for connectivity between the TV and the device (iPod®, iPad®, Mac, etc.).  Video on-demand providers have been able to keep market share because of the difficulty of allowing guests to access TVs for their own media experience.  Giving guests connectivity to new flat-screen televisions is a giant step in giving them the home experience they demand.  Where Apple goes, so do the other technologies, so look for similar technologies to hit the market in the next six months. 

While both Parker and Hardin point to financial security in 2012, Royal Caribbean’s Martin brought up another progressively hot topic: social media and mobile interactivity while on property.  This is both an exploding topic as well as a rapidly growing industry.  An international company has developed analytics that influence buying decisions to people both receiving and sending messages through social media while the sender is at the hotel or resort.  Social media has already made an impact in the hospitality industry, but the use of real-time data to influence immediate purchasing decisions is staggering when you consider the dollars at stake.  While the analytics are complicated, the implementation is not.  The question is what do you do with the data?  What do you do with the influence?  Is social media even real? 

As social media develops many hoteliers understand the basics of how it’s used personally, but not the long-term impact as a business.   Information movers and shakers are salivating.  Politico just signed an agreement to partner with Facebook to gather information (no specific posts are released) for what is being called research purposes.  Facebook will measure mentions of the candidates in U.S. posts and comments as well as assess positive and negative sentiments expressed about them.  Facebook, on the verge of filing for a ground-breaking IPO, could demand more money than Google in its initial offering.  The information Facebook can deliver through millions of volunteers posting unsolicited messages to their friends and family will change the way we market, interact and drive revenue.  All the hospitality brands are reacting by bringing people on full time in house or through consulting firms to figure out how to make this a success.  2012 will be the transformation from infancy to impact. 

Q6: What is the most unique technology that you have implemented?

With that seed firmly planted and the wheels spinning, what is the most unique technology that you have implemented or have on the drawing board in your company? 

Parker had a quick answer.  He said, “[Stout Street Hospitality] has deployed Square for cash bars, and we recently put in some new data in transit security scanning that is really protecting us from data breaches as related to credit card data.” Stout Street Hospitality is also deploying hosted phone switches, leveraging the Internet to improve costs and services.

While we discussed non-traditional point of sale earlier, hosted phone systems is a new topic.  Stanton (Destination Hotels and Resorts), Bina (Rosen Hotels and Resorts) and Eng (CTF Development, Inc.) are all on board. 
 
The move from traditional phone systems to systems in a cloud has both financial and operational merit.  Voice in the hospitality industry is on the decline to the point that it seems we only have a system for emergency calls and some inbound reservations.  Moving the system to the cloud allows for consolidation which in turn reduces expenses.  Also, since IT has taken on the responsibility for voice, an IP phone system is in the wheel house of IT unlike a traditional system.  With the maturity in the industry, 2012 should be a big year for IP telephony. 

Open the champagne and toast the year of the IT department.  The reward?  You will be overworked, underpaid, and quietly responsible for billions of dollars. I haven’t seen a better group of people in the industry to take on the challenge. 

Trevor Warner is the president of Warner Consulting Group and can be reached by email at trevorwarner@warnerconsultinggroup.com or at (614) 486-4636.

©2012 Hospitality Upgrade
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CIOs Speak

We started this conversation about trends for 2012 back in September 2011 at the CIO Summit. Many of our attendees were gracious enough to speak on camera about their specific plans for 2012.  Below are a few excerpts. Please go to our digital edition to view each CIO video individually.

To see all videos from the 2011 CIO Summit please visit www.hospitalityupgrade.com/HUTube or click the links below.

 

Best Western, Scott Gibson (http://www.hospitalityupgrade.com/HUtube-Videos/scott-gibson.asp)
Will you be spending more, the same or less on technology in 2012?
“Certainly more. We are substantially increasing our capacity in the application development and application support areas so that we’ve got more capacity to get some critical projects done that we need to get done.”

New systems or revamping old?
“It’s a combination of both. We have a lot of work that we want to do with our existing systems, but we have some new projects we want to take on as well.”

 

Marriott International, Bruce Hoffmeister (http://www.hospitalityupgrade.com/HUtube-Videos/bruce-hoffmeister.asp)
Will you be spending more, the same or less on technology in 2012?
“Yes... We’ll spend more on technology next year, but we’ll do it in a way that we will try to spend less on certain things, maybe get more efficient on a per-unit basis, see if we can have the costs go down in order to free up some capacity for us to spend on some new innovative areas.”

New systems or revamping old?
"There are some systems that we are going to update and revamp, some of our financial systems need to be updated, and those are not necessarily new and exciting, but things that need to be done. And we’re also looking at doing some new and innovative things in our sales and marketing area and revenue management areas."

 

Loews Hotels, Tony DelMastro (http://www.hospitalityupgrade.com/HUtube-Videos/tony-delmastro.asp)
2012 spend?
"For 2012, pretty much we’ll be static. We’ll be consistent with what we spent in 2010 and 2011.

This year… network infrastructure. We have a pretty strong POS network, but the way we are providing info to employees, things are changing… as well as some applications that are Web based. Our focus will be the network arena, we will need to analyze how we are going out to the Internet to retrieve SaaS-like systems. Another focus will be mobile device management."

 

Sonesta Collection, Carol Beggs (http://www.hospitalityupgrade.com/HUtube-Videos/carol-beggs.asp)
2012 spend?
I think inevitably it’s more. There’s just more to be done. Certainly (we're) still looking at critical redundancy because we have become so dependent upon technology.

New or revamping existing?
We have been making a move toward some new products... that really address some of the anytime anywhere issue."

 
 
Gemstone Resorts, Michael St-Laurent (http://www.hospitalityupgrade.com/HUtube-Videos/michael-st-Laurent.asp)
Any focus in particular?
"We’re doing a lot of virtualization now to try and save some money, and also to aid in our IT management of our infrastructure. It’s a lot easier; we have a very limited IT staff and therefore whatever I can do to make that much more efficient is something I am definitely trying to do.”
 
 

IHG, Gustaaf Schrils (http://www.hospitalityupgrade.com/HUtube-Videos/gustaaf-schrils.asp)
Will you be spending more, the same or less on technology in 2012?
“There’s no question that we are investing more in 2012 and actually beyond. There is a lot of activity on the distribution side as well as investments that need to be made in the hotels and the increasing demand of our loyal guests."

Are there any other areas that you are focusing on?
"Mobility is obviously, clearly one of those areas that is growing rapidly, beyond what people have been expecting.... booking using mobility but also (using) technologies like Zigbee®, Bluetooth® and NFC where (guests) can actually use their mobile devices to transact within the hotel."
 
 
 
 
Benchmark Hospitality, Darrin Pinkham (http://www.hospitalityupgrade.com/HUtube-Videos/darrin-pinkham.asp)
2012 spend?
“In 2012, we’ll be spending a little bit more on technology than in 2011–our major focus still with PCI and a lot of infrastructure data center migrations. We're really standardizing a lot of our products across the platform, personal luxury resort and hotels, business to take to the next level of that luxury collection service."
 
 
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The Social Network Revolution
Social networking is so new many business have not really figured out what to do other than set up a site to keep up with the Joneses.  Pursway is trying to take social networking to the next step.  Its slogan, “Stop marketing.  Start Influencing.” is a brilliant, simplistic argument.  How do we use social networking to our advantage?

Consumers have increasingly taken control of the buying process.   Over-marketing and the abundance of mass marketing has made messages white noise and made marketing less financially efficient while not making the desired impact.  Take for example your television at home.  When is the last time you sat through a commercial (other than the Super Bowl) or even paid attention when you did? 

Pursway has entered the hospitality market with a focus on targeting the influencers.  Take this statistic for example, a 2009 Nielsen report said 90 percent of people trust recommendations from people they know.  In comparison, 14 percent respond to direct targeted marketing according to Forrester analyst David Frankland.  Consider the impact TripAdvisor has had on our industry.  Many hotels live and die based on the TripAdvisor reviews.  We watch the reviews like a hawk and jump on any negativity posted to insure our online guest satisfaction remains positive.  While online research has less of an influence than a personal recommendation, they all have changed the marketing strategy.

Pursway is working with hotels to market to the influencer.  By using algorithms and metrics, Pursway helps hotels insure they “maximize the viral effect created by influencers.”  What seemed like a fad or something so pie in the sky just a few years earlier now generates or loses revenue instantly.  Information travels fast in 2012 and hotels need to find ways to use technology to their advantage.   
 
 
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IP Phone Systems Making an Impact
Stout Street Hospitality recently completed an installation of innAcloud, a hospitality IP-based phone system at its Omaha, Neb., property.  Vice President of Information Technology Jeffrey Stephen Parker said Stout Street Hospitality had an aging phone system and he had questions about what the next step would be short and long term.  “The innAcloud IP phone system was not only more capable than any system we looked at, it had the features and services of every new traditional PBX for a fraction of the cost,” Parker said.

“Cost was not the driver in this particular install but it was a significant benefit and selling point to our ownership,” said Parker. The innAcloud IP phone system uses all generic equipment, creating a vanilla infrastructure that any IT or PBX vendor can service.  Parts and service are no longer manufacturer specific.  By moving away from the traditional phone system, Stout Street Hospitality reduced its cost to operate the phone system by 60 percent.  More importantly, the brain of the system has no moving parts.  Since everything is software based, there were also no peripherals needed.  For example, where typically a voicemail and call accounting would be third-party add ons, with an IP PBX it was all part of the software package. 

“In moving to IP our greatest concern was the install and service, but the team delivered excellent service and support taking the major concern and making it a success,” said Parker.  “Operationally the IP phone system is invisible to our guests and staff.  It simply works.”  Another key component is the ability for an IP PBX to take advantage of any telecom connectivity.  This gives the property more freedom when considering technologies such as SIP or carrier VoIP to reduce operating costs. 

Stout Street Hospitality can also benefit from the IP technology in Omaha.  Since Stout Street runs a central reservations, calls can be rerouted to the reservations center without tying up facilities in Omaha or losing call quality in the transfer of the call. 
 
“Our power usage is significantly less and the footprint in the telecom closet is less than half of the previous system.  A lower upfront cost, lower cost of ownership and a seamless transition made innAcloud a great partner,” Parker said.  IP phone systems are now a strong option for hotels when making a buying decision.   


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